Renovation Paybacks

Buying a home is only the tip of the iceberg when it comes to real estate investing. Once you've settled in and optimized your living space, you may realize it's time for a change.

Renovations around the house are a great way to expand and increase its value. However, not all renovations are beneficial in the long run. For instance, a new in-ground pool may sound like a good idea, but it may not attract buyers who are looking for a low-maintenance house when it's time to sell.

The return on your investment depends on several factors, including the current state of the real estate market, the scope of your renovation and how attractive the change is to potential buyers.
The following is a rundown of the smartest home renovations and their potential payback. In every case, remember to get more than one estimate for the work you want done and always keep your receipts for tax deduction purposes.

All costs and estimated payback figures are in Canadian dollars and can vary greatly depending on your house and budget.

Top “10” renovation paybacks:
1. Paint & decor, interior-100%
2. Heating system replace-100%
3. Kitchen renovation-94%
4. Family room addition-86%
5. Bathroom renovation-75%
6. Painting, exterior-65%
7. Flooring upgrades-62%
8. Fireplace addition-62%
9. Window/door replace-57%
10. Basement renovation-49%

Top “10” renovation trends:
1. Main floor laundry room
2. Home theatre room
3. Hardwood floor upgrade in kitchen
4. Ground floor home office
5. Whirlpool bath separate from shower
6. Built-in kitchen appliances
7. Addition of kitchen cooking island
8. Non-neutral interior paint colours
9. “Smart” house wiring
10. Skylights

Add a new bathroom

Though dealing with the new plumbing installation can be a pain, adding a second or third bathroom to your home is always a wise investment. It'll add convenience for as long as you live in the house and then pay off when you decide to sell. A new bathroom is a big project: it entails adding new plumbing, walls, tiles, counters, a toilet, and a shower. It is wise to put in a shower stall or bathtub (if your hot water tank can handle it) because this gives your a house another complete washroom.
Cost: $4,500 to $13,000Estimated Payback: 92%

Remodel your bathroom

If there is no space for a new bathroom, consider remodelling a current one instead. Simple things like cleaning up the floor tiles or adding a fresh coat of paint can go a long way. Of course, more drastic measures like installing a Jacuzzi, putting in new cabinets and mirrors or giving the bathroom a fresh new layout will also catch the eye of potential buyers.
Cost: $250 to $10,000Estimated Payback: 75%

Remodel your kitchen

As with bathrooms, kitchen renovations are also worthwhile. Both current and future owners reap the benefit of a more eye-catching and practical cooking space. Improvements can be minor (adding new linoleum, installing marble countertops) or major (adding an outdoor patio/eating area, changing the layout). In particular, installing built-in kitchen appliances, like a dishwasher, and an island benefit homeowners in the long run.
Minor Work Cost: $175 to $5,000Estimated Payback: 94% to 102%
Major Work Cost: $5,000 to $28,500Estimated Payback: 90%

Add a new family room

Many homeowners may be surprised to hear that the addition of a new family, living or sitting room is a rising trend. Older houses often have rooms that act as both a place to watch TV and entertain guests; this leaves no room to just sit and relax. To remedy this, renovators have hollowed out garages, extended the rears of houses and rearranged rooms in order to create a comfortable family room.
Depending on your home, the work involved can get quite serious. In some instances, you will need to knock down walls, extend the exterior walls of your house (laws permitting) or sacrifice current space, like storage rooms. The costs will be very high, but the payback can be quite rewarding.
Cost: $20,500 and upEstimated Payback: 86%

Remodel your home office

Dissatisfied with your small work area at home? Think about the possibilities of creating a dream home office. With proper planning, you can find enough space for a big oak desk, office electronics and all the trimmings. The result is a sanctuary for you and an added bonus for a potential home buyer in the future.
Those who have previously expanded their home offices have torn down adjoining walk-in closets and storage rooms. Since this room is more of an added luxury than a necessity to most however, don't sacrifice that all-important second bathroom for it. Instead, improve upon your current space with new flooring, light fixtures and maybe even a liquor cabinet.
Cost: $900 to $9,000Estimated Payback: 69%

Add a garage

The best thing about adding a garage to your home is that it can serve several purposes. Not only does it keep your car away from being battered by bad weather, it can also become a place to have a pantry or store tools. Unfortunately, not all homes are suited to have garages -- the driveway setup has to be just right.
Most homeowners who attempt this addition already have an open carport and need only close it off with a garage door and create direct access to the interior of the house.
Others have a second entrance to their house at the head of a sloping driveway and thus can afford to change this entrance from a living space to a garage. Either way, it's one of the hardest and longest renovations to do, but for convenience's sake, many find it necessary. Those not lucky enough to have part of the work done for them, as mentioned above, can find prefabricated garages that literally sit on top of the driveway.
Cost: $125 per square foot and upEstimated Payback: 65%

Finish your basement

Nothing is as frustrating for a homeowner as having a basement and not putting it to good use. Covering the cement floors, redoing the walls and converting your dank underground into livable space reaps loads of possibilities.
You can turn the basement into a TV room, use it as storage space or add a kitchenette and bedroom, and then rent it out. Therefore, the work can go from minimal (i.e. installing some carpeting) to extensive (creating a self-supporting apartment). Basements with a lot of natural light and direct outdoor access generally bring in more return than ones that simply have a few dark rooms.
Cost: $175 to several thousand dollarsEstimated Payback: 15% to 25%

Add a pool

Surprisingly, the addition of a pool is not a great investment. In-ground pools and the surrounding walkway and deck usually bring current homeowners lots of pleasure but do not markedly increase the value of the home. The trade-off is "fun now, no return later" and many are satisfied with this. The one saving grace is that a well-constructed deck with ample seating room will often mature in value. So, hire the pool crew if you must, but don't fool yourself about a generous return on investment.
Cost: $2,300 to over $13,500Estimated Payback: 5% to 15%

Improve the landscaping

Just like dating, buying a home is all about first impressions. If you put in the effort and money to groom your lawn into perfect shape, potential buyers will notice.
Good curbside appearance is important and can be achieved with the help of a local grass and pesticide company or the addition of a rock garden, stone path, rose bushes, and anything else your creative mind can think of. In fact, a few small touches can increase your payback more than the installation of a pool can.
Cost: $250 to $17,000Estimated Payback: 30% to 60%

Add a new heating or air conditioning system

The changes you make to your house do not always have to be aesthetic. Functional upgrades, like installing a dual electronic/oil heating system or central air conditioning, can do wonders for the value of your home. If done only a few years before moving out, you can expect to see almost a full "refund" when the house is sold. Usually, furnaces and central air components last for decades, requiring only minor annual checkups.
Cost: $2,300 to $9,000Estimated Payback: 100% for heating system, 75% for air conditioning

money can grow

The beauty of proper home renovation is that you benefit twofold: first, from the initial improvements to a room or property; second, your home increases in value when placed on the market. Of course, not all renovations are profitable -- that's why we've clued you in on the ones that pay off.ying a home is only the tip of the iceberg when it comes to real estate investing. Once you've settled in and optimized your living space, you may realize it's time for a change

Steps for Successful Home Renovation

DETERMINE WHAT YOU WANT- Magazines and books are a great source for fresh and new house renovation ideas. Once the work has started, any renovation changes that you make may cost more that if you include them in the original agreement.

DEVELOP A BUDGET - Most people tend to leave this step to the contractor. It's a good idea to talk with your financial institution about a relative range for your home improvement project. This step can also help you get pre-qualified for your home improvement loan.

GET ESTIMATES - A good rule of thumb is to obtain at least three different bids. Make sure that you provide all the renovators with the same detailed information.

ASK FOR REFERENCES - Good references are your best guarantee that your renovator can and will perform as expected. Ask for references from the last three projects they worked on. (Contractors can "cherry pick" their good references). Don't hesitate to let the renovator know that you will check out the references provided.

ACCEPT OR REJECT THE RENOVATOR'S CONTRACT PROPOSAL - The contract the renovations provide you are not etched in stone. Take the time to review it line by line. If necessary seek the advise of an attorney. Don't accept the contract unless the whole document is agreeable to you. If portions are not acceptable, discuss alternatives with the renovator and ask for a revised version of the contract that you both can mutually agree on. Remember that if a contract is grossly lower or higher than others, it should be avoided unless the renovator can explain his deviations from your other contracts.

UNDERSTAND YOUR OBLIGATIONS - Often it is assumed that the only obligation expected is timely payments. However, you may need to make alternative living arrangements as the work, or portions thereof, are in progress. Careful planning can greatly minimize inconvenience of living during the construction phase.

MAINTAIN A GOOD WORKING RELATIONSHIP WITH YOUR RENOVATOR - Have the renovator update you on a regular basis or at specific interval during the performance of the contract. Be available to make decisions when they are needed so work is not held up.

M1 Design 2733 Masefielld Rd. North Vancouver, BC