A home is the biggest investment most people will ever make in their lifetime. With the Canadian real estate market steadily rising over the past decade, so too have the use of HELOCs (home equity lines of credit) – HELOCs have grown an astonishing 170% over the past decade. One of the main uses is home renovations. With many baby boomers looking to downsize, lets look at renovations that provide the highest benefit-to-cost ratio when selling your house.
Before starting any major renovation it’s important to think about the needs of buyers. If younger families are moving into your area, think of renovations that will appeal to them like a backyard deck. It’s equally important to use your renovation budget wisely – some renovations provide a higher benefit-to-cost ratio than others.
Kitchens and bathrooms tend to provide the highest Return on Investment (ROI), while other investments like in-ground swimming pools and skylights generally aren’t so appealing. For a full list of renovations and their ROI check out: Style At Home: Return on renovation costs: How much will you get back?
Home renovations can be expensive – not only do you have to pay for materials, you also have to pay for skilled labour. If you’re handyman you can save yourself a bundle doing the renovations yourself. If you aren’t so handy, retail stores like Home Depot offer classes and YouTube has plenty helpful videos from experienced professionals. It’s probably a good idea to leave the trades to the experts, but you save a lot of money by doing simple renovations yourself (just be sure to do a good job or you could decrease the value of your house).
In a buyer’s market, a major renovation like a new kitchen can make your house really stand out. If you’ve neglected repairs over the years, an updated kitchen, a new bathroom and a fresh coat of paint can be the difference between selling your house at a bargain “as is” and getting a decent price. For resale condos, renovations benefit greatly as there is almost always a glut of them on the market. If your condo has updates, i.e. kitchen, bathroom, molding, wood floors, fireplace, etc., this would certainly make your condo much more desirable.
In a seller’s market, it usually isn’t worth undertaking major renovations. Your house will more than likely attract multiple offers regardless of a new kitchen. If a lot of people are topping up houses in your area (rebuilding bungalows as “McMansions”) major renovations are probably not a wise investment. Renovations are all about the latest trends – if you install crown molding today and plan to sell in five years, will it still look in good shape and be in fashion? You’re lucky to break even with most investments, so it’s important to choose sensibly.
Some renovations like a new roof or furnace may need to get done right away if they’re in bad shape, but may not provide the best curbside appeal. It’s important to understand that you can over-renovate your house. For example, a $75,000 bathroom probably doesn’t belong in a $300,000 bungalow in the suburbs.
If you’re planning to sell your house major renovations like adding an in-law basement apartment can add significant value to your property – if done right. It’s vital to look at the needs of buyers in your neighbourhood and do the renovations that provide the highest ROI. Have you ever undertaken any major home renovations yourself? Please share with us your experiences.
About the Author: Sean Cooper is a single, 20-something year old, first time home buyer located in Toronto. He has experience in the financial sector as a Pension Analyst, RESP administrator and Income Tax Preparer. He holds a Bachelor of Commerce in business management from Ryerson University.