As the cold weather leaves, you might be one of the many homeowners considering a new deck as a home improvement project this spring. Not only can building a deck provide an enjoyable outdoor living space, but it can also offer financial benefits to your property's value. You should be aware, however, that rising prices and interest rates mean that you'll need to research the costs and carefully consider your budget to decide if this is the perfect time for your decking project.
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Why Build a New Deck?
Building your dream deck comes with plenty of non-financial benefits due to the extra space and enjoyment it can provide your family and guests. However, a custom deck can make your home more valuable so you'll be increasing your profit when you eventually sell. The key is the deck needs to be well built. Also, know that the type of deck affects the cost and benefits, and that you shouldn't expect to recoup the whole cost.
For example, a 2021 study from Remodeling Magazine reported that a wood deck addition costs $16,766 on average and adds $11,038 of resale value to your home. That means you'd get back 65.8 percent of your investment. On the other hand, a composite deck addition costs more at $22,426 on average and provides $14,169 in resale value. In that case, you'd only get back 63.2 percent of your investment.
It's important to note that you won't get an immediate tax benefit, such as a deduction, for your deck building project. However, the cost would be added to your home's basis that the IRS will use for calculating your capital gains when you sell. This can mean tax savings in the future.
Consider also: Tax Deductible Home Improvements
You'll want to be aware, however, that rising prices and interest rates mean you'll need to research the costs and carefully consider your budget to decide if this is the perfect time for your decking project.
Considering Deck Construction Costs
With year-to-date inflation sitting close to 8 percent, you can expect to pay a premium for decking materials and labor. This can make the project less financially appealing, especially if you plan to use professional deck builders or are interested in a complex, multi-level deck design.
Even if you cut costs by building it yourself versus hiring deck contractors, you'll still need to budget for pricey materials. Some of these include deck boards, posts, joists, beams, hardware, nails, connectors and any roofing and landscaping needs. Supply chain issues have made lumber prices particularly high.
Since many factors determine deck building costs, you might use an online tool to provide a rough price estimate based on size and sample plans. However, the most precise option is to get a professional quote.
Assessing Financing Costs
If you need to finance your deck, be aware of recent interest rate increases that will affect loans.
Home equity loans and home equity lines of credit are popular for home improvement projects since they allow you to take advantage of your home's equity. They also usually offer better rates than alternatives like credit card and personal loans. However, even interest at just 4 percent can add up for a high-cost deck project.
Therefore, you'll want to shop around for interest rates and consult financing calculators to be aware of the total interest you'll end up paying. Also, consider how urgently you need the deck since you may be able to get better interest rates – or be able to pay in cash – if you delay.
Consider also: Can I Have Two HELOCs From Different Banks?
Finding Ways to Save Money
Since the deck design affects your costs, you'll need to carefully consider your options to fit your budget. While multi-level decks might seem appealing, you might opt for a simple deck design to better fit your budget and reduce the loan you need.
Unless you're taking on the whole project yourself, getting quotes from multiple professional deck builders increases your chances of reducing your labor and building materials costs, but you'll want to consider the company's reputation too. On the other hand, it pays to price your materials from different companies if you're doing the labor yourself. Keep in mind, though, that doing it yourself comes with the risk of costly mistakes.
In addition, the time of the year affects pricing. You can consider delaying your new deck construction until the off-season during the fall and winter months to get cheaper materials and labor. However, building a deck in winter means the risk of a delayed project due to harsh weather.
Consider also: Can I Get a Home Improvement Loan With an Owner Financed House?
- Custom Deck Builders LLC: Can I Get a New Deck in the Winter?
- Remodeling: 2021 Cost vs Value Report
- IRS: If I Sell My Home and Use the Money I Receive To Pay Off the Mortgage, Do I Have To Pay Taxes on That Money?
- U.S. Bureau of Labor Statistics: Consumer Price Index
- The Home Depot: How to Calculate Deck Materials
- Decks.com: Cost To Build a Deck
- National Association of Home Builders: Framing Lumber Prices
- Consumer Financial Protection Bureau: The Fed Is Raising Interest Rates. What Does That Mean for Borrowers and Savers?
- Bank of America: Home Equity Loan vs. Line of Credit? Here’s What You Need To Know
- Bank of America: Home Equity Rates