Growing housing markets across Canada have spurred home renovation spending. Canadian renovation spending surged at an annual average rate of 7 per cent over the last decade, as TD Economics reported at the end of September 2013. Canadians are investing in home improvement projects to make their lives more comfortable as well as increase their homes' overall value. However, boosting the value of your home by remodelling is a very difficult and risky task that requires a lot of preparation and knowledge. Some renovations have a greater return on investment than others, so if your main aim is to increase your property value and your chance of selling, you should do your homework.
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John Schick, remarked,
People often believe that if they invest in their home, the value of their home will increase by the amount that they invested. This is usually not the case and home owners need to make wise choices before investing in their home, especially if they are thinking of selling shortly after they renovate their home. Doing a little research first, like most things, is the prudent thing to do. In addition to information online, consulting a Realtor would also be a choice.
There's no guarantee that your home renovation project will increase the sale price of your house, but it might improve your position among competing sellers.
First of all, if you consider home renovations as an investment, then you should forget about the emotions. Even though you might love a new swimming pool or wall-to-wall carpeting, in the eyes of potential buyers, it might be an unwanted addition that they're not willing to pay for. Such controversial additions might even discourage buyers and eventually force you to go down in price. Consider that home features that might be dangerous and expensive to maintain, such as a swimming pool or trampoline, will most likely not increase your property value.
Moreover, investing in expensive high-end upgrades won’t boost your home’s value if the upgrades aren't consistent with the rest of the house or if they would make your home overpriced for the neighbourhood. You should also be very careful with taste-specific improvements such as wall-to-wall carpeting, since it's difficult to recoup the costs. Another issue you should keep in mind is that the improvements are visible. Investing in a new plumbing, air conditioning, or heating system may be important, but it won’t help you get a better deal. Buyers expect everything in the new home to work as it should and are not willing to pay more for invisible improvements.
There's a lot of truth to the saying that the kitchen is the heart of a home. It's the room where family members cook, eat, and gather together. A kitchen has lots of impact on potential buyers, so people tend to spend huge amounts of money on kitchen renovations. Using materials such as granite or stainless steel is costly — especially if the kitchen renovation is custom. As OntarioContractors.com informs on its website, the return on investment of a minor kitchen renovation is 79 per cent, while a major kitchen renovation recovers 70 per cent of remodelling costs.
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Even though the kitchen is a very important room, you should keep in mind that it's just one part of your home. Avoid overspending.
Clayton Spanton is the owner of Span-Co, a Toronto-based full-service construction contractor. He told us,
Kitchen renovations (cabinets, counter tops, et cetera) always add to the home. The kitchen should look appealing. This could involve a refacing approach or painting maybe just backsplash tiles. Every home and neighbourhood value would help dictate how much to undertake for improvement work — just spending $25,000 to $50,000 on a new kitchen project does not mean you automatically will recover the investment and more.
In addition to aesthetic improvements, you might want to connect the kitchen to a living room or other adjacent rooms, creating a more spacious feel. Potential buyers picture themselves having Christmas dinner or other celebrations in the new home, and a bright and spacious kitchen might just be the key factor to help them decide. Plus, don't forget about new energy-efficient appliances.
An old and unkempt bathroom is a huge turn-off for potential buyers, but a renovated bathroom has a return on investment of 69 per cent, according to OntarioContractors.com. Bathrooms provide a place where people want to relax after a rough day, so people want their bathrooms to be as comfortable as possible. There's high demand for master bathrooms with large airy showers and soaking tubs. Also, you might also want to invest in grab-bars and high-quality tiles.
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An important aspect of every bathroom is proper light. A bright bathroom feels fresher and cleaner, which is very important for potential buyers. The same concept applies to spacious bathrooms with lots of storage compared to small cluttered bathrooms. Buyers prefer clean designs and high-quality materials. On the other hand, bathroom renovations don’t necessarily require a huge budget. If the bathroom is in good condition, then you can increase the resale value through simple small improvements like replacing the shower faucet, fixtures, toilet, et cetera.
Clayton Spanton commented,
Should the existing home already be in good updated condition, then would a $200,000-to-$300,000 addition or larger improvement project bring a higher return than the investment spent? In a highly valued neighbourhood, you could get more return from investment spent. This is where a Realtor's knowledge would be helpful. But generally, I think small Improvements would give the best returns.
Instead of spending your funds on expensive invisible improvements, you should focus on curb appeal and the first impression that your home makes on buyers. It's important for buyers that the home looks fresh and clean. The most efficient way to achieve this goal is to give your home a fresh new coat of paint. According to statistics from the U.S. National Association of the Remodeling Industry, the average cost people spend on paint when renovating is $700 and the average return on that investment is 200 per cent.
John Schick explained,
It can brighten the home and give it a newer and cleaner feel, which is very important when a potential buyer walks into your home. The first impression a buyer gets usually sticks with them throughout the showing.
You can find more information about the importance of fresh paint when selling your house in John’s article.
Adding More Space
If you're planning a renovation project, you should think about all the unused space in your home and try to figure out how to effectively use it. Remember, adding square footage to your home will increase the selling price. If you can turn a three-bedroom house into a four-bedroom, then you should at least consider it — especially if you have a basement or attic that just collects clutter. In addition to creating new spaces, finishing your attic or basement will also make your home more energy-efficient, as there are often many energy wasters in these unused spaces.
Undertaking renovation projects for the sake of a return on investment is a difficult and risky task. Plus, the fact that renovations are costly compared to new home costs discourages a lot of people. However, as Clayton Spanton pointed out,
The square footage cost of new home construction is much lower than renovation costs per square foot. New home construction is usually built to minimum standards, whereas renovation work is often done to a higher degree of quality. I believe the housing market does impact the renovation return on investment because many people cannot see the potential of what renos can do.
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If you do your homework and figure out which renovations are the most suitable for your home and the most demanded in your neighbourhood, your investment will very likely pay off. Also, if you don’t want to sell and you like the location of your house, then undertaking home renovations might be a wise solution considering the costs of moving, land transfer taxes, and other fees.
Title photo by: Kristin Nador