One of the benefits of being a homeowner is the ability to shape your property the way you want it. Investing in home renovations not only improves your daily living conditions, makes your home more sustainable, and increases the value of your home, but it also saves you money in the long run.
Renovation projects can increase real estate value and home equity, so upgrading your home with new technology can significantly increase its value. Technological upgrades that make your home more attractive on the buying market can make it easier to sell when the time comes.
“By implementing cost-effective upgrades with proven long-term savings, homeowners can make their homes more attractive to potential buyers who recognize the savings achieved. ” said Lucas Haldeman, CEO of SmartRent.
Housing market experts say it's difficult to measure exactly how much a particular technology-enabled renovation will add to your equity, but it's usually a good investment.
Will technology upgrades increase the value of my home?
If you plan on renovating your home to sell, first find out how much the renovations will cost. While many are easy and affordable, some technology upgrades require investment, so it's worth knowing how much of that cost you'll get back.
According to Haldeman, there are different values for homeownership. The first is home equity, measured as the difference between what you owe on your home and its appraised value. There's also energy efficiency and sustainability. Utility costs, long-term savings, and high return on investment are also important factors to consider.
Unlike basic upgrades like renovating the kitchen or replacing flooring, it's difficult to assess whether a particular smart home upgrade will be beneficial to your home's value. Technological renovations are often tailored to personal taste, geography, and current trends.
Unlike a home's appraised value, which is determined by a professional appraisal at a specific point in time, a home's market value is based on what buyers are willing to pay and is influenced by macroeconomic conditions and market forces.
When an appraiser looks at a home that has been enhanced with smart home upgrades, they will make what's called an “appraisal adjustment” to reflect what buyers typically pay for that particular feature.
“Smart homes can be more expensive and therefore easier to sell,” said Tai Savet, founder of Agents of LA.
Popular home technology upgrades
When it comes to technology, things change and evolve quickly. The upgrades you make today may be outdated in five years, so make choices that align with what will make your life better, says Alexander, director of residential real estate at Figure8 Realty in Los Angeles. Lerner says.
Let's take a look at some popular technology upgrades for your home.
Smart thermostat/temperature control
For many people, a smart thermostat is the first logical technology upgrade that delivers the greatest overall value and ROI, Haldeman said. Some smart his thermostats measure whether the user is home or away through occupancy sensors and adjust the temperature. Some even switch between “home” and “away” modes based on your phone's location.
For approximately $200 to $500 to purchase and install, you can greatly improve the regulation and control of your home's energy. “Homeowners can reduce their overall energy consumption, which translates into money savings throughout the homeownership lifecycle,” Haldeman says.
water monitor water leak detector
Another popular smart home upgrade is thermostat moisture sensors and water monitoring leak detectors. These sensors can help detect pipe defects and flooding early, allowing you to address issues quickly, prevent costly property damage, and avoid the need for water damage insurance claims.
“Implementing these technologies can also help reduce insurance premiums and protect homes from significant climate change and extreme weather patterns,” Haldeman said.
Integrated smart lighting system
The latest version of The Clapper, a smart lighting system, allows you to control and adjust the lighting in your home via your smartphone or other smart device. This reduces electricity usage and saves you money. Lighting accounts for an average of 3% of a home's energy use, and investing a few hundred dollars in a smart switch starter kit and a few light bulbs could equal the savings on your electric bill.
security system
According to Haldeman, security systems that work with smart home hubs and add-ons for security features like smart locks and doorbells are economically sound upgrades. “Not only does it provide increased peace of mind, it's easy for homeowners to install and can be installed at a relatively low cost depending on the sophistication of the system being installed,” he said.
high performance windows
High-performance windows are windows with two or more insulating panes of glass that can increase energy efficiency by increasing insulation. Additionally, they can provide better acoustics through better acoustic control and let more light into your home. Installation costs for this type of window range from $800 to $1500 per window.
heat pump system
Heat pump systems are an energy-efficient way to control the temperature inside your home. There is no need to use a furnace or air conditioner for heating or cooling.
Heat pump systems use electricity to move heat from cold spaces to warm spaces. In the summer, they move heat from indoor spaces to outdoor spaces, making your home cooler. During cold weather, heat pumps use heat from outside to increase the temperature inside your home.
solar panel
Installing solar panels on your home can save you money on energy bills in the long run. However, there are additional responsibilities if there are significant start-up costs and the need to raise funds.
Solar panels cost an average of $3.30 per watt, or $16,500 for a 5-kilowatt system. Do your homework and find out if going solar is worth it in terms of energy savings and sustainability impact.
household battery
In recent years, home storage batteries are used not only as a backup power source. Time-of-use algorithms and virtual power plants help you save money on your energy bills. But like solar panel systems, solar cells can also be expensive, ranging from $12,000 to $22,000, according to the U.S. Department of Energy.
Depending on where you live, some upgrades may be worth more. Energy-efficient upgrades may become more desirable and common in areas with high electricity costs. When considering costs, it's also a good idea to find out what state-wide and local tax incentives and rebates are available.
Will technology upgrades cost a lot of money?
The cost of upgrading your home technology depends on several variables, including the type of upgrade, how long you plan to live in your home, and how much you'll save in the long run.
For example, more expensive upgrades such as installing solar panels or batteries can cost tens of thousands of dollars and usually require financing. Smaller technology upgrades, such as smart security or lighting systems, are much cheaper improvements that can be covered out of pocket.
When you balance the initial investment with the value you receive, technology upgrades can help reduce energy costs and save money on your monthly budget.
But some of these upgrades depend on your lifestyle preferences, so you won't always expect big returns in terms of dollars and cents, says Realtor and founder of Will & Way Homes. Yes, says Will Rau, author of From Vision to Realty..
read more: How home equity loans can help pay for energy efficient upgrades
What is the best way to finance home renovations?
If you have a significant ownership interest in your property, you may be able to take out a second mortgage to fund repairs and upgrades to your home. When used responsibly, a second mortgage (usually a home equity loan or home equity line of credit) can allow you to borrow at a lower interest rate than a personal loan or credit card.
If you decide to make a large investment and need to take out a loan to cover the initial costs of your project, you have several options.
home renovation loan
Home improvement loans are secured or unsecured personal loans used for home improvement projects. A secured loan means that the loan is secured using your home as collateral. Unsecured personal loans tend to have higher annual interest rates than loans secured by home equity.
Home Equity Loan (HE Loan)
A home equity loan is a type of loan that uses the equity in your home as collateral. You will receive a lump sum upfront and will be responsible for paying in monthly installments.
You must have at least 15% or 20% equity to qualify for a home equity loan. Because these loans are backed by a valuable asset, your property, lending standards tend to be less stringent and interest rates are usually lower than home improvement loans or credit cards.
Home Equity Line of Credit (HELOC)
A home equity line of credit (HELOC) also taps into the equity in your home, but instead of being paid in a lump sum, it's a revolving line of credit like a credit card. You are given a line of credit for a set period of time and can borrow against the line of credit as needed. Just like with a credit card, you pay off the balance over time.
cash out refinance
Cash-out refinancing is another popular way to pay for home renovations and upgrades. Replace your existing mortgage with a new, larger mortgage. After factoring in closing costs, you pocket the difference. Lenders can typically convert up to 80% of your home's equity into cash. However, this is a large, long-term loan with new terms and annual interest rates, so you need to make sure you can repay the new debt.
A cash-out refinance can also give you a lot of cash for home technology upgrades, but it may only make sense if you can get a lower interest rate. Otherwise, a home equity loan may be a stronger option as long as you have a repayment plan in place. Otherwise, it's not worth risking your home if you might default on your loan.
Whichever financing route you choose, it's important to consider your budget and consider your monthly payments to ensure you can repay the debt. If you choose a secured loan, such as a home equity loan or HELOC, remember that your home is used as collateral. This means that if you fail to pay, you are at risk of foreclosure.
Lindsey Hahn, an agent with Christie's International Real Estate in San Luis Obispo, Calif., says that to get the best interest rate on a home equity loan or HELOC, be sure to shop around and have more savings. He said people should start with their banks and credit unions. “If you have a good relationship with your bank, they will often offer you discounts on your mortgage, such as lower interest rates,” she says.
read more: These homeowners leveraged home equity to their advantage.you can too
conclusion
High-tech and smart home upgrades have many benefits for homeowners, but be wary of investing based purely on the potential for increased home value.
Renovations like this can be beneficial if you're looking for a more sustainable lifestyle, want to save money on energy bills, or if you plan to sell your home soon.
“Ultimately, buyers have come to expect smart home technology in some form or fashion,” Haldeman said.
