Is it worth renovating before selling? Looking for the best return on investment? Renovate the kitchen.
by Multi-Prêts Mortgages
What you’ll learn
- Renovating the kitchen and washrooms are your best investment
- The easiest thing to do: repaint everything
- How to set up and get to work
According to popular belief, a spotless kitchen and washroom are your most convincing arguments to help you sell your property, and it’s completely true! The brighter these rooms shine, the brighter your chances of making the sale.
But…any homeowner who’s gone through a renovation project knows that it’s fraught with hidden surprises, delays, and expenses. The bigger the project, the more delays and surprises will strain your budget, your patience, and of course, your profit.
You think spending a lot of money will ensure your chances of selling, and, more importantly, allow you to tack on a few zeroes to the end of your sales price? Wrong. Your property is primarily evaluated based on the other houses in the area or condos in your building.
What projects have the biggest payoff? A fresh coat of paint is by far your easiest, cheapest and quickest option. It will undoubtedly give you the most bang for your buck.
For bigger projects, renovating your washroom will allow you to recoup 50% to 100% of your investment. The kitchen is even better, netting 75% to 100% of your investment, according to the Appraisal Institute of Canada.
For $15,000 to $25,000, you’ll get a modern kitchen with new stainless steel appliances. With a budget of $7000 to $10,000, your washroom will measure up to any glitzy Hollywood spa. You can also limit yourself to new granite, Corian or quartz counters in the kitchen or washroom, or you could change the sinks, bath, tiles, backsplash or cupboards as well.
Switching out your carpets for wooden or cork floors will also draw in buyers. For a budget of $4 to $8 per square foot (double that to account for labour), you’ll get a return of around 75% on your investment when selling. Some floating floors, which look just as nice as hardwood flooring, are much less expensive and easier to install.
If your budget is limited, simply change the kitchen and washroom tiles and, if possible, counters and sinks. Even simply changing the taps and faucets goes a long way.
What are the least profitable projects? Installing a home theatre, a fence, or a pool will only earn you a quarter of your investment. Even worse: pools scare off certain buyers! In some municipalities, zoning by-laws forbid covering up in-ground pools. This means you will have to destroy your in-ground pool if buyers don’t want it, or if it requires expensive upgrades, and then pay for the landscaping to top it all off.
According to the Appraisal Institute of Canada, other renovations that aren’t as profitable include replacing doors and windows, finishing the basement, replacing the heating system, installing a fireplace or heat pump, etc. These projects or additions will only yield a 50% to 75% return on your investment. Landscaping or paving the driveway yields even less return (25% to 50%).
But be careful though; your renovations have to be in line with the rest of the neighbourhood. Adding high-end lighting, luxury appliances, or outrageously expensive materials in your washroom will only tear into your profits. No need to give the client more than what he’s asking for. Forget wine cellars and solariums, unless your house can fetch over $500,000.
Sometimes, certain renovations are necessary. Even if a new roof won’t increase your resale value, unsightly shingles can send buyers running. Adding urethane in your basement or replacing the vapour barrier in the attic is unavoidable, even if the buyer won’t notice it immediately. However, you can be sure the building inspector he hires will!
- Hire a building inspector who can identify the work needed to avoid problems or a change of heart from potential buyers (once they have their own inspection performed).
- Carefully plan out how you will finance your renovations. See if you are eligible for a grant or tax credit
- Set your priorities, draw up a budget, discuss your project with your mortgage broker, get quotes from at least two contractors, and plan a surplus (up to 20% of the original costs); forget last-minute changes (nicer tiles, another type of faucet, etc.).
- Keep all your renovation invoices, even those that go back several years. They will prove to evaluators and buyers that your renovations were done with the materials you claim, at the cost you claim. Furthermore, many of your purchases come with long-term warranties (heat pump, roof, foundation, etc.).
- Patios, skylights and spas are practically worthless.
- Repainting ledges, balconies, fences, façade, and even adjusting the landscape can pay off big in relation to the time and money invested.
- Be sure to let your insurance company know. Your coverage and premiums will either increase or decrease.