Some remodelling projects may improve your home without significantly increasing your home's value. Find out which ones pay back.
Renovating your home is a balancing act between your family's enjoyment of your home and making a wise investment. Recouping your remodelling investment may be your goal when you sell your house. But when it comes to resale value, all home improvements are not created equal. As a rule, kitchen remodelling projects and bathroom additions almost always pay back 90 percent or more of their costs. However, finishing a basement usually pays back less than 50 percent. Other improvements fall somewhere in between.
Consider these payback estimates* for typical home improvement projects:
|Interior paint||50% to 100%|
|Remodel kitchen||75% to 100%|
|Remodel bathroom||75% to 100%|
|Replace shingles||50% to 100%|
|Replace a furnace||50% to 80%|
|Replace doors & windows||50% to 75%|
|Install hardwood flooring||50% to 75%|
|Add a family room||50% to 75%|
|Build a deck||50% to 75%|
|Add a fireplace||50% to 75%|
|Finish the basement||50% to 75%|
|Build a garage||50% to 75%|
|Install or upgrade landscaping||25% to 50%|
|Build a fence||25% to 50%|
|Resurface the driveway with interlocking paving stones||25% to 50%|
|Resurface the driveway with asphalt||20% to 50%|
|Install a pool or hot tub||10% to 40%|
*These estimates are compiled from several published surveys including The Appraisal Institute of Canada
Understanding Payback Value
Payback value depends heavily on the real estate market and prevailing property values. If the market is slow, expect to see less payback than you would in a fast market. Issues that can influence payback value include:
The quality of craftsmanship and materials is one of the most important issues to consider when doing home improvements. A home renovation done badly can actually reduce the value of a home even if expensive materials are used i.e. a paint job that leaves streaks in the ceilings or walls and has paint dabs on the trim will reduce the value of the home. Replacing the kitchen cupboards with the least expensive stock cupboard purchased at a discount store is not likely to increase value of a home.
Type of Improvement
Kitchen and bathroom remodelling projects consistently return the most in resale value and almost always help sell a house. Converting a basement into a family room yields the smallest return on the investment.
Scope of Improvement
Projects can be large or small. Sometimes, the cumulative effect of small projects can pay back more in resale value than that of larger projects. Small projects tend to be cosmetic in nature: fresh paint, new doors, garden windows, and ceiling fans. Large improvements involve adding or upgrading living space.
Today's fad may be tomorrow's standard. Backyard decks, for example, were difficult to find 30 years ago; now they are common. Decks may not have paid back very much in resale value decades ago, but as decks have become more desirable, their resale value has increased.
The price of home improvements fluctuates depending on economic conditions and region. If remodelling costs are particularly high in your area (or home sale prices particularly low), you may not recoup as much on your investment as you would if costs were in sync with sales prices.
Home values and returns on investments in home improvements are dependent on the location of the property, i.e. city, rural vs. urban, and the neighbourhood. Homes on the same block tend to have similar values. If you remodel your house to twice the size of the other homes on the block, it is unlikely that you will be able to sell at double the price.