Return on renovation costs: How much will you get back?

Projects that can increase -- or decrease -- the value of your home

Canadians are investing in home improvement like never before.  While most plan to spend reasonable sums, others say they'll go all out: luxurious materials, home theatres, a Jacuzzi on the patio...even $60,000 kitchens are not that unusual! But how much of their investment will be recovered when their house sells?

Homeowners tend to embark on renovation projects to meet their needs, improve their quality of life or simply pamper themselves with a little luxury. But even if you're renovating primarily for your own sake, you should try to assess the post-project increase in the value of your house, just in case you ever want to sell. There is also the fact that a renovated house will typically sell quicker than one that has not been upgraded. That's got to be worth a bit of something too.

Every year, the Appraisal Institute of Canada surveys its members and compiles a list of renovations that yield the best return on investment. Year after year, refurbished kitchens and bathrooms head the payback list: 75 per cent to 100 per cent of the outlay for these projects can be recovered upon resale. Adding a pool, on the other hand, is far less advantageous.

Such positive evaluations don't always hold true, however. For example, a kitchen that has been renovated to the tune of $25,000 but in appallingly bad taste could adversely affect the sale of the house. If renovating in order to sell, you must plan for changes that will meet the needs of a majority of potential buyers and ensure that the modifications are suitably up to date and will appeal to the maximum number of people.

“A house that looks nice inside will sell at a slightly higher price, but above all, it will sell faster,” says Guylaine Barakatt, a real estate agent and housing consultant. “It has to be fashionable and in line with current trends; people are increasingly inclined toward luxury.” At the same time, though, beware of passing fads.

One rule seems to apply in all cases: avoid projects that will set your house apart from other properties in your neighbourhood.

The Appraisal Institute of Canada posts this warning on its website: “If the value of your house exceeds the average market value in your neighbourhood, your renovations will not yield much return. But if your house value is below the average, you can recover a larger part of the renovation costs.”

Also bare in mind that the amount spent on renovation projects should be relative to the value of the dwelling: A $30,000 remodeled bathroom does not belong in a $100,000 house.

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Suggested percentage recovered upon resale*

Income Suite: 75% to 100%
Kitchen upgrade: 75% to 100%
Bathroom upgrade: 75% to 100%
Interior painting: 50% to 100%
Roof replacement: 50% to 80%
Replacement of furnace or heating system: 50% to 80%
Expansion (addition of family room): 50% to 75%
Doors and windows: 50% to 75%
Deck: 50% to 75%
Installation of hardwood floor: 50% to 75%
Construction of a garage: 50% to 75%
Fireplace (wood or gas) 50% to 75%
Central air conditioning: 50% to 75%
Finished basement: 50% to 75%
Wood fence: 25% to 50%
Interlocking paving stones on driveway: 25% to 50%
Landscaping: 25% to 50%
Asphalt driveway: 20% to 50%
Pool: 10% to 40%
Skylights: 0% to 25%

If you are considering renovating and are not sure about your home value why not call Danielle and get her opinion on your renovation thoughts based on your home value and proposed renovations.

* Values are based on home value, renovation type and quality, current market and nieghbourhood properties. Percentages are an average and may differ in your part of Canada.

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