Which Home Renovations offer the best ‘return on investment”?
Home Owners often ask: ‘Which home renovations increase the value of my house, and assure that I get ‘top-dollar’ when selling?’ This and many more questions like it are being answered on my blog as well. While there is no hard-and-fast rule, here is a sobering statistic from the Appraisal Institute of Canada:
The Appraisal Institute of Canada compared typical costs for renovations versus the impact on a home’s selling price to come up with a “payback range” for common projects.
Bathroom reno: 75% to 100%
Kitchen reno: 75% to 100%
Installing a deck: 25% to 75%
Exterior siding: 50% to 75%
Flooring upgrade: 50% to 75%
Basement reno: 50% to 75%
Why do I say “sobering”? If you look closely, you will see that none of the estimates exceed 100%. In other words, they are suggesting that if you spend $5,000 on siding, your home’s value would only increase by between $2,500 and $3750 (50% to 75%). On the surface, it would not seem a worthwhile investment to improve your home for the purpose of increasing it’s resale value. So does it make sense to improve before selling? Maybe…. depending on your answers to two major questions!
Those two major questions are 1) What is the current condition of the item which you are thinking of improving, and 2) Can you do some of the labor yourself, thereby saving money. Lets take a look at what I mean:
1) Current Condition
On this topic my advice is “If it ain’t broke, don’t fix it.” Lets use the example of a furnace. If your home has a 10 yrs old, mid-efficient furnace, it should be working fine. Replacing THAT with a brand new, $3500 H.E. unit will in most cases, not increase the value of the house by an equal or greater amount. On the other hand, if your furnace hums and howls and is the size of a sub-compact car, buyers might be turned off from making an offer. Installing a new, energy efficient unit would probably we a worthwhile home renovations project. Much the same applies for most other home renovations projects: Is the current item in good condition, or will it detract from the home? Is the kitchen falling apart, or merely ‘dated’ in appearance. Are carpets just a little worn, or can you see the sub-floor and notice every spot where “whiskers blew chunks”?
2) Home Renovations D.I.Y.
I am going to assume that the Appraisal Institute used, for its calculations, prices that included professional labor. So the question is: how much (if anything) can you do yourself. If you’re fairly handy, painting the interior of your home is probably one of the best home renovations projects you can tackle. Another high-value/low-cost improvement is modernizing the lights. Go with bright, modern lighting, such as halogen, and keep the twisty florescent bulbs for your next home. They might save money in electricity, but their slow start-up and dim lighting don’t help sell a house. In any case, completing home renovations by yourself will drastically improve the return-on-investment numbers, provided the renos are done well. Buyers and their agents can spot poorly done D.I.Y. home renovations, and the result is lower offers and a slower selling home.
So, keeping the above rules in mind, Home Renovations done right can and will improve your sales price.