Home Renovations: What’s Worth It?

How many of you took on a home renovation project recently? If the line ups at home improvement stores are any indication I would guess... almost all of you! It seems everyone is finally taking on the projects they said they would do when they bought their house. Here you are 5, 6, 10 years later, and finally installing the new faucets in the bathroom and painting the spare bedroom. 

Recently a client asked us for advice: “If they were going to do any renovations and updates, what was the best investment?” We get this question a lot, so it’s time to share our real estate wisdom here.

A common misconception is “If I spend $50,000 on my kitchen - it increases the price of my house by $50,000”.  That is not the case, typically the rule is: your return on investment (ROI) is 50 cents on the dollar for most renovations. Which is good advice, because in general terms it can be true. Read a few article on the issue and you will see ranges of 45-56% return on investment for common renovations home owners take on (kitchen, bathrooms etc). This is pretty good advice, but it is not a hard and fast rule.

What is our advice you ask? There are a lot of factors to consider, so let’s get into it:

When considering renovations and updates for resale, the first thing to consider is the condition of the house. What condition is the roof in, how old is the furnace, are the seals on our windows broken. Getting a home inspection can be very helpful: you will have a solid understanding of the condition of your house, and there will be no big surprises when you go to sell it. Otherwise any updates may just be “lipstick on a pig.” No need to spend a ton of money on decorative updates if you have bigger structural problems. 

The timing of your renovations and updates is a big factor at play in determining your ROI. For example, if you just moved into a home you intend to live in for the next 10+ years, most of the updates completed now are just for you. When you go to sell in 10 years, those updates are likely going to be dated, and wear and tear will be showing. The 50 cents on the dollar rule, no longer applies here. However, you have still made improvements, and a 10 year old kitchen is better than the 30 year old one. If you are concerned with how it will effect the resale down the road, make design choices that are classic instead of the trendier and bolder options. Focus on quality, how will those countertops hold up?

The goal of the average home renovation when considering re-sale, should be desirability. The housing market is a competition. You want your home to be the best of what’s on the market. However there is such a thing as out-pricing your neighbourhood.  If two identical homes are for sale in a subdivision, the first has a new kitchen and a fenced in yard, while the second only had a fresh coat of paint. The first home will sell faster and for more money. However, if on average these houses are selling for $550,000, you cannot expect $300,000 worth of renovations to yield a return of $150,000. There is a cap on the value of your home. In this case it will be difficult to find a buyer willing to pay $700,000 in an area where very similar house are selling for $550,000, even with a gorgeous kitchen.

What updates should you undertake?

Living Rooms

In older houses, it can be tempting to take down walls and open the space between a living room and kitchen or a living room and dining room. This can create more flow for your home, and make the spaces feel bigger. Houses that are open concept are more marketable right now. 

When taking down walls it is important to make sure that it is done correctly as it could impact the structural integrity of the house. It is equally important the space is still useful. When we start taking down walls it’s important to consider things like where would a TV go? Do we still have enough electric outlets in the space. It may seem silly, but these factors play into the functionality of one of the main spaces in the house, and therefore effect it’s desirability and value.

Fresh paint is one of the easiest updates. A fresh coat of paint makes a huge difference in the overall appearance and first impression of the house.

Bathrooms

Bathroom renovations can be very expensive. In the average home, stick to mid-range materials, and pick finishes that are current, focus on changing out your builder basics. In high end estate homes, going all out choosing the best finishes will pay off in your ROI. Less buyers are looking for bathtubs with jets these days, and instead are opting for the more modern look of large glass showers.

If you have the space, adding in an extra bathroom can be the best thing for ROI. In older homes where there is only one bathroom, adding a main floor powder room or a master bath can be a game changer for your home. 

Kitchens

Kitchens are the heart of the home for most buyers. A ‘bad’ kitchen can quickly deter clients from wanting to see a home. Which is why we see a good ROI on kitchen renovations. Kitchen renovations can return on average as much 58%. The first things to date in a kitchen are usually the cabinets and faucets. Currently quartz counter tops are the preferred choice of buyers. We also recommend choosing a backsplash that is simple, durable and easily cleaned. 

Consider upgrading the flooring to hardwood, tile dates quicker. Hardwood floors throughout the house will create better flow, and make placement of furniture easier. As there is now no specific line between the kitchen, dining or living areas where the tile and hardwood meet, you have more options for the space.

Outdoors

The exterior of your home is actually where we see the highest ROI. A new roof can return over 100% of your investment!  Improving the front yard will also yield high returns. In fact, projects that improve curb appeal like gardens, front walks and garage doors can return over 90% of your investment. It is the first impression of a home, and it matters.

With outdoor living becoming increasingly popular (even with our long, cold winters), deck and patio projects can yield an ROI of 70%. Of course, make sure that any structural issues are corrected when making upgrades to a deck. 

So what should you takeaway from this:

Home improvements are an excellent way to increase the value of your home. Remember that the work has to be done well, poor workmanship will show and reflect in the value of your home. We aren’t all DIY experts, know your limits.  Talk to experts! If you are planning on selling, and want to plan your renovations  - consult your realtor first, we will know what buyers are looking for, and how your home compares to others on the market. All that said, if this is your forever home, make the choices that will bring you the most joy, regardless of ROI.