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Welcome back, fellow parent

It’s officially home improvement season! 

I'm excited, I hope you are too.

It's safe to assume most Americans are getting their tools and wallets ready for the warm weather. In case you didn't know, home improvement expenditures have been on the rise pretty substantially since 2020. 

Let’s dive in…

The TL;DR

I get it - we're all busy trying to keep other humans alive. Here are the key takeaways from today's newsletter:

• It’s much cheaper to renovate your current home versus purchasing a new one. If you bought a $350k home in 2024 versus 2021, you may be paying an extra ~$900 per month on interest.

• Refinishing your hardwood floors has the highest ROI at 147% while adding an upscale addition hits the bottom of the barrel with a 47% ROI.

• Top ways to finance your project include cash, personal loans, home equity loans and lines of credit, refinancing, and credit cards.

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There are many reasons why you’d take on a home improvement project. My wife loves transforming a space. Me? Not so much. Unless we're planting trees or moving dirt around, I'm not your man. 

But the reality is that moving has become cost-prohibitive for millions of Americans. 

No surprise here, but interest rates for a 30-year fixed have swung wildly over the past few years. We hit historic lows which dropped below 3% in 2021 to the super fun ~8% we're seeing in 2024.

Let’s do some easy math. The median cost of a home in 2021 was ~$350k. We’ll exclude taxes and insurance and will use a 20% down payment ($70k).

Here’s the breakdown:

Those numbers are staggering! It's no wonder why homeowners are hunkering down and renovating their homes versus purchasing something new. According to Houzz, home renovation spending has increased from $15k in 2020 to $24k in 2023.

Best Home Improvement Projects

From a return on investment (ROI) standpoint, all projects are not created equal.

Below is my compilation of the best and worst home improvement projects based on a return on your investment.

This is based on an embarrassingly amount of research comparing and contrasting data from contractors, home services companies, realtors, retailers, and lifestyle-focused brands.

Top 5:

• Refinishing Hardwood Floors - 147% ROI

• Minor Bathroom Remodel - 102% ROI

• Replacing a Garage Door - 100% ROI

• Minor Kitchen Remodel - 99% ROI

• Exteriors: Siding, Doors, Etc. - 92%

Bottom 5:

• Swimming Pool Installation - 50% ROI

• Adding a Sun/Mudroom - 47% ROI

• Master Suite Addition - 45% ROI

• Luxury Kitchen Remodels - 40% ROI

• Upscale Addition - 46% ROI

The top 5 focus on curb appeal and spaces that matter most to buyers. The bottom 5 are primarily additions that only you may be interested in, especially if you’re really into a more luxurious lifestyle.

How to Pay for a Renovation

There are many ways to pay for a home renovation. This will depend on you and your budget.

Here are a few ways to pay for your renovation:

• Cash: Pretty obvious, but if you have the cash, it’s not a bad time to use it.

• Borrow from Friends/Family: Not always the best idea, but they’ll hopefully give you a better interest rate than the market.

• Personal Loans: If you need to take on debt, this is a decent option to consider as personal loans typically have interest rates that are half of what you’ll find with credit cards.

• Home Equity: Either a home equity loan or line of credit, these are highly sought after and not always the easiest to get. A home equity loan takes a loan on your home’s equity and provides a fixed interest rate and monthly payment. HELOCs offer a variable rate, with the biggest pro being you only pay interest on balances you carry (interest typically calculated daily).

• Refinance: Not the best option in this rate environment, but if you have equity in your home you can consider refinancing the loan and taking cash for the renovation.

• Credit Cards: This should be your last resort unless you are paying off the balance quickly or have an introductory rate. Credit Cards have notoriously high-interest rates and can destroy your ability to get out of debt.

From my point of view, I’d use cash unless you can find funding with a low-interest rate or are planning on selling in the near future. With the interest rates being sky-high, it’s very costly to borrow money.

I’d Love to Hear from You

What do you have planned this year project-wise?

Home renovation or otherwise, I’d love to hear about it.

Money News 🤑

1. Big win this past week for shareholders of LendingTree (TREE) as they reported their first revenue beat in a couple years. The market responded positively with a ~30% jump in share value. Hopefully it’s just the start.

2. Job growth has slowed down a bit in April, as the US only added 175k new positions and unemployment hit 3.9% last month. Economists were expecting 235k jobs to be added with unemployment sticking around 3.8%. Could be a sign that the high interest rates are slowing down the economy, only time will tell.

3. Apple is making headlines as they announced the largest stock buyback in history at $110 Billion. This is a great way to provide value to the shareholders as the remaining shares on the market will be worth more. Fun fact: an alternate route would have been to increase their dividend, but that would have led to higher taxes for their shareholders. With a buyback, the stock value goes up without being taxed. Win-win for current shareholders.

Thank You for Reading

Thanks again for reading. I’m grateful to be part of your financial journey.

Talk soon,

The Dollar Dad

P.S. If you’re considering starting a newsletter or blog this year, I’d highly recommend Beehiiv (use my link for 20% off any paid plan for 3 months). Drop me a note if you need help getting started or growing your business.

P.S.S. As a heads up, the above link for Beehiiv is an affiliate link. If you make a purchase using the above link, I’ll receive a commission at no extra cost to you.