Return on investment (ROI) is a key concept in the business world. Simply put, it’s coming up with a method to measure the age-old concept of “you have to spend money to make money.” When it comes to home renovations, there are certain projects that generally have a better ROI than others. Here’s a rundown of where you might want to put your reno money.
Also read: INFOGRAPHIC – The Reno Rookie’s Cheat Sheet>
My Own Personal Experience
When my wife and I took possession of our first house a little more than a decade ago, the first thing we did before moving in was to paint. The previous owners had some, let’s say, eclectic tastes: deep blues, yellows, and reds, applied with a sponge swipes. It took us a couple coats of primer and paint – three coats to finally cover the hideous yellow in the bathroom – but, in the end, we had a fresh new home for the price of a few gallons of paint and long-weekend’s DIY labour.
About a year after we moved in, we gutted and renovated the kitchen. I was able to call in some favours from friends and family who worked in the renovation business so it only cost us a few thousands dollars in materials to have a completely new kitchen.
In both cases, we opted to make the changes for our own enjoyment. But, as you’ll see below, we also ended up making changes that have the best reno ROI.
In our next house, we hired a contractor to extensively renovate the kitchen and main bathroom. While it’s impossible to figure precisely how much it helped boost the final price we got for it, the renovated rooms definitely helped ease the sale.
The Numbers Game
There are a variety of organizations that have calculated the ROI on various renos, each with its own motivation for doing so. Real estate agency Re/Max, for example, compiled a list rating their suggested best bangs for your buck. (Given that agents make their living on commissions, the higher your house sells for, the more they earn.) For their money, Re/Max recommends turning your bathroom into an in-home spa, followed by kitchens as the top two reno ROIs.
Members of the Appraisal Institute of Canada make their living appraising homes, so they know a thing or two about which renos best boost a homes value. For one, they encourage people to consider little details like changing light fixtures and door handles. They also point out that energy efficiency improvements can often pay for themselves in the long run – appealing to both homeowners looking to stay, and potential new buyers.
Landscaping can also be a wise investment, but don’t splurge on the pool – unless you plan to do a lot of swimming. A splash of colour with a few fresh flowers can help you achieve that all-important curb appeal when trying to sell, but many buyers are reluctant to take on the expense and labour required to maintain a pool, so they’re generally considered a selling liability.
Renovations For Reality
Unless you’re planning to move imminently, your best choice is to base your spending on what will make you happiest. If you really want that pool, go ahead and put it in. If you’re on a tight budget and are just looking for a bit of a fresh look, invest in a few cans of paint and put in some elbow grease.
But if you’re looking to sell, start small – some paint here, some updated cabinet handles there – then, depending on the state of your home, consider some major upgrades to rooms like the kitchen and bath.