Best Investment of Homebuyer Tax Credit

The Senate recently voted to extend the $8,000 federal homebuyer tax credit aimed at stimulating sales to September 30, 2010 (it was originally going to end on June 30). So now it looks like an estimated 180,000 home purchasers who were already in the sales pipeline could benefit from the tax credit. [Update: The extension now appears dead in the Senate, after a June 25 vote on it, but the credit still applies to deals closed by June 30].

So what would these lucky new homeowners do with this lucrative windfall -- here are some suggestions for projects to improve the home:

Some of you might be tempted to take the cash and spend it on a "State of the Art" home theater. Nathan Ziegler, of KS Audio Video recommends an $8000 package including a 54" HD 3D plasma TV, a Bose Lifestyle Entertainment System, with a Touch Screen Remote with Lighting Control, Just remember that while you may have years of viewing pleasure, it will do nothing to increase the value of your home.

Why not use your new-found gain to take on a home project that will improve your bottom line when it is time to sell the property? According to Remodeling Magazine, this year smaller home improvements are yielding the best "bang for your buck" instead of larger projects. They surveyed Realtors from 80 markets and found that most of the top-producing improvements were exterior upgrades, illustrating the importance of curb appeal. The highest yielding improvement, at a gain of 128% of investment, was replacing the entry door. Other high yielding improvements were new siding, new roofing, and new windows.

Conventional wisdom is that the kitchen and the bath are what sells the home. This new study, however, recommends doing minor upgrades to these two rooms, rather than major remodels. In the kitchen, think about upgrading appliances and counter tops rather than gutting the room and starting over. In the bathroom, replace the landscape mirror with a smaller framed mirror, add new lighting, and re grout the tile rather than replace it. The goal is to refresh the look rather than replace it. Not only is this good for the wallet, it is good for the environment, too.

The two more substantial home improvements that get the highest return on investment are converting an attic into a bedroom and adding or enlarging a deck. These illustrate home purchasers' constant quest for more space. Adding an extra bedroom is particularly beneficial when converting a three bedroom home to a four bedroom home. Four bedroom homes are in higher demand so it immediately increases the marketability. Outdoor living and entertaining is another new trend, so increasing the size of your deck is another great investment.

Congratulations on the purchase of your first home. Remember your home is the greatest investment you will make. Make the most of it by making sound financial choices for improving it.

Barbara Green is The Design Diva and owner of Sensibly Chic Interior Design. She creates one-of-a kind interiors for homes, offices, motorcoaches, and yachts. Follow on Twitter @thedesigndiva.


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