How to Value Renovations when Selling, Buying, and Residing
Payback on renovations is measured three ways:
- The value of increasing the selling price of your property
- The value of enjoying the renovated space
- The value of maintaining the worth of your property
For the highest return on your investment, ensure the workmanship is of good quality and that the materials are consistent with other homes in the area.
Top 5 Renovations with the Highest Return on Investment
- Kitchen: Renovate or update.
- Bathroom: Renovate, update, or add-on.
- Interior/Exterior: Repaint with tones that have wide-ranging market appeal.
- Décor Update: Replace lighting, plumbing fixtures, countertops, and worn flooring (vinyl or carpets); refinish hardwood floors.
- Declutter: Remove all excess items so your home is showcased.
Top 5 Renovations with the Highest Enjoyment Value
- Basement finishing
Top 5 Renovations with Longer-Term Value
- Replace the roof.
- Update the heating and cooling systems.
- Replace windows and doors.
- Update the electrical (panel, wiring, sockets, fixtures).
- Repair structural defects.
Tips to Make Your Renovations a Success
1. Understand why you are renovating
Do you want to increase the value of your home or enjoy the renovations for years to come? Both?
2. Think about your personal needs and wants
How much do you want to spend? How long do you plan to own the home after your renovation project?
Will you be doing work yourself? Will you work with a general contractor or hire your own tradespeople?
The amount you spend on improvements should depend, in part, on how long you plan to live in your home. If you are thinking shorter term, smaller and less-expensive improvements may be your best bet to recover your investment, such as a fresh coat of paint, updated lighting, improved curb appeal, decluttering, and so on. Those items can give your home an updated feel with a limited budget.
Keep in mind the present condition of the item you are renovating. For example, if you are replacing the builder-quality maple cabinets in your 10-year-old home with custom-designed cabinets with an antique finish (because that is your personal style), the change may not increase the value of your home.
To appeal to a wider number of prospective purchasers, ensure the renovation blends with the overall style and design of your home.
3. Hire trusted professionals with references.
Before you start your renovation project, consult with an interior designer, architect, and/or contractor. That investment can go a long way to prevent cost overruns and change-fees later on. They can draw up a plan and assist with renovation advice or construction and build those costs into your project budget.
4. Engage a professional appraiser to increase your awareness of over-improvement and unique features.
When planning your renovation project, consider your neighbourhood and the expectations of buyers in the area. Depending on the particular market and/or neighbourhood where you reside, expensive projects that over-improve your home may be only partially recognized by prospective purchasers. For example, in a particular market, renovating the basement of your home at a cost of $65,000 in an area where homes generally do not exceed $200,000 may not provide the best financial return on your investment.
Unique designs or improvements uncommon for a particular market may impact the re-saleability of a home. For example, a custom-designed and climate-controlled wine room can cost many thousands of dollars. If you are a wine collector extraordinaire and cost is not a concern, then creating a wine room can be personally gratifying. For you to recover even a portion of your investment, however, a potential purchaser would need to share your passion.
5. Consider the value that the improvement may add to the overall value of your property.
That is where the expert advice of real estate appraiser can provide an objective perspective.
Renovations take time, patience, and planning and can be appreciated for many years. Work with an expert! Find a qualified professional real estate appraiser in your area through the Appraisal Institute of Canada’s online search tool at www.AICanada.ca. Those trained individuals can assist you to understand how your renovation project will contribute to the overall value of your property.
Christina Dhesi is Executive Director of AIC-BC, which represents approximately 1,200 members and delivers AIC’s member programs and services within the region.
Posted in Real Estate