Compare Cost vs. Payback

It appears that more and more people are investing in home improvement like never before: According to an Ipsos-Reid survey, 2/3 of homeowners intend to undertake renovations this year. While most plan to spend reasonable sums, others say they'll go all out; luxurious materials, home theatres, hot tub, even very expensive 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, jut in case you ever want to sell.

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% to 100% of the outlay for these projects can be recovered upon resale. Adding a pool, on the other hand, is far less advantageous. Still, pool vendors did a booming business this past year.

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." "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.

How much? One rule seems to apply in all cases; avoid projects that will set your house apart from other properties in your neighbourhood. Get expert advice from your realtor or an interior decorator or contractor.

The Appraisal Institute of Canada posts this warning on its web site: "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 bear in mind that the amount spent on renovation projects should be relative to the value of the dwelling: a $75,000 remodeled bathroom does not belong in a $350,000 house.

Home improvement trends tend to lean toward: Home Theatre, Basement development, Ceramic tile, Hardwood - especially including kitchen, Office on ground floor, Laundry on main or upper floor, Kitchen makeovers, and High efficiency furnaces.

"What's it Worth - To Buyers?" from the Appraisal Institute of Canada; percentage recoverable upon resale.

• Kitchen upgrade: 75% - 100%
• Bathroom upgrade: 75% - 100%
• Interior painting: 50% - 100%
• Roof replacement: 60% - 90%
• Replacement of furnace or heating system: 60% - 90%
• Expansion or addition of family room: 50% - 75%
• Door & windows: 50% - 75%
• Deck: 50% - 75%
• Hardwood (not laminate) 75% - 100%
• Garage addition: 80% - 100%
• Fireplace: 50% - 75%
• Central air conditioning: 30% - 60%
• Finished basement: 60% - 90%
• Wood fence: 25% - 50%
• Interlocking paving stones on driveway: 25% - 50%
• Asphalt driveway: 20% - 50%
• Pool: 10% - 40%

As you can see some renovations have a better return value than others, but keep in mind that unless your planning on selling in the near future, your decision to renovate should be based on what your family need or want is. The level of renovation you undertake will ultimately affect the percentage and the numbers can change up or down. If your planning on staying where you are for 3-5 years before selling then the choices you make should reflect on how they meet your needs. No renovation project is a lost leader, as the return value most often is getting to enjoy what you have done! So go ahead, jump in and start planning on getting done what you've been putting off for so long. The sooner you do, the sooner you will be able to sit back and admire your newly renovated home.