Back in 2011 I wrote a post about the payback range for typical renovations. A lot has changed since back then. In 2011, a young Barack Obama was two years into his first term as President of the United States, Prince William had just married Kate Middleton and I was saying I really need to start going to the gym regularly.
It’s now 2016 and an older Barack Obama is finishing up his 2nd term, William and Kate have two kids and I’ve gone to the gym about three or four times since 2011.
I decided to revisit what statistics there were out there on the payback range for various renovations that homeowners can do on their homes. I often get asked this question and I’ve been replying with answers based on the stats I discovered when I wrote that article in 2011.
When I look back at that article I wrote, I see that while I wrote it in 2011, the only statistics I could find were actually from 2006. That makes it a solid decade since the Appraisal Institute of Canada said these are the rates of return on common renovations.
I’ve done my best to track down some reputable stats on what ROR you can expect so you can decide if renovating your kitchen or bathroom makes the most sense. Sadly, it appears that the Appraisal Institute of Canada has gotten out of the ROR game. While I could find lots of reference to a 2012 report by the AIC about the “best” renovations, they have stopped referencing percentage returns anymore. A tool they created called RENOVA that did those calculations is no longer present in any form on their website. It is so completely gone from the internet that I fear the good folks at AIC might have become embarrassed by it.
While I can’t find reliable statistics on the rate of return for common renovations, I can tell you that in my experience, the renovations that give you the best bang for your buck are where you turn a negative into a positive (or at least a neutral).
Have a kitchen that was redone in 2005 that looks a little passe but is otherwise functional? Don’t renovate it and expect to recover those big dollars.
Have a bathroom that has a tub with rust stains, cracked tiles and water stains in the ceiling? Renovate it and take it to at least a basic Home Depot style of new functionality and that is money very well spent.
When I help my clients get ready for a sale, we walk around the home and have this very conversation, where nervous soon-to-be-sellers ask me if they need to fix this or that in order to sell.
When I see something that makes me wince or grimace, that makes me think that potential buyers will see it and wonder how much it will cost to fix, or what other problems are in the house if there is this issue, then I recommend repairing and renovating.
If it is safe, functional but not the most attractive or modern style, I generally recommend leaving it be. There is nothing as frustrating as spending money on a renovation, only to have your renovation not be to the taste of the potential home buyer. I have seen many kitchen backsplashes and countertops that were installed just before a sale being ripped out by new buyers.
If you or someone you like are considering renovations or selling a home, please don’t hesitate to give me a call. I’d be happy to provide you with my opinion on whether it is a good investment of time and money or whether it is better to leave it for the buyer to update to their style. As always, I’d love to be responsible for what comes next.
PS – As a bonus for reading all the way to the end of this post, if you want to see a U.S. based website that seems to do a great job of assessing rate of return, click here.