Protecting Your Home Investment During Remodeling

Once upon a time, and not too long ago, your house might have been appreciating somewhere between 10% and 15% annually. Those were the days when you could pull a little equity out of your house and send a kid to college. Or, even better, finance a pretty great retirement. It seems like only yesterday when most Americans sat comfortably in their living rooms knowing that their home was a stable, sound investment.Needless to say, times have changed. Property values have plummeted, and more and more homeowners find themselves faced with an upside-down mortgage a loan with a balance that exceeds the value of the home.But alls not lost: with home values so low, its never been a better time to improve your property. When prices start to rise in the coming years, your home will be that much more valuable when you decide its time to move on. Think of your home as your investment portfolio; with prices low, now is the perfect time to add some gems to the mix, which will only increase your portfolios performance once the market surges again.More is definitely not better for many people, a house is the single most expensive item theyll ever purchase, and a remodel or improvement is, in and of itself, a smart way to protect the investment theyve already made in their home. But exercise restraint with your plan. Very often, people who decide to undertake a major renovation of their home think more is better. Nothing could be further from the truth. Over-developing your property so that it no longer seems to fit in with the neighborhood profile is a huge and avoidable mistake. If your finished renovation makes your house look like a 19th-century Bavarian castle, and your neighborhood is filled with adorable, postwar Cape Cods, youll probably have lots of problems recouping the investment youve already made.Okay, lets renovate. Now what?Youve decided to take the plunge and renovate. A key step to this process is soliciting and then comparing bids from several contractors. Contractors compete directly for your business, but you have to be careful. Under no circumstances should you automatically accept the lowest bid; even though that contractor might be offering you the cheapest deal, your renovation might be done with correspondingly cheap materials, which will ultimately create expensive problems down the road. Never forget that what a contractor is offering you is a service, not a product. If your contractor wants to do a quick job on the cheap, youll be sorry.Just like you should never pour thousands of dollars into a mutual fund you havent researched thoroughly, you shouldnt invest a dime in a renovation without researching your contractor and his bid from stem to stern. When you feel like you have enough information to make an informed decision about the contractors bid, start your research from scratch and make sure you havent missed anything. This is the single most important step in protecting your investment during a renovation.Insurance concerns.Of course you have home insurance, but a renovation is a special circumstance that has a host of issues to bear in mind. Your contractor should carry a commercial general liability policy, or CGL insurance. This covers issues like bodily injury that results in actual physical damage, property damage or loss, and personal injury. Make sure you require your contractor to carry an insurance policy thats at least twice the value of your home after the renovation is complete. Check the certificate of insurance and make sure that the policy is underwritten on an occurrence basis, which allows you to make a claim after the renovation is done and the contractors policy has expired. Its also important that you and your home address be listed clearly and correctly as both a certificate holder and as additional insured. If you have any doubts about your contractors CGL policy, write or call the insurance agent listed on the certificate and ask for more details.Theres no doubt that many people are anxious about homeownership right now. But, with some careful planning and a healthy, long-term perspective, protecting the investment youve made in your home can be a simple, straightforward process. Do your math, do your research, and youre sure to come out ahead in the long run.

ArticleSource: ArticlesAlley.com