الأربعاء، 20 يونيو 2018
How to Generate Sales for a New Product Release
So you’re ready to launch a new product.
Congratulations.
Regardless of your business type or industry, it’s important for brands, both new and old, to be innovative to stay relevant. I know how much hard work you’ve put into this new release, so I want to commend you on that.
Whether you’re releasing a new product or an extension of an existing product line, you’ve got to make sure your marketing efforts lead to sales.
Think about all the blood, sweat, and tears you put into this creation. Okay, maybe not blood, but you get what I mean.
This goes all the way back to your early brainstorming sessions as well as your research and development phases. You may have even had some failed attempts.
Oh yeah, and what about all the money you invested in this new product? Can’t forget about that.
If you can’t get consumers to buy your product, you won’t get an adequate return on that investment.
But those of you who are able to effectively promote your new product will enjoy the high sales. I’ll give you some tips and advice that will help you out.
Build hype early
If you wait until your product launches to start marketing it, you’ve waited too long. Those of you who failed to start early are already behind.
But don’t worry. I’m not here to reprimand you. There are still ways in which you can generate sales after the item is released, but we’ll talk about those later.
A great way to build hype in the early stages is by turning the announcement into a big deal. Apple is famous for this with its keynote presentations.
Since the company has been using this strategy for years, consumers now anticipate the announcement itself. By the time Apple announces a new product, people have already decided to buy it.
Announcing new products at a particular event will get your audience ready. They’ll want the latest and greatest product or technology.
The anticipation of the release makes the product that much more desirable. Now you’ve got them hooked before it’s even released.
Consumers will be lined up around the block to buy your new product because they’ve been thinking about it for months. They already know the features and benefits of it because they’ve done the research.
Building hype before the release will help you generate sales on the release date as well as the subsequent days and weeks.
Start taking pre-orders
Again, this strategy relates to the idea of starting early.
You don’t need to wait for your product to be in stock to start generating sales. Let your customers pre-order the product so you can secure profits right away.
Offering pre-orders has tons of benefits. One is collecting money early. But pre-ordering an item also gives your customers a sense of exclusivity.
It will give customers the illusion that they have something before anyone else does. They’ll be one of the first people to have the product in their hands.
Furthermore, if you take pre-orders, people may think there is a chance the product may sell out. If they don’t order it now, they may not have the chance to buy it on the official release date.
Pre-orders ensure your new product gets off to a strong start, which is better than it would do through the average product life cycle.
There’s no reason to have a slow introduction phase if you can avoid it.
In addition to wanting to be exclusive or have the product before anyone else, think of other reasons why a consumer may be interested in a pre-order.
Discounts.
Everyone loves getting a deal. Depending on your brand image and pricing strategy, you could potentially offer a discount to customers who pre-order the product to help drive sales.
Taking orders before release can also help you gauge your inventory. You’ll have a better idea of how much of the product you’ll need to have on hand for the initial release.
This is important information in terms of your production costs, and it will help you maximize your ROI.
Target your most loyal customers
Just because you’re releasing a new product doesn’t mean you need to find new customers.
Don’t get me wrong. New customers are great, and they are always welcome to buy. But you already have an existing clientele of people familiar with your brand and existing products. Those are the customers whom you should contact first.
Your email marketing list is a great place to start.
These are the customers who are so interested in your brand and products that they signed up to hear from you on a regular basis. So send emails before and after the product launches.
Here’s an example of an email sent out by Lululemon:
This email is promoting new colors of an existing product. So it makes sense the company is starting with its existing customers, who may already be familiar with this product.
Even if it was a new product, telling your email subscribers about it first is still a viable strategy.
It’s also worth noting that you have a 60-70% chance of selling to a current customer. But you only have a 5-20% chance of a new customer purchasing a product.
If sales are your goal, focusing on new customers won’t be as effective.
Research shows that it’s six or seven times more expensive to acquire a new customer than it is to market to an existing one.
When it comes to your ROI, marketing to your most loyal customers is the best bang for your buck.
Run a contest
Another way to generate sales for your new product is by giving it away.
I know what you’re thinking. This sounds counterproductive. How can you make money by giving something away?
You need to learn how to run a profitable giveaway. Contests will get people interested in what you’re selling. Rather than promoting it by saying “here is our new product,” put a unique spin on it by running a contest.
The cost to run a contest is relatively inexpensive as well. The only major expense is the cost of the item you’re giving away, plus maybe some additional shipping charges.
But the benefits will be worth it. In my opinion, social media platforms are the best places to set up your contests. Here’s why:
Running your contests on social media will expose your new product to a larger audience. As a result, it will help you generate more sales.
Here’s a hypothetical example to show you what I’m talking about. Let’s say you run a contest on Instagram. To enter, people need to post a picture to their personal Instagram profiles and include a relevant hashtag.
Let’s say 1,000 people enter your contest. That’s 1,000 photos of your brand just from one contest. Tons of people will see these pictures.
Of those 1,000 entries, you’re selecting only three winners. But there are still 997 people who want your product, plus who knows how many people who were exposed to it.
They’ve already built up excitement about using it. There is a good chance a large chunk of that group will still buy it.
As you can see, something as simple as giving away three items can generate hundreds or potentially thousands of sales.
Offer a discount
Typically, most brands don’t offer discounts for new items. When a new product gets released, they discount older items.
While I can understand the thinking behind this concept, it doesn’t necessarily mean it’s correct. People love to get a deal. Put your pride aside for a moment, and recognize that consumers are price sensitive. They’re also more intelligent than you think.
If they realize your new product will eventually go on sale, they have no reason to buy it right now. But by the time it goes on sale, they may have forgotten about it and lost interest.
While the product is fresh in the minds of the consumers, close the deal.
Mark down the price right away. If you want, use an age-old marketing trick. Jack up the initial retail price, then discount it making sure you can still profit.
Psychologically, it’s going to be tough for people to justify paying a full price for a product when they see cheaper items surrounding it on your site and in stores.
Blog about it
Use your blog to your advantage.
Start talking about the product in your posts before it gets released. Continue talking about it after the release as well.
As you can see from these numbers, your blog can help you generate new leads. Consumers trust advice from blogs.
Sure, it’s obvious your readers will know your opinion is biased. They realize you won’t say anything bad about the products you want to sell.
But that shouldn’t stop you from writing about your new release. You can also reach out to other websites and try to get featured in guest posts.
Set up a link directly in the posts that brings the readers to the checkout page with the new product in their carts. Reducing the steps in the process increases the chances of driving sales.
Be innovative
If your new product is boring, is the same as your other items, or is already available from other retailers, people won’t be thrilled to buy it.
But if it’s unique, improves their lives, and enhances their customer service experience, they’ll be much more willing to spend their hard-earned cash.
Be creative.
Start by conducting the right market research.
What do your customers want? Give it to them.
Try to make drastic improvements to existing products that have problems. If your product is revolutionary, it will sell like crazy.
Highlight the new product on your website
Now that your product has launched and is available for purchase, don’t bury it on your website.
Showcase it on your homepage. Take a look at this example from the GAP website:
The new arrivals are the first thing featured on its homepage.
Do you notice anything else about this site? It also offers discounts on its new items, a strategy I’ve previously discussed.
You can feature your new product in other places of your website as well.
Let’s say your site has a search filter, which it should, so I’m assuming it does. When someone searches for something by name or by a category that fits the description of your new product, it should be the first item they see on the page.
If they have to navigate through pages and pages of results to find your new product, it will decrease the chances of them buying it.
Here’s a look at how Michael Kors sorts products on its ecommerce page:
You can employ a similar strategy to increase the exposure of your new products.
This will help you generate more sales.
Timing is everything
Your new product might be great. However, if you release it at the wrong time, you won’t get lots of sales.
For example, let’s say you’re planning to release a product on a Thursday, which just happens to be July 3rd that year. You can’t just do that without taking things like that into consideration.
July 4th is obviously a national holiday celebrated by Americans. Lots of people will take July 3rd off work and enjoy a nice long weekend with family and friends.
They could be having a barbeque, traveling, or spending the day on the beach. They probably won’t have tons of time or incentive to buy something online.
Your opening weekend is going to be a dud. This won’t build much buzz around your product release.
On the flipside, if you were releasing a product that could be used on the 4th of July, such as American flag apparel, you’ve got to make sure the release date gives your customers enough time to get the item before they need it.
If they need it for the 4th, releasing it on the 3rd won’t get you sales either.
You should also keep seasons in mind as well. For example, nobody in New England is going to buy snow gear in the summer.
When it comes to proper timing, ecommerce brands can build hype for the holiday season. You’ll want to release your products when consumers are ready and willing to spend money.
Use video content as a promotion tool
Don’t just share pictures of your new product. You’ll want to give people as much information as possible about what they’re buying.
That’s why video promotions are a viable strategy. There are lots of ways in which you can accomplish this.
You can use commercial style promotions to showcase your product. This can be done before and after your product is released.
Once the new product is available for purchase on your site, include a video demonstration to show website visitors how it works.
Recognize what type of content your target market wants to see. Consumers would rather watch a video about a product than read about it.
Furthermore, 90% of consumers say videos about products help them make buying decisions. Customers are 64% more likely to buy a product online if they’ve seen a video about it.
Share the videos on your website, social media platforms, marketing emails, and all your distribution channels.
Jump on the live video bandwagon. Showcase the product with live video streams as well.
These tactics will help you drive sales for your new product release.
Conclusion
Releasing a new product can be intimidating. You put so much effort into the release that you need to make sure everything goes smoothly.
If you don’t generate sales, your new product won’t turn a profit.
That’s why it’s important for you to start building hype for your product before it gets released. Take pre-orders, and start collecting money right away.
Rather than looking for new customers, promote the new release to your most loyal customers.
Come up with an innovative product. Run contests, and offer discounts as promotional methods. Talk about the new product in your blog posts.
Showcase the item on your website, and consider the timing of your release.
Create video advertisements, and share them on all your distribution channels.
If you follow the advice in this guide, your new product will generate sales and drive high profits as a result.
What marketing strategies are you using to drive sales for your newest products?
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The Snowball Effect of Retirement Savings
If there was one financial move that I executed well during my first few years of professional life, it was my decision to save heavily for retirement right off the bat. My first post-college employer offered a great retirement plan and offered robust matching and my mentor, whom I trusted deeply, told me I should go in there on the very first day and contribute enough to get every drop of that matching money, which I did. Thank goodness.
At first, the decision to contribute felt like a monumental one, one where I had total control over the situation. My total contribution was about 20% of my salary and that felt like a lot.
I started contributing right at the end of the recession of 2002 and, for the next six years, I contributed steadily to my retirement plans (across two different employers), receiving matching at both places.
In 2008, I stepped away from that career path and moved to my own, starting a Roth IRA and contributing to that without matching because I’d seen the power of those contributions.
Over the years, I’ve watched those initial contributions grow and shrink and grow again. I can’t add more to those accounts at this point, but I can certainly watch them grow like a terrarium inside of a glass bottle, and I’ve learned a few things along the way.
For starters, for most of the last several years, those investments have grown more each year than I ever contributed to them in a single year, without me putting a drop in there. I personally contributed between $5,000 and $7,000 a year to retirement in those early years and those accounts grew by more than $7,000 a year on their own most of the past several years. This is a function of the power of compound interest.
Another interesting note: I’ve contributed more to my Roth IRA than I ever did to those accounts, yet the balance of my Roth IRA is lower in total than those older accounts. This is, again, a function of the power of compound interest, and taken together, it should be clear to anyone that it makes a ton of financial sense to contribute as much as you can as early as you can to your retirement savings.
However, that’s not really what I’m writing about today.
As you progress down the road to retirement, the contributions you make have less and less of an impact and the ins and outs stock market has more and more of an impact.
Let’s say, for the sake of convenience, that you have an investment account that returns either 10% per year and -20% per year. You have five years of 10% returns and then a sixth year of -20% returns and then the cycle repeats itself.
You contribute $10,000 at the start of year one of this cycle, and that’s all.
At the end of year one, where you earn 10%, you’re left with a balance of $11,000.
At the end of year two, where you earn another 10%, you’re left with a balance of $12,100.
At the end of year three, where you earn another 10%, you’re left with a balance of $13,310.
At the end of year four, where you earn another 10%, you’re left with a balance of $14,641.
At the end of year five, where you earn another 10%, you’re left with a balance of $16,105.10.
At the end of year six, where you lose 20%, you’re left with a balance of $12,884.08.
As you can see, over those six years, you earned $2,884.08. You could have altered that return a little by contributing to a different investment – something that returned 7% a year every single year would have earned you $5,007 over that timeframe, for example. That’s a solid difference, but it’s not a huge one. The investment you choose will definitely make a difference early on, but the difference isn’t enormous. Your earnings difference over six years on that $10,000 initial investment will probably range by a thousand or two if you’re comparing similar investments.
Now, let’s look at a different example.
At the end of year one, where you earn 10%, you’re left with a balance of $11,000. You invest another $10,000 at this point, so your new contribution makes the balance go up 90.9%.
At the end of year two, where you earn another 10%, you’re left with a balance of $23,100. You invest another $10,000 at this point, so your new contribution makes the balance go up 43.3%.
At the end of year three, where you earn another 10%, you’re left with a balance of $36,410. You invest another $10,000 at this point, so your new contribution makes the balance go up 27.5%.
At the end of year four, where you earn another 10%, you’re left with a balance of $51,051. You invest another $10,000 at this point, so your new contribution makes the balance go up 19.6%.
At the end of year five, where you earn another 10%, you’re left with a balance of $67,156.10. You invest another $10,000 at this point, so your new contribution makes the balance go up 14.9%.
At the end of year six, where you lose 20%, you’re left with a balance of $61,724.88.
What’s the point of this illustration? Early on, your contributions make an enormous difference to your balance, but as time goes on, your contributions gradually become less and less important. After several years, most of the time the ins and outs of the stock market will have far more effect on your savings than your contributions. Your contributions have a smaller and smaller impact in terms of percentage, but the impact of the market stays the same in terms of percentage. Eventually, your contributions by percentage are substantially below the impact of the return on your investment.
In other words, once you’ve contributed for several years, your investments, if put into something reasonably aggressive, will start to grow so fast that in a typical year they’ll earn more on their own than you contribute. This gets more and more and more true over time, because as your investment grows, the annual returns grow.
What this feels like to me is pushing a snowball down a hill. At first, you have to really push and push and push a snowball around to make it sufficiently big, but there comes a point where that ball starts to have momentum on its own and it starts to roll on its own without you having to keep pushing it. You can keep pushing it, but you’re adding less and less and less force to that snowball rolling down the mountain and it’s picking up more and more and more steam on its own.
It’s at this point that making a good investment choice becomes increasingly important. When your balance on your account is $1,000, the difference between a 9% return and a 10% return is just $10. When the balance on your account is $100,000, that difference jumps to $1,000. Furthermore, that difference accelerates over time because that return is reinvested.
What’s the lesson here? The absolute most important thing you can do for your retirement savings is to just start contributing now. Don’t worry about choosing the perfect investment option. Just start contributing as soon as humanly possible. The earlier you start, the quicker you can get your retirement savings snowball big enough that it starts rolling down the mountain on its own momentum.
Later on, it will make sense to start looking more carefully at your investment options, not so much because a strategy change is in order, but to make sure you have your money in an option that charges low fees. I have every drop of my retirement savings in index funds for this purpose – they’re low fee investments that basically just match the overall stock market.
However, you don’t have to worry about that right now if you haven’t even started saving. The most important thing, by far, is that you get started right away. That’s far more important than what investment you choose. You can sit there blindfolded and choose one at random and as long as you eventually get around to figuring out which one you want in the next several years, you’re going to be in far better shape than waiting.
Start now. Start your snowball. Contribute something to retirement and start doing it consistently. Don’t worry about the specific investment that much, at least not right now. You’ll never regret this.
The post The Snowball Effect of Retirement Savings appeared first on The Simple Dollar.
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Honey, They’re Shrinking the Sam’s Club in Texas. What’s Going on?
Sam’s Club will open a new location in the Lower Greenville neighborhood of Dallas later this year, the company said in a blog post last week.
“We’ll lean heavily into grocery and fresh food items, such as grab-and-go meals,” SamsClub.com CEO Jamie Iannone wrote. The store will also offer self-serve returns, same-day order pickup and Scan & Go checkout.
The store will also feature digital signage.
Why open a smaller store when parent company Walmart could simply open a new Express location or a Neighborhood Market?
It’s all about being a member. And that’ll cost you at least $45 per year.
The store will be restricted to Sam’s Club members, who will only need to traverse 32,000 square feet to fill their carts, instead of the chain’s typical 80,000-plus square feet.
At less than half of the club’s typical footprint, the store will likely feel more like a small grocery store, albeit with supersized containers of the items you might pick up regularly.
The new format seems like a play on the largely self-service Amazon Go store, right down to the membership requirement. And with grocery stores vying for customer loyalty, Sam’s Club may be hoping to snag customers for more frequent visits, not just the occasional stock-up trip.
A Sam’s Club representative said that the Lower Greenville store is the only one planned at this time.
Lisa Rowan (@lisatella) is a senior writer covering the retail and grocery industries.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
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The Cost of Dog Care is Extreme. Here’s How to Make it More Affordable
If you were my neighbor at the time, you might have even spotted me stripping down to nothing in my backyard at 3 a.m. to shake the fleas out of my sweatpants — but that’s another story.
As the proud parent to two dogs, together weighing 250 lbs., I’ll be the first to admit that pet ownership can be expensive. With vet bills, preventative care, quality food, grooming, toys and cleaning, the costs can make a huge dent in your budget.
To keep costs low, my partner, Nick, and I have gotten creative. Below are some of the ways we have saved money on pet care. While these all apply to raising dogs, I also have included some unique ideas I have found for parents of cats and birds.
DIY Flea Repellent
To keep our home flea free and our dogs safe from the threat of Lyme disease and other flea afflictions, we keep Greyson and our Great Dane, Clyde, on flea meds during the warmer months.
During the flea off-season, it is still important to keep our pooches safe. Rather than spend $30 per month to treat both of them, however, Nick and I create a milder flea repellent that does the trick during low-risk months.
The recipe we use includes water, lemons, lavender and witch hazel. And it makes the dogs smell amazing.
The author of this recipe uses it on her cat in the summer, but after battling fleas in my birthday suit, I still shell out the money for the strong stuff in peak season.
Homemade Dog Treats
Dog treats are great for training your dog, rewarding good behavior and feeding your pooch something extra just to see him get excited. But these treats, especially high-quality dog treats, can be expensive.
Nick and I invested in a food dehydrator for about $35 that has more than paid for itself with the amount of treats we make. The favorite in our house is dehydrated sweet potatoes, but you can find plenty of recipes online for other snacks ranging from chicken jerky to salmon jerky.
Don’t want to invest in a food dehydrator? Try one of these three recipes featured in The Penny Hoarder.
Cheaper Pet Food
For the longest time, Greyson was on Taste of the Wild, while Clyde went through giant bags of Blue Buffalo twice as fast. They are both big dogs with food allergies and sensitive stomachs, so finding the right food for them was a challenge — and a major expense.
But then we got our Costco membership. Costco’s Kirkland brand offers its own Nature’s Domain dog food at a much better price, and the ingredients were comparable to Clyde’s food and the same as Greyson’s.
A 30-lb. bag of Taste of the Wild Pacific Stream (salmon and sweet potato) cost us $50, but the bag of Nature’s Domain Salmon Meal and Sweet Potato ran us just $35. Even if we weren’t using our Costco membership for our groceries and paper products, the membership would more than pay for itself with the amount of food our dogs eat.
I swear by Costco’s dog food. Since switching, Clyde’s digestive problems have improved, and Greyson’s coat is much brighter and more colorful than it ever had been before. The fact that we save roughly $540 a year on dog food is an added benefit.
Bathing at Home
Grooming can be costly, especially for long-haired dogs. Even if your dog doesn’t need special grooming, regular baths are still important, (though the frequency will vary), to keep allergies at bay and skin healthy.
Unfortunately, Clyde is too big for a regular tub. If you own a large dog and can’t fathom how you will bathe him, Nick and I have a few ideas. The first is the more obvious: Buy a kiddie pool. If you have a backyard and a garden hose, fill up the pool, put on your swimsuit and hop in with your dog for bath time. We spent $15 on ours, and it has made baths much more manageable and saved us from having to seek professional grooming.
Our second solution is untested for now. Nick and I just bought our first home together. On our list of renovations in our unfinished, concrete basement is our very own dog-wash station. For the price of a small floor barrier, some piping and a detachable shower head, we will soon have a walk-in “bathroom” in which to wash both dogs without dirtying our shower or trying to find the warmest winter day for a backyard bath.
(A note: The second purchase will run about $75; if you do not intend to regularly bathe your dog and also to continue owning dogs your whole life, the investment may not be as financially sound.)
Durable Toys
Our dogs destroy most of the toys we find at the store within minutes. If your dog is particularly aggressive with toys, consider investing in high-quality, durable toys that may cost more but will last much longer.
The toys that hold up the best with our dogs have historically been Kongs, Nylabones and rope toys, which are great for tug-of-war. Rover.com includes a list of durable toys that are well worth the investment.
Nick and I also get creative with DIY toys at home, particularly when it comes to feeding and separation anxiety. Dogs can bloat from eating fast, so we often make a game out of mealtime using a muffin tin that forces Clyde to slow down.
To help with Greyson’s separation anxiety, we like to line a small bowl with a layer of peanut butter, mash in pieces of his food and then stick it in the freezer. When we leave, we put out this “busy bowl,” which takes a lot of time (and licking) to unfreeze and makes it a challenge for him to find the food.
Here are some more DIY dog toy ideas from The Penny Hoarder.
Boarding Costs
Nick and I love to travel, but it isn’t always easy when you have dogs at home. Even so, we have never paid for boarding — and never plan to.
Instead, we have developed strong relationships with several other dog parents. Some are friends, some are family and some are people we have met at the dog park.
Our rule for leaving our dog with caretakers for an extended time: We have to have had several opportunities to get to know the people and see how they take care of their own animals at home and how our dogs behave with them and their pets. We typically do a trial sleepover as well.
The relationships are mutually beneficial. When we leave our dogs with sitters (or invite the sitters to stay at our place with the dogs), we know that we will, in turn, be asked to watch their dogs — and we love to do it. It saves everyone money on boarding, it is much less stressful for the dogs and it is fun to get to play with extra dogs for a couple weeks each year.
Cleaning
Accidents happen. Whether it’s a muddy dog barreling past you at the back door or a dog on medication that makes it difficult to control bodily functions, there is a strong chance you will need to do some cleaning. Pet hair alone will transform the color of your carpet into something unsightly.
Because I have rented a fair share of apartments and houses — and lost an equally fair share of pet deposits due to stains that I didn’t properly treat right away — I have now invested in a carpet cleaner and a good vacuum.
The Spruce has identified top carpet cleaners for pet owners; Nick and I chose this BISSELL carpet cleaner. As a result, we got our last deposit back in full and intend to get the deposit back at the house we just vacated. A $180 investment has already helped us save more than $1,000 that we likely would have forfeited otherwise. But more importantly, our house feels fresher and cleaner, despite having two dirty dogs roaming freely.
Preventative measures — flea meds, high-quality food and regular exercise — will pay off long-term in vet bills you avoid. They also will ensure a better quality of life for your companion.
Greyson and Clyde have proved to be expensive (yet incredibly rewarding) additions to our family. We use the tips above, and pet insurance to help with vet bills, to keep costs manageable for our family — and it has made a world of difference.
Timothy Moore is an editor and freelance writer based in Ohio. He and his partner love to take their two dogs, Clyde and Greyson, for long hikes and swims in the lake. Clyde and Greyson mostly love to eat, sleep and sniff gross stuff.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
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Should You Remodel or Move?
If you’re feeling like you’ve outgrown your current home, you might be considering a move. And with housing markets around the country heating up with the weather, it’s peak house hunting season.
But what if the idea of moving stresses you out? What if you like your yard and your neighborhood, but just not your house? In that case, you may want to consider an alternative option. Moving isn’t the only way to get a larger home or upgrade your living space, after all. You could also remodel what you have — a move that has become increasingly popular as housing prices continue to surge and available inventory remains surprisingly low.
Moving vs. Remodeling: Pros and Cons
Remodeling may not be as exciting as buying a new home, but it could be a more cost-effective move in the end. This is partly because moving itself is costly — as is selling your existing home.
But it’s also because home prices have been rising dramatically. Real estate data firm CoreLogic’s home-price index shows that, nationwide, housing prices were up 6.9% in April 2018 compared to the year before, and they’re expected to climb another 5.2% through May 2019.
Obviously, rising prices are a huge consideration for anyone considering moving. Sellers may receive a higher sales price for their home, but they’ll likely pay more when they go to take out a mortgage for a new property. Plus, there are other costs to be aware of. Surging sales prices can also mean higher prices for other essentials, such as homeowners insurance and property taxes. All of those expenses can and will add up over time.
Should you move, or should you remodel? Experts we spoke to say you should consider the pros and cons of both options before you take steps in either direction. Here are some of the advantages and disadvantages to consider:
Advantages of Moving:
- You can physically move your location. John Bodrozic of Home Zada says one of the biggest advantages of moving is the fact that you get to select a new location to call home. This can mean looking for a considerably larger or smaller home based on your preferences, but it can also mean choosing a better neighborhood or a lot in the country if that’s what you want. You could even move to an area with better schools, which is something you don’t get when you remodel your existing home.
- You don’t have to live in a construction zone. If remodeling your home would require an invasive project like a bathroom or kitchen remodel, moving could save you from dealing with the mess and the stress. A major kitchen overhaul could leave you without a place to prepare food for months, after all. This can be inconvenient and costly.
- You don’t have to deal with contractors. While remodeling your home could seem ideal, dealing with contractors is rarely stress-free. There are always hiccups when you remodel or build, and not everyone wants to deal with the drama or the expense.
- You can purchase a home that’s 100% turnkey. Earl Correll, president of Texas-based On Point Custom Homes, says that moving gives you the option to buy a home that’s been remodeled and upgraded to your specifications. If you buy a home that’s in great condition already, you can pack up your stuff and move right in after closing.
Disadvantages of Moving:
- You may not get exactly what you want. One major reason home prices have been rising is the lack of inventory – and that means you may not have a ton of options in your desired area. According to Correll, it’s pretty common to find homes that check off some of the boxes you want — but not all of them. “This means you’ll probably have to compromise on a few wish list items,” he says.
- You may have to leave an area you love. If you love your current neighborhood and can’t find something bigger in your area, leaving the area to get what you want can be a major disadvantage. You may love your new house, but what if you don’t love your new neighborhood or your child doesn’t like their new school?
- Buying a home and moving can be time-consuming and stressful. Bodrozic says that dealing with finding a new home, getting financing, and closing on the new home while selling your current home can be a huge hassle. Timing can be especially tricky with homes flying off the market in an average of 34 days — the fastest rate in years, according to Redfin.
- Moving is expensive. While you might find a “deal” on a new home that brings it within your price range, don’t forget the costs of selling your home and moving. You’ll likely need to pay around 5% to 6% of the sales price in real estate agent commissions when you sell your existing home. You may also have closing costs on both homes, moving costs, and the costs of upgrades (paint, new carpet, etc.) for your new home.
Advantages of Remodeling:
- You can plan a remodel to meet your exact specifications. Ethan Vickery of Triplemint Real Estate in Manhattan says that remodeling lets you choose exactly how everything is created and finished to suit your needs and tastes. This is a big contrast to selling your home and moving since your new home won’t be designed just for you.
- You may be able to use home equity to pay for the renovation. If you have a lot of home equity, a home equity loan or HELOC would allow you to use your home as collateral and borrow against its value to pay for the remodel. Borrowing against home equity can be less costly and less of a hassle than taking out a new home mortgage as well.
- If you love your neighborhood, you don’t have to move. Remodeling lets you stay where you’re at, which can be a huge advantage if you love the local schools, your neighborhood, or the area in general.
- You can avoid the costs of moving and selling your home. While remodeling isn’t cheap, you can avoid the realtor commissions, moving costs, and the money you’d likely spend getting your new home exactly how you want it.
Disadvantages of Remodeling:
- You’ll probably face some surprise expenses. Correll says it’s extremely common to run into unexpected issues during a remodeling project. “This is especially true if you are taking on a large-scale project that includes tearing down walls, moving plumbing, adding gas lines and so forth,” he says. Unfortunately, these surprise expenses can cause your remodeling budget to surge.
- Remodeling can be a pain. Bodrozic says that the home improvement process can be mentally tough, especially when you’re dealing with budgets, contracts, contractors, product selections, and potential delays. Depending on how intrusive the remodel is, you might have to live in a construction zone for months or even stay with family or in a hotel during the worst of it.
- You may not get your money back out of your remodel. While remodeling your home can be cost efficient, most remodeling projects cannot offer a 100% return on your money. According to the 2018 Cost vs. Value Study from Remodeling Magazine, a minor kitchen model brought an 81.1% return on average nationally last year — meaning a $20,000 kitchen remodel would only increase a home’s value by about $16,220. However, those who paid for a major kitchen remodel only recouped 59% of their costs during resale.
Other Issues to Think Through
In addition to the considerations above, there are financial implications that come with both choices. Bozrodic says you really have to run the numbers on how much equity you have in your current house, the price point of what a new house will cost, and whether either option will leave you better off financially.
It also makes a difference whether you got a great deal on your existing home or not. If you bought low and housing prices are currently high where you live, you may not want to start over with a bigger house and a bigger mortgage. You may have lots of equity in your current home, but you’ll deplete it if you sell and buy a home at a much higher sales price.
On the flip side, there are times when you don’t have much of a choice in terms of what to do. Vickery notes that remodeling isn’t always an option, since there are times when even a full remodeling project won’t address the biggest problems with your home. If you live in a condo, for example, you probably can’t just add a room for more space.
Finally, don’t forget that moving may have tax consequences that could be either good or bad. For that reason, it may be wise to consult your financial advisor or accountant to see how selling your home or moving could impact your bottom line.
Move or Stay Put? Here’s How to Decide
While there are no hard and fast rules to determine whether you should sell your home or stay put, realtor Don Cramer of Urban Nest Realty in Las Vegas says there are plenty of questions you can ask yourself that will help you decide.
For starters, you should ask yourself what your housing goals will be in the next five to 10 years. If you like your home and it works for your job and your family, then it can make sense to remodel and work with what you have. If you plan to move in a few years anyway, then you may want to consider staying where you are and not remodeling, on the other hand. Since it’s unlikely you’ll get all your money back out of a remodel when you sell, spending a ton of cash on a huge project may not make financial sense.
Also consider how your lifestyle will come into play — both today and tomorrow, says Cramer. Are the kids now out of college and starting families on their own? If they are or soon will be, you may not need a larger home at all and could benefit from a simple remodeling project to improve your home’s flow or make it more comfortable.
Also consider your finances. Moving can be extremely expensive, but so can remodeling. Before you choose either option, make sure you can truly afford it. Money you borrow will ultimately need to be paid back, so you should be prepared to pay for your dream home for the long haul.
Holly Johnson is an award-winning personal finance writer and the author of Zero Down Your Debt. Johnson shares her obsession with frugality, budgeting, and travel at ClubThrifty.com.
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- Five Things I Was Willing to Give Up to Save Money
Have you ever had to decide between remodeling and moving? What criteria did you consider? What did you decide to do in the end?
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Should I open a Lifetime Isa?
A reader asks if he should open a Lisa for a house purchase when he has little credit history
I am in my late 30s and don’t own my home. I am considering opening a Lifetime Isa (Lisa) before I turn 39 and using it to save and fund either my retirement or a house purchase. Am I taking a risk in putting money into a Lisa when there is no guarantee that I can get a mortgage?
I am concerned as I don’t have much credit history, having never had a credit card, and in recent years I’ve lived in a property where all utility bills were covered by my partner’s employer.
Initial diagnosis
Scott Gallacher, director of wealth manager Rowley Turton, believes your fi rst task should be checking your credit score through specialist companies such as Equifax or Experian.
You can quickly sign up with either company and download a free credit report to see exactly what information they hold on file about you.
Once you know what potential lenders will learn about your financial history, you can see if there are any mistakes or issues that may cause you problems.
Mr Gallacher says: Martin Bamford, managing director of financial planning fi rm Informed Choice, agrees your poor credit rating might negatively impact your ability to get a mortgage but suggests there are steps you can take to improve this in a relatively short period of time.
“The act of borrowing money and paying it back reliably is all it takes to build a credit history,” he says.
For example, applying for a credit card and store card to use for a few purchases and paying both back in full before any interest charges are applied will help your case in the future.
“You are also likely to have a credit history if you have owned a mobile phone on a contract basis,” he adds.
Treatment plan
However, regardless of the outcome of your credit history research, Mr Gallacher insists this shouldn’t deter you from putting money away.
“The key advantage of a Lisa is that it can be used for buying your first home or being available tax free from age 60 to help fund your retirement,” he says. “Consequently, even if you can’t get on the property ladder it will still be a helpful part of your long-term planning.”
Mr Bamford also concludes that it makes sense to open a Lisa before you reach the 40-yearsold age limit if a home purchase is a possibility.
“You can then continue to contribute through to your 50th birthday and receive the 25% government bonus on contributions each year up to £4,000,” he says.
Alternative treatment plan
However, there are other factors to consider before opening a Lisa. The risk you are concerned about refers to the withdrawal penalty, points out Danny Cox, a chartered financial planner at investment fi rm Hargreaves Lansdown.
“A Lisa receives an annual bonus of £1,000 for every £4,000 saved, but if withdrawals are made other than to buy a first house, or before age 60, a 25% penalty applies,” he says.
So, if you don’t buy a house, there is no risk from a withdrawal penalty as long as the Lisa savings are held until age 60.
That said, Mr Cox concludes: “In my view, it would be a good idea to open up a Lisa before age 39, using the minimum balance, so you have the option to save more later.” It’s also worth speaking to a mortgage adviser who can assess your situation, points out Alistair Cunningham, a chartered financial planner at Wingate Financial Planning.
“It is possible for two people to use a Lisa to buy together, so a joint mortgage might be possible,” he says.
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