When we say that we’re often asked what renovation has the best return on investment, we mean it.  It might not be the most common question we get, as that award goes to the near constant “So, how’s the market doing?”, but it is definitely one we get all the time.

We originally wrote an article about it back in 2011, then again in 2016, so it seems like time to update our answer once again.  We say, “update our answer”, but the fundamentals of what is worth doing don’t really change.  Yes, there are design trends that come and go, but we don’t focus on what’s in this year or featured in celebrity home profiles.  After all, carpeted bathrooms and textured walls were once considered the height of design in homes and neither have aged very well.

Instead of looking at design trends, we look for what’s always of value to buyers, based on our daily and ongoing interactions with buyers. Let’s review what we’ve said in our past articles and what we say now and see if we’re in fact as consistent as we think.

It’s 2011!

This article was short and sweet and our first attempt at answering the question of whether a renovation a homeowner is thinking of doing will pay for itself in the form of a higher sale price when they look to sell the home.

This is a crucial question, made even more relevant by the fact that many homeowners don’t do the renovations until right before they sell.  At that point, they’re very much focused on whether it will add value as they may still have the balance sitting on a credit card!

We began the article by pointing out that certain renovations add features to a home that mean you can attract interest from a buyer who would not have even considered your house before it was done.  Many buyers don’t want to see houses without central air conditioning, and a master bathroom with a shower instead of a bath is not appealing to buyers with babies or young children.  Renovations that address such issues as these may cause offers to show up that may not have otherwise happened.

We finished the article with a list of payback ranges of typical renovations, provided by the Appraisal Institute of Canada.  Even back in 2011 it was hard to find Canadian stats and the below payback ranges were actually from a study done in 2006.

Payback Range of Typical Renovations

• Bathroom renovation (75 – 100%)
• Kitchen renovation (75 – 100%)
• Interior painting (50 – 100%)
• Exterior painting (50 – 100%)
• Roof shingle replacement (50 – 80%)
• Furnace/heating system (50 – 80%)
• Basement renovation (50 – 75%)
• Recreation room addition (50 – 75%)
• Installing a fireplace (50 – 75%)
• Flooring (50 – 75%)
• Constructing a garage (50 – 75%)
• Window/door replacement (50 – 75%)
• Building a deck (50 – 75%)
• Central air conditioning (25 – 75%)

You’ll note that none of the above payback ranges exceed 100% and a fair number of them start at 50% payback.  The highest range was for bathroom and kitchen renovations and we think that this is a function of how disruptive such renovations are for homeowners.  If you renovate a kitchen, get used to ordering takeout and cooking in microwaves for a number of months!  If you choose a bathroom reno, here’s hoping you have a spare full bathroom in the home, otherwise you better have (close) friends or family nearby who don’t mind your family using their shower!

Five..years…later.

This article was an update on the one we wrote in 2011, and given that original article used statistics from the Appraisal Institute of Canada from 2006, it was time for an update!  After all, in 2016 it was a decade since the Appraisal Institute of Canada’s rates of return on common renovations as listed above.

We weren’t able to update with more recent stats from the Appraisal Institute of Canada, as it appeared that they had gotten out of the Return On Renovations game.  While we could find lots of reference to a 2012 report by the AIC about the “best” renovations, they stopped referencing percentage returns anymore.  A tool they created called RENOVA that did those calculations was also no longer present in any form on their website.  It is so completely gone from the internet that we fear the good folks at AIC might have become embarrassed by it.

In the absence of any stats, this article was more focused on how 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, a floor with cracked tiles and water stains on the ceiling? Renovate it and take it to at least a basic Home Depot style of new appearance and functionality and that is money very well spent.

The advice we gave back then that is still what we recommend to clients to this day.

If a space or attribute is safe and functional but not the most attractive or modern style, we generally recommend not renovating it.

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.  We have seen many kitchen backsplashes and countertops that were installed just before a sale being ripped out by new buyers.

Welcome to now.

Given we’ve been answering this question for 14 years now, we’re pleased to tell you that we’ve continued to refine our answer.

First off, we previously wrote a whole separate article on the logic and theory behind what to renovate and what to leave and you can read it here.

We promised some actual rates of return and not just philosophical musings, so let’s give you the goods.  It remains challenging to find Canadian specific stats that we deem reliable, whereas there are some very good US-based sites that have rates of return for various projects.

Our favourite comes from an organization called Zonda, that focuses on critical insights to move the housing industry forward.  They have a slogan of “Better data, better communities” and we’re fully on board!

You can find the 2024 Cost Vs Value report here.

Let’s cherry pick a few of the projects and give you our thoughts.  They are saying that the three best renovations are:

• Garage Door Replacement, which has a 193% return
• Steel Entry Door Replacement, which has a 188% return
• Manufactured Stone Veneer, which has a 153% return

We wonder if the first two have such high returns due to combining both increased visual appeal as well as higher security.  With climate change impacting many parts of the US, a secure garage and front door may be attractive both in terms of looks as well as to keep your home safe and secure.  Even the adding of a stone veneer, while primarily cosmetic, could feel like it would help keep the home safe from water and wind.

Rounding out the top five (but not getting all of the cost back) are two largely cosmetic projects.

• Fibreglass Grand Entrance, which has a 97% return
• Minor Kitchen Remodel (Midrange), which has a 96% return

The grand entrance addition adds curb appeal and certainly makes sense as to us in that it would appeal to more buyers.  The kitchen remodel is also a popular project, and we appreciate that they specified minor and midrange.  If you look much further down on the list, a major kitchen remodel (again, midrange) only has a 49.5% return.  The upscale version is even lower, at 38%.

This holds true for many other common projects, where a minor version gives you a better return than a major renovation, and midrange is consistently a better return than upscale or luxury versions.

A similar logic is in place for the quality of materials for other projects.  Adding in a wood deck addition gets you a 83% return, whereas a composite material (typically considered more durable and requiring less maintenance) gets you only a 68%, despite costing considerably more.

The bottom three renovations in terms of return on investment are:

• Midrange Bathroom Addition, with a return of just 34%
• Upscale Bathroom Addition, with a return of just 32%
• Upscale Primary Suite Addition, with a return of just 23%

We would argue that a midrange bathroom addition which takes your home from a one bathroom home to a two bathroom home would have a better return, but we can see how adding a 3rd or 4th bathroom would not be something that buyers would necessarily pay a significant premium for in their purchase.

The lessons from this latest review are pretty clear.  Fix what is broken or terrible, but don’t make it the newest, luxury version of it.  If you hot water tank is broken, replace it with a similar one.  If you decide to splurge on a tankless hot water system that is then installed beside your 35 year old furnace, don’t expect to get the cost back from a buyer.  Make sure the renovation is at least to a similar standard as to the rest of the home, but don’t spend money on a standout attribute right before you sell.  Such gleaming, fancy new aspects can often make the rest of the home look shabby in comparison.

If you’re thinking about moving and want to know what buyers in your area and price range love to see in a home, get in touch with us.  We’d love to help advice you on the smartest renovation with the best return!

Not all renovations add the same value to your home.  Here’s our look at what renovations give the best return as well as when you should do them.

An important caveat is that there is considerable disagreement as to exactly how much value a renovation adds to a home.  There is no shortage of stories in the media that report percentages and dollar values as facts rather than opinion.  We’ve looked for consensus from different sources and also applied our own experience helping clients buy and sell to come up with some guidelines for your renovation plans.

Let’s get started.

It’s what is on the inside that matters.

Royal LePage conducted a survey of 750 agents in 2018 and one of the results was a consensus that exterior projects like adding a pool or deck are the least likely to increase a property’s value.  We know from our work with clients that pools are not a good investment.  If you buy a home with a pool, you often don’t have to pay a premium for the pool compared to a property without one.  Considering a pool can cost between $60K to $80K, if you want one in your home you should definitely make sure you buy one with one in place rather than build one yourself.

Cooking before Bathing

The same survey found that a kitchen renovation has the potential to increase the value of a home by over 12.5%, compared to a bathroom renovation, which ranges from 2.5% to 12.5%.  While we all enjoy a lovely bathroom, with open concept homes more and more common, a new kitchen is a constant visible feature you will appreciate far more often.  The survey uses percentage increase in the value of the home as a whole, which is an interesting approach.  It means that you’ll need to consider how much you spend on a project related to the overall value of the home.  Spending $10K on a bathroom remodel in a $400K home might not be the smartest investment.  Many other surveys look at the return on the cost of the investment itself – i.e. if you spend $23K on a kitchen, you might get a 77% return on that investment, adding $18K in value to the home.  If that number seems specific, it’s because it is pulled directly from the 2020 Cost to Value Report from Remodeling, a US-based website and magazine.

Curb appeal still matters.

Despite the Royal LePage agents saying you should focus on the inside, the Remodeling Cost to Value report shows that the two highest return projects are exterior projects, namely adding manufactured stone veneer to your house or replacing your garage door.

Global News consulted some real estate professionals, which we assume is code for Realtors, to come up with their five low-cost renovations that have the highest return on investment and two of the five suggestions are exterior improvements.

Image courtesy of Global News

As mentioned, take the numbers and percentage returns above with a grain of salt.  It looks very official when it is presented this way, but the numbers are a result of a real estate agent saying something like “Oh, for sure, you could get ten or even fifteen thousand more for your house if the front was landscaped nicely.”

It’s almost Christmas..better start that reno.

In terms of timing, the month of November is considered to be the best time to get the best prices on a renovation.  The reason is pretty simple – supply and demand.

Contractors are often busiest in the spring and summer months, particularly if any of the renovations require work outside.  As we head into fall and colder temperatures, work continues but there are often deadlines to complete projects before the holidays.  Most projects that start in the latter half of the year have mid-November as a deadline so that the homeowners can prepare for the holiday season without the stress and activity of a renovation taking place.

If you are comfortable with the idea that you’re not going to host much of a Christmas gathering or New Year’s Eve party, you can find contractors who are happy to be working rather than sitting around waiting for the new year.  A lack of projects can mean that the best contractors are more readily available, and you have a greater chance of being able to negotiate a discount.

The ideal project for this time is one that can be done comfortably in a month or so.  Contractors are working against the holiday deadline and as such things often go quicker than if they had the option of delaying your work to handle a few other small jobs.

As a bonus, retailers often run sales on end of season appliances as they make space for the new models coming next year.  Considering such appliances are often the largest purchase (outside of materials and labour) in a renovation, saving a few percent can really add up.

The worst time to renovate?

Finally, let’s talk about when is the worst time to do a renovation.  It isn’t a particular month or time of year – it’s right before you move.

If you’ve ever renovated a home right before selling it, you understand this point immediately.  There is nothing quite like finally addressing something that has bothered you for years, only to get only a very short time to enjoy it.

Choosing to do a renovation a year before you move rather than a month before you move gives you more time to enjoy the finished product, which has some value in it’s own right.  It will likely still be in good shape and not dated when you go to sell and we’ve never encounter a buyer client who demanded to know exactly when the recently updated kitchen was renovated.

In terms of what renovation not to do, we’d suggest avoiding combining open concept with your bathroom.  Open and airy isn’t always the best way to go.

If you’re considering selling (or as we say in our last point above, not considering selling just now) and want to discuss which renovations will best improve your home’s appeal and sale price, get in touch.