Home Renovations and the Return on Your Investment
If you are considering doing some home renovations this summer to improve your house, there are a few things to know ahead of time. There are many projects that can increase the value of your home. There are also many that can decrease its value.
A recent Ipsos-Reid survey showed that two-thirds of homeowners are planning to undertake some type of home renovations this year. With so many Canadians investing in home improvement projects, it’s important to know how much of that investment will be recovered when they sell their house.
Many homeowners will embark on home renovation projects for their own purposes either to improve their quality of life, to meet their needs or simply to pamper themselves. Whatever your reason, it is necessary to assess the cost of the after affect of your efforts in the event you ever decide to sell.
One of the first rules of thumb is to avoid projects that set your house apart from all the other houses in your neighbourhood. If a house looks good on the inside, not only will it sell for a higher price, it will sell much faster. Sticking with local trends and avoiding passing fads is strongly advised. A successful project has nothing to do with the amount of money spent on an upgrade. If a kitchen renovation costs $30,000 but is done in poor taste, resulting in a poor layout, bad colour choices, cheap appliances and a useless work area, this would be an example of a renovation that could easily decrease the value of your home.
Each year, the Appraisal Institute of Canada surveys for the best home projects that yield the best return. Here is a list of their findings:
Highest return
- Bathroom upgrade: 75 percent to 100 percent
- Kitchen upgrade: 75 percent to 100 percent
- Interior or exterior painting: 50 percent to 100 percent
Medium-level return
- Roof replacement: 50 percent to 80 percent
- Replacement of furnace or heating system: 50 percent to 80 percent
- Finished basement: 50 percent to 75 percent
- Addition of family room: 50 percent to 75 percent
- Fireplace: 50 percent to 75 percent
- Installation of hardwood floor: 50 percent to 75 percent
- Construction of a garage: 50 percent to 75 percent
- Doors and windows: 50 percent to 75 percent
- Deck: 50 percent to 75 percent
- Central air conditioning: 25 percent to 75 percent
Low return
- Landscaping: 25 percent to 50 percent
- Interlocking paving stones on driveway: 25 percent to 50 percent
- Asphalt driveway: 20 percent to 50 percent
- Fence: 25 percent to 50 percent
- Pool: 10 percent to 40 percent
- Skylights: 0 percent to 25 percent
Source: Appraisal Institute of Canada
The Appraisal Institute of Canada also reminds homeowners who are considering a renovation, that “If the value of your house exceeds the average market value in your neighbourhood, your renovations will not yield much return. But if your house value is below the average, you can recover a larger part of the renovation costs.”
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Great information. It is definitely a busy time for home owners in Ontario and Canada in terms of renovations. Obviously having quality bathrooms and an updated kitchen are key to getting a return on your investment. Although some of the smaller things might not bring a dollar for dollar return, they can help in the quick sale of a home. Consumers need to be aware of these figures though before they sink their money into a reno. Thanks for the article.