Best home renovations to increase your property value

04 November 2018 by National Bank
best home renovations to increase value

Do you want to raise the value of your property in order to sell it and one day profit from the renovations you do? Here are nine tips to get there.

1. Determine the winning qualities

Making a kitchen renovation, bathroom expansion or basement transformation profitable requires implementing a strategy. Before you begin, you must outline your priorities and identify the work that will make a real difference.

The Appraisal Institute of Canada says that the renovations that generate the highest return on investment are—in this order—the kitchen, bathroom and interior and exterior painting. Storage space as well as giving new life to lighting, countertops, curtains, cabinet hardware and flooring are also on the list of profitable projects.

2. Prioritize the most critical work

Beyond the aesthetic value that you want to bring to your living spaces, don’t forget to prioritize the more pressing work that will turn out to be a safe investment, such as roofing, windows and doors. If they need to be replaced, if the brick is crumbling or if the boiler needs changing, potential buyers will not be swayed by your new quartz countertops. Many specialists agree that the cost of windows or a roof could return up to 75% of the amount invested.

Another profitable investment is energy efficiency, which enhances the occupants’ comfort while lowering the electricity bill. Medium- and long-term yields for energy-efficient renovations are particularly interesting because municipalities and the government often offer financial assistance and tax credits to lower a part of the initial costs.

3. Estimate the recoverable value of renovations

Have you made a list of work to do and decided to renovate essential rooms like the kitchen and the bathroom? Before heading to the hardware store, think about calculating the anticipated costs as well as the added value of the work, in case you want to sell your property.

Recoverable value of a kitchen

Many experts estimate that the amount invested in a kitchen should never exceed 15% of the total property value. For a $250,000 house, this represents $37,000, which is a substantial amount. Once the kitchen is renovated, the recoverable amount at resale is about 75%.

However, this amount remains relative: “You can get back 100%, but if the kitchen was already in good shape, this percentage will be lower,” explains Eric Périgny, president of Reno-Assistance. “If the kitchen has clearly been redone and you are ready to sell, it’s often better to leave it as is than to do small jobs because, in the eyes of a potential buyer, this will not be perceived as added value in the selling price.”

Recoverable value of a bathroom

Like the kitchen, the bathroom influences buyers’ decisions. The maximum cost of a bathroom renovation is estimated at 5%, which is $12,500 for a $250,000 house. The improvements could generate a recoverable value of about 85%. A new coat of paint on the walls and some cosmetic changes can work wonders to create added value at a low cost.

4. Get the right price

Whether for a house, condo or chalet, before starting renovations—and to make them profitable—it’s in the property owner’s best interest to find the right price by getting estimates from several contractors and staying wary of overly economical offers.

“Unfortunately, renovation miracles do not exist,” warns Eric Périgny, who advises hiring a qualified and reputable contractor. “It’s impossible to profit from work if it needs to be redone later or if, along the way, it becomes more expensive than the starting price.”

As profit margins of contractors are relatively small, Périgny advises being wary of any offer that would be 20% cheaper than a comparable offer.

Take the time to ensure the skills of the people involved in the renovations. They must have the necessary permits and insurance to carry out the work. The Office de la protection du Consommateur offers several tips to follow before hiring a contractor for renovations.

5. Avoid changes that are too eccentric

When it comes to renovations, originality is not always the best idea. “From a resale perspective, owners have the advantage of renovating to please the majority while avoiding customization,” says Eric Périgny. According to him, the use of noble materials, or materials that appear noble—such as imitation wood or granite—can make a difference.

The materials used can also harmonize the entire property; for example, the exterior colours should not clash with those of the neighbourhood.

6. Skip less profitable renovations

Unless you stumble upon a wine lover, a wine cellar is not considered an investment. The same goes for a pool (in-ground or above-ground), fencing, paved driveways or skylights. Even if these elements are pleasing to you, studies show they have little to no value to most buyers.

7. Prove the value of your renovations

Keep your receipts (materials, fees, etc.) in a safe place to prove the date, cost and quality of the work. This will add weight to your argument when negotiating the sale of your property.

8. Maintain your property

If renovation is the wisest option, ensuring consistent maintenance of your property is a profitable tip that should not be overlooked: Between two similar options in the same neighbourhood, the difference between an impeccable property and a neglected one will be crucial.

9. Profit from your renovations

Since a full return on investment is never guaranteed, it’s wise to take advantage of this investment for a few years. Eric Périgny says that a period of five years is a good crossroads between the date of renovation and the date the property is sold. You will have the leisure and time to enjoy the renovations before publishing photos of the new, up-to-date rooms.

In the end, before undertaking your next renovations, take the time to plan them well and, at the same time, consider the added value they will generate. Because when it comes time to sell, you will be able to fully enjoy the economic benefits of your decisions.

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