Home remodeling is on the rise. And no wonder. Owners having trouble selling their homes in this sluggish real estate market want to give them as much buyer appeal as they can afford.

Others are deciding if they can't move, they might as well make the most of the house they may be calling home for some time to come.

After a year of decline in home remodeling, the number of homeowners saying they plan to remodel in the next 12 months increased from last year, according to RemodelOrMove.com, a website that provides homeowners remodeling options and has conducted semi-annual surveys of owners since 2005.

In tough economic times, it's important to make smart decisions. Here's what to consider before you pick up a hammer:

1 - The biggest bang for your buck

Before you even come up with a plan, consider how long you will live in the home. If you only plan to stay for several years, you may not be able to earn back the cost of a major renovation. Short-term owners should consider simple cosmetics, such as refinishing floors, painting and updating fixtures and lighting.

If you plan to stay in the home for five years or longer, then a kitchen or bathroom renovation provides the best return on your investment.

One of the biggest mistakes people make is to install a new pool in parts of the country where the weather is colder. In general, renovating should bring a property up to the value of the comparable houses nearby, not make it the most expensive home in the neighborhood.

A good rule of thumb is you shouldn't try to improve the value of your home more than 25% of its current value.

2 - Financing the project

Before you start renovating, estimate the cost and decide how you'll pay for it.

Borrowing is not the only way to finance a remodeling job. If your project is inexpensive and you have adequate savings, tapping them is the easiest way to go.

Many use their credit cards for projects under a few thousand dollars.

Owners can finance a kitchen or bath renovation or add a deck that way. If you hire a contractor for a bigger project, the costs can balloon. Then you may be better off with a personal loan, a home-equity loan or line of credit.

Sharp declines in home values mean many owners have no equity to tap. For those who do, financing home improvements with a home-equity loan makes sense because the interest is tax-deductible, Woolsey says.

3 - Are you covered?

Before you start a project, make sure the contractor and subcontractors have adequate insurance coverage. Ask if the contractor has workers' compensation, which covers lost wages and pays for medical and rehabilitation expenses if workers are injured. If not, an injured worker can sue you, says the Insurance Information Institute.

If you're adding an extra room, you'll need to increase your home insurance coverage. Don't wait until the renovation is completed to contact your insurance agent. If the addition is damaged or destroyed before insurance coverage has been increased, you may be responsible for the cost of repairing or rebuilding it.

Homeowners also should visit DisasterSafety.org, where the Institute for Business & Home Safety provides info about each state's building codes and standards. It's where homeowners can find out how to be sure contractors make their homes hurricane- or wildfire-resistant.

And during the renovation keep all of the receipts for items purchased, such as furniture and electronics, because you will want to make sure you have the right amount of coverage for personal possessions.

4 - Ways to save money

Kitchens and bathrooms are the most popular renovation projects. But don't overlook less-visible improvements that may cut the costs of owning a house.

Updating old plumbing and electrical wiring and disaster proofing your roof may lower your insurance premiums.

Owners of older homes can reduce their energy bills by adding insulation and installing new windows. Federal and state tax credits for certain improvements — such as energy-efficient central air conditioning, heating or water heaters — can lower your costs even more.

In the end, a renovation project's payoff may be measured best by how much satisfaction it gives the homeowners.

Now that the real estate bubble has burst in some markets, you just might be able to find real estate for less than the cost of a used car. Stacy Johnson explains…

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Our September 2010 Shreveport Real Estate Newsletter is now online…

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Home ownership is a big step, and many people worry whether they're ready to take it on. If you currently rent your house, you may wonder if you can even afford to buy a home. Just looking at real estate listings online or in the Sunday paper can make you break out in a cold sweat. Yes, homes are expensive. But they should be considered an investment, and for many homeowners, it's one of the smartest investments they'll make. Depending on how much you currently pay for rent, how expensive homes are in your area, what your credit score looks like, and how long you plan to live in the house (among other factors), buying a home is often less expensive than renting in the long run. After all, when you rent, you just pay for a roof over your head. When you buy, you become the owner of that roof and everything beneath it.

Renting does have its advantages. Here are some:

• Renting offers more flexibility. If you like knowing you can pack up and move at a moment's (or a month's) notice, it may make more sense to rent. Depending on the terms of your lease, you're not tied to a residence for more than a year or two at most. When you own a home, on the other hand, you need to sell the property or find a suitable tenant before you can move—or else you'll end up paying a mortgage on an empty house.

Tip: If you know you're likely to move within three or four years, you're probably better off renting than buying. That's because you won't have time to build up much equity in your house (its cash value as you pay off your mortgage's principal) or break even on your closing costs.

• Maintenance is someone else's headache. When you rent, you call the landlord if a pipe bursts or the furnace quits. He sends someone to fix it and takes care of the bill. When you own, all the maintenance — from keeping everything in good repair to mowing the lawn and shoveling snow —- is your responsibility.

• You can move in faster. Buying a house takes time. If you're in a hurry to move to a new neighborhood, you might want to rent for a year and look for a place to buy during that time. Renters can usually move in soon after getting their rental application approved. Buying a home, on the other hand, takes months. You'll be living in your new house for years, so you want to take your time finding just the right home. Then you may spend a couple of weeks negotiating with the seller before you agree on a price and conditions. And getting financing and preparing for the property transfer can take 30 days or longer.

• Your move-in costs are lower. Renting a house usually involves no more up-front costs than two months' rent and a security deposit. Buying a home is far more expensive. You need a down payment of anywhere from 3.5 to 20 percent—or more—of the home's purchase price and thousands of dollars more for the fees and costs associated with getting a mortgage.

• You can keep your money in the bank. Being a first-time homeowner frequently means scraping together all the money you can find to afford a down payment and closing costs. Once you buy a house, your money is tied up in your home. After you built up some equity (cash value in the house as you make principal payments), you can tap into it with a home equity line of credit. But if you want your money readily available (especially within the next few years), or if you want to invest in something other than real estate, it may make more sense for you to rent.

If you're thinking about buying a home, you're already aware that buying has its own advantages. Here are some major ones:

• Say goodbye to your landlord. It irks some people to pay good money each month and not get anything more in return than the right to live under someone else's roof. When you own your home, each mortgage payment builds up your equity in the house that increases with time. Some landlords are great, but others are slow to make repairs—and quick to raise the rent. If you want to feel like your home is your own, you might be ready to buy.

• Take advantage of tax breaks. You can deduct mortgage interest, property taxes, and some closing costs from your federal income taxes.

• Beat inflation. As the cost of living goes up, the cost of rent goes right up with it. If you use a fixed-rate mortgage to buy a home, however, your principal and interest payments stay the same for as long as you live in the home. The longer you stay there, the more pronounced this benefit.

• Build equity. Renting is pay-as-you-go; as long as you pay your rent and abide by the terms of your lease, you can live in your home. But if you buy, as you make mortgage payments and as home values rise, you gain equity in your home. You can treat your home's equity like a savings account, cashing out when you sell the home and using the money for a down payment on your next home. Or you can borrow against it using a home equity line of credit.

• Have your own place. For many people, the main reason to buy a home is to have a place that's truly their own. You're not paying off the landlord's mortgage—you're investing in a home with your name on the deed. That's a great feeling, whether you buy a one-bedroom manufactured home or a many-roomed mansion.

Wondering whether renting or buying is best for you? Contact us and we'll discuss your options with no obligation on your part.

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