As homeowners, we’ve all heard the experts advise us not to spend more on renovations than we can recoup on resale.
While that’s excellent advice:
How do you know which home improvements provide the most value?
Can I do some of the work myself, or do I have to hire a contractor to get the most money back?
The home improvement industry in Canada is booming. The Financial Post reported that renovation spending in Canada topped $68 billion in 2014, has steadily increased in 2015 and has continued to be strong in 2016. Surprisingly, more Canadians are spending money on updates instead of purchasing a new home. This is especially true for the two hottest housing markets in Canada—Toronto and Vancouver.
Speculation is twofold as to what’s influencing their decisions:
First, the popularity of home renovation shows has encouraged homeowners to try out the latest trending products in their aging homes, and
Second, interest rates continue to hover at record lows, allowing homeowners to refinance their mortgages and free up money to put back into home improvements.
With renovation spending accounting for 3-4 percent of the Canadian economy in 2014, it’s more important than ever to make sure you’re spending your money wisely.
Before you make any decisions about what type of work you’re going to tackle, you should consider:
The impact of the project on your home’s appraised value.
Appraisers indicate that you should limit the renovation cost to the value of the room as a percentage of your overall house value. For example:
- A kitchen represents 10% to 15% of the overall house value.
- A master bathroom suite equals about 10% of the house’s value.
- A powder room/bathroom is approximately 5% of the house value.
- A finished basement or attic comprises about 10% to 15% of the total.
- Other rooms like the living room, dining room, or bedroom have a 1% to 3% value based on the entire house.
- Exterior improvements such as a patio, deck, paths, and landscaping correspond to 2% to 5% of the overall house value.
The length of time you plan to stay in the home before selling:
A typical return on investment (ROI) for a home improvement expenditure is between 80% and 90% after a year or two. Waiting longer to sell, will allow your property to increase in value and provide a full-value or more ROI.
The strength of the resale market in your area:
If you’ve been in your home for a long time, your perspective may be skewed on the salability of your property. You’re probably familiar with the classic real estate catchphrase “location, location, location.” It’s important to consider factors such as the price of recent real estate transactions, the type of buyer you may attract (Millennials interested in the latest trending amenities or empty-nesters who want high-quality, easy-care features), and its proximity to public transit, shopping/restaurants, parks, waterfront, or acreage with privacy.
So, what’s the bottom line?
Now that you’ve evaluated how much you should spend, the length of time you’ll need to stay in your home, and the saleability of your home, you can feel confident in choosing among these 14 best home improvement ideas that are guaranteed to make you money on resale:
Appraisal Improvement Projects
In determining the market value of your home, both banks a real estate agents will order an appraisal. There are a number of factors that determine the price, such as location, livable square footage, number of bedrooms and bathrooms, updated mechanicals (plumbing and electrical), improved core areas (kitchens, bathrooms) and construction material. Home improvement projects that improve the structural features will rank higher and increase your ROI.
1. Kitchen Renovation/Kitchen Upgrade
According to the National Association Remodeling Industry (NARI) report, buyers rank complete kitchen renovations and upgrades at the top of their list for both value and appeal. Wish list items include:
- Upgraded cabinets and hardware
- Granite or marble countertops
- Island workstation
- Hardwood or laminate flooring
- Abundance of lighting (including under-cabinet)
- Updated appliances
- Decorative backsplashes
- Walk-in pantry, closet or cabinet
- Modern sink with trendy faucet finishes and features
An average kitchen upgrade that costs around $30,000 would return about $20,000 when sold.
2. Bathroom Renovation/New Bath Installation
When realtors surveyed their clients, bathroom renovations and new bath installations ranked second for home improvements that helped make a sale. Renovations should work toward upgrading worn-out surfaces and materials, improve function and livability, and modernize the space.
Buyers are willing to pay more for a bathroom with:
- Ceramic tile flooring
- Walk-in shower with ceramic tile, body sprays, rain shower head
- Separate soaking tub (for Master Bath)
- Solid surface countertops
- High-quality plumbing fixtures (name brands are more desirable)
- Modern, double sinks with decorative/functional faucets
- Bright, but dimmable lighting
- Decorative mirrors
A remodeled bathroom will earn approximately 58% return while adding a new bath will bring in a 52% ROI.
3. Repair or Replace Flooring
Hardwood flooring is one of the most popular products among homebuyers today. It helps instill value and is an excellent investment. If your hardwood floors are worn and damaged, your first consideration should be to refinish them. If you’re handy, you can consider this a DIY project and rent sanding equipment from a home improvement retailer. However, even with the higher cost of using a professional installer, you’ll see huge rewards and ROI. Light stain colours will make the room look bigger and casual, while dark hues will be more dramatic and formal. Definitely, choose a stain finish coat as it reduces the appearance of scratches over semi-gloss.
Hardwood flooring is in such high demand, that you will have no problem obtaining more than 200% return on investment.
If your hardwood flooring is covered with carpeting, tear out the carpeting and refinish the floors, if needed. If you don’t have hardwood, consider replacing sheet vinyl/linoleum with hardwood or a high-quality laminate in the foyer, hallways, kitchen, dinette, dining room, sunroom, and laundry room. Laminates come in a variety of patterns that mimic hardwood and tile. They are extremely durable, waterproof, and resist damage from pet claws.
Carpeting that is more than five years old should be replaced. Changing it out for hardwood will garner the biggest return on investment. Although, installing the right carpeting and padding for the room’s use and traffic patterns will keep it looking good while you’re living there and all the way to the sale. Select a neutral colour to appeal to the most buyers. While you may not enjoy as large an ROI, new carpeting will show the house as well maintained and may help sell it faster.
4. Basement Conversion to Living Space
Converting your basement into a home office, entertainment center, extra bedroom, game room, or in-law apartment can greatly add to the appeal of your home. While it may not always be recognized as “living space” by appraisers, the HGTV lists it among the smartest home improvement projects with a 77% payback.
It’s critical that you make sure your basement is protected from moisture and flooding with proper waterproofing. Install a sump pump with battery back-up, run a dehumidifier, and use materials rated for below-grade use. This project should involve a professional contractor who is licensed, insured, and adheres to local building codes.
5. Room Addition
Expanding your home can help make your family more comfortable now AND add value when you sell it. Since its publication in 2014, Remodeling Magazine’s Cost vs. Value Report has shown a bigger percentage of return than the previous year in every expansion project. Just look at some of the impressive numbers these additions have achieved:
- Attic bedroom = 84% ROI
- Second story = 72% ROI
- Garage = 69% ROI
- Family Room = 69% ROI
- Master Suite = 68% ROI
- Sunroom = 52% ROI
Now, you may not have thousands of dollars to spend on home improvements, but that doesn’t mean you can’t benefit from some inexpensive upgrades.
Maintenance and Repair Projects—Preserving the integrity of your home through maintenance and repairs will always pay dividends. Buyers are most likely to choose a home with a solid structure and systems over a home that’s fallen into disrepair.
To obtain the highest possible return, consider taking on these projects:
It may be surprising that such a simple and inexpensive improvement like painting can gain as much as 200% return on investment, but it’s true. Freshly painted interior rooms and exterior trim work creates an excellent first impression to potential buyers. By choosing warm, inviting colours, you’ll appeal to a larger portion of the market while adding value. If possible, stick with taupe, tan, or white as the main colour palette. You can always add bright accessories for contrast without being overpowering.
Don’t forget that many buyers shop online before ever stepping into a home. A fresh exterior paint job will ensure buyers are lining up to tour your home first.
7. Upgrade Insulation
Improving energy efficiency and comfort is a top priority for most homeowners today. According to Remodeling Magazine’s 2016 report, upgrading your attic insulation is currently offering the highest return on investment at a whopping 117%!
Blown-in, loose-fill fiberglass insulation is gaining popularity over the traditional batt-style due to its ability to reach tight spaces. A professional installer can help you achieve the greatest R-value and efficiency rating.
Curb Appeal Projects—We’ve all heard about how important curb appeal is in selling a home, but today’s existing home market requires more than a neatly manicured lawn and flower pots. To achieve the highest emotional appeal, consider these visual improvements:
8. Add a Deck
With many families looking for a reprieve from the daily stresses of life and opting to stay home for vacation, increasing the outdoor living space by adding a deck makes perfect sense.
The cost of adding a deck can range anywhere from $1,200 to $10,000+, depending on size, materials, and options. According to HGTV, it’s worth it as more and more buyers will find your backyard more appealing and be willing to pay you between 65% and 90% of your investment dollars in return. The large range is affected by the type of material used (although more expensive, maintenance-free composite decking is easy to care for), the size of the deck (multi-level, activity stations), and extras such as pergolas, outdoor kitchens, fireplace/fire pit, built-in seating or planters, and storage, etc.
9. Add a Privacy Fence
Another great improvement is to add a high-quality privacy fence. By using wood or stone, a fence can change the look and improve security of your home. Potential buyers will be attracted to the privacy offered, and you can expect a 100% return in an updated home value. Use a professional fence installer for the best results.
10. Updated Windows
By replacing old, drafty windows, you’ll be adding security and beauty while helping reduce wasted energy. Adding Energy Star-rated windows to your home can save up to $500 a year in heating and cooling costs plus a possible green energy tax credit from local government agencies or your utility company, which is a savings you can receive while you’re still living there. As an extra bonus, you can recoup 60%-90% upon resale.
11. Updated Landscaping
The ultimate feature for generating curb appeal is with updated landscaping. A professional, high-quality landscaping project can increase your home’s value, sell it faster, and help you net as much as 252% ROI. Even if you can’t afford a complete overhaul, consider bringing in an expert to clean-up, trim, and fertilize your existing flowerbeds to showcase your home in the best possible light.
12. Replace or Repaint Your Front Door
As the first thing a buyer sees or walks through, your front door is a critical component toward creating the best first impression. Repainting it is an inexpensive way to immediately improve the look of your home. If you need to replace your standard 20-gauge steel door, it’ll cost you; but with a 102% ROI, it’s worth every penny.
13. New Roof
One of the first things, other than the front door, that buyers are looking for is a recent roof replacement. With the cost of roofing jobs going up dramatically in the last few years, providing peace of mind to your new buyer will help your sale. You’ll see about a 61% return and will save on repair expenses from a leaking roof.
Lifestyle Projects—While these types of projects don’t traditionally bring a large return, Millennial buyers are sure to flock to your home if you include this innovative feature:
14. Add Home Automation
Home automation is fast becoming one of the largest industries in the country. Including wireless technology to your residence can provide state-of-the-art security as well as high-tech smart features that will set your home apart from the competition. A typical system install will cost you around $2,100, but with a full 100% return on investment, there’s no reason not to go for it.
The best part:
No matter what type of home improvement project you’re considering, large or small, you’re guaranteed to make money. Remember that you’ll be able to recoup more of your investment dollars if you stay in your home at least a couple years after doing the work.Do check out some good blog posts from Home Inside.