Tuesday, February 26, 2008

Death, Renovation and Taxes

In many areas of Indiana (and many other states around the country) homeowners recently experienced exponential increases in their property tax bills. Regardless of your own particular situation or politics, there are a few key pieces of advice to keep in mind in light of these recent developments when it comes to your outlook on Renovation projects.

Don’t Panic – It’s easy to say I know. Yes, there may be some real and immediate effect on property values, but look at it this way; you own a large number of shares in a stock that’s been trading at $80 more than what you paid for it 15 years ago. Suddenly, it closed out today down $50. Would you put in a sell order tonight? Your financial advisor would tell you not to. You haven’t lost anything until you sell. You could look at your property in a similar light. If there is any way that you can endure the next few months of uncertainty, hang on and wait to see what happens. If it's any consolation, Indianapolis remains atop the list of affordable housing markets and our taxes are still low relative to most other states.

Renovate for Yourself – There are two points of view to consider when you’re planning your Renovation project; Quality of Life and Resale Value. Unless they are planning on selling their home in the next two years, I typically advise clients to lean more heavily towards the “Quality of Life” side of the equation. The recent property tax issues bear this out now more than ever. If you want to remodel your kitchen or add a master suite or extra bedroom just to improve your quality of life in your existing home, then by all means, do so. I wouldn’t advise executing a design that will negatively impact your resale value or expanding to a project scope that will price you too far out of your neighborhood, but being comfortable and happy in your own home has a value all it’s own.

Renovate to Sell – If you need to sell your home soon, certain Renovation projects can give you the upper hand in a slow market. One look at the lineup on HGTV will prove my point. Yours may be one of a growing number of homes in the neighborhood that have recently sprouted a Realtor’s sign. There’s no need to worry about property taxes now, you’ve already been assessed. All you’re worried about is getting the house sold. What will distinguish your home from the others? Will an updated kitchen do the trick? Or will yours be the only one with a legitimate master suite? A well advised approach to key Renovations could help you sell faster and bring in more at closing than your neighbors.

As we enter what is likely to be a new era in the ongoing debates on taxation, property value and, in turn, the real estate market, it may be best to take a step back, be patient and examine our Renovation goals. Who are we Renovating for? And why? Despite wildly varying opinions, the property tax issue will eventually be settled and life will return to normal. Approach your Renovation project under quality guidance and you should come out ahead. It won't be the death of you.

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