Understanding Cost Vs. Price When Building or Remodeling a Home

Robert Kiyosaki, author of Rich Dad Poor Dad, makes a very compelling argument for the case of your home not being your biggest investment but rather your biggest liability. Many agree with him on this point. However, that argument loses some of its punch when we consider how innovation and forward thinking can make your home more desirable. A look at the balance of “Cost vs Price” can help us to better understand what smart home investors already know.

One of the things that makes your home such a liability is the constant maintenance and money it takes to operate combined with fluctuations in the resale market. If you’ve ever had my company consult with you on a project then you already know that we spend a great deal of time looking at how you plan to use the systems and the efficiencies of your home so that we can help you determine what will work best for managing the operating and maintenance cost. It’s all about making intelligent decisions given the information we have so we feel comfortable moving forward.

Let’s take a deeper look at what we mean by cost vs. price and how it affects your next building project:

First, we all can understand the value of placing longer lasting products into our homes so we don’t have to pay for them to be replaced in a shorter period of time than a slightly higher “priced” product on the market. (Only the very rich can afford to pay for something twice and not worry about it). What about the way that we will heat and cool the home? Installing a geothermal, or similar alternative HVAC source, can be more expensive up front. However, with a pay-off of as little of 7 years, this is an exact example of how to manage the “cost” of your home and decrease its liability to you. Increased insulation values to your home can cost a few thousand dollars more on the average, but if you figure that you are making your home twice as energy efficient than the average home today, then you can see that there is a huge value to this cost savings of your home that for some can be paid off in the 1st year of ownerships.

The average person lives in their home for roughly 8 years before they plan to sell it and so we also need to consider that resale value is important. It goes beyond just making your kitchen beautiful but also to understanding that the competition of the marketplace will be loaded with homes built to an energy standard that you want to stay ahead of. In this equation I see that buyers will soon be adding in energy audits to their home inspection process. If I'm right, then a home with low efficiency ratings could cost you a lot of money at the negotiating table. Making upgrades like dual flush toilets, low flow fixtures, added insulation and Energy Recovery Ventilation systems will save you money and make your home more enjoyable and desirable.

Yes, we all have a budget because we know how much we are comfortable spending on something. But we have to always look at the cost of operating something so that your investment is not costing you more than it needs to. The price of the home you are building or remodeling is really related to what it costs to operate over the life cycle of the home.

So, if done well then your home doesn’t have to be your biggest liability just waiting to need maintenance that you are required to save up for or cost a lot to heat and keep cool. Instead it can be an asset, giving you a place to live for low maintenance and expense and one that helps you actually save money and is desirable when you decide to sell it.

Matt Silva is the sales/marketing manager for New Hampshire-based Ridgeview Construction