Cost vs Value: How to Make Your Renovation Payoff
By Greg Andruff
With all of the uncertainty in the Real Estate market recently, many people have been asking about how to make their renovation the most profitable when they go to sell. Whether you are a “Do It Yourselfer” (DIY), or you hire a contractor, proper budgeting and planning are key to saving you both time and money.
Planning – Why, How, Who, Where and What
Why –The first step in planning a renovation is figuring out “Why” you want to make alterations. For example, if you are looking to update a bathroom is it because you want more space or just updating fixtures? Home improvement projects should typically be done with a mindset that you are improving your home for your own enjoyment. Often renovations are done at a large expense and owners are looking to recover costs only to find that their home sits on the market without any interested buyers. It is reasonable to expect improvements will increase the value of your home, just make sure you are realistic with your expectations which can happen if you have a plan. So choose your upgrades wisely, or it could cost you even more in the long run.
How – When budgeting, ask for project quotes from 2 or 3 reputable contractors that specialize in renovations. If you are doing a DIY project, shop around for you materials. Explain what it is that you want as clearly as possible, and get estimates in writing. Remember to give room for a contingency of 10%-15% for cost overruns or unforeseen costs.
Who– You may want to engage the services of a contractor for a number of reasons. One is that you want the work to be done according to building code (especially in the case of resale.) Future buyers want warranties that all renovation work has been done to code. Also, they will be able to assist in getting the proper permits which can be a hassle and a challenge for someone who has never done it before. At the end of the day, if they are a true professional, they will save you time and money!!!
If you want to do it yourself, acquire free home remodeling plans and ideas from the Internet, home remodeling supply centres, open houses and home magazines. Many of these resources can also help you with advice and “how to techniques.”
Major Point – High quality appliances, spacious rooms, and quality construction will go a long way in improving your value. Be careful of cutting corners that turn off potential buyers. If you are working with high end materials, give them high end treatment and installation.
Where– Keep in mind the neighborhood in which you are renovating. A project should be relative to the dwelling. For example, don’t remodel your kitchen for $30,000 in a $100,000 home. The Appraisal Institute of Canada warns, “If the value of your home exceeds the average market value in your neighborhood, your renovations will not yield a significant return. However, if your home value is below the average, you can recover a larger part of the renovation costs.”
What – Here are the “percentage recovered upon resale statistics” from the Appraisal Institute of Canada:
75% to 100% – Kitchen and Bathroom upgrade
50% to 100% – Interior painting
50% to 80% – Roof replacement, Replacement of furnace or heating system
50% to 75% – Expansion (addition of family room), Doors and windows, Deck, Installation of hardwood floor, Construction of a garage, Fireplace (wood or gas), Central air conditioning, Finished basement
25% to 50% Wood fence, Interlocking paving stones on driveway.
So you can see that the kitchen and bathroom are what pay out the most in returns when you sell your home. Conversely, those are the places that really appeal to buyers. If you have a little bit extra money to spend, those are the areas that you will want to spend more. Also, note that a fresh coat of paint can really help energize a home and often pays for its self too.
- A house that looks nice inside will sell at a slightly higher price and above all it will sell faster!
- Build to what most people will like! A renovation that cost $25,000 is not worth that much if it is done with poor taste.
If you have any other tips for getting the best bang for your renovation buck, share them with us in the comments!
Greg Andruff is a member of the residential real estate team, Team Andruff, with the slogan “Our product is homes…our passion is people.” To contact Greg visit www.TeamAndruff.ca or call 778-899-4267