Renovations that increase the value of your home (and those that don’t)
The following is a guest post by Sean Cooper, bestselling author of the book, Burn Your Mortgage.
Are you considering undertaking a major home renovation in the coming months? You’re not alone. A home is no longer just a place to live. Rapidly rising home prices in big cities means it’s the single biggest financial asset for most Canadian families – and that trend isn’t slowing down.
Home equity lines of credits (HELOCs) have become a popular source to fund home renovations. Operating like a credit card anchored to your mortgage, about two million Canadian homeowners have HELOCs as of May 2018.
Given the risks associated with HELOCs, before renovating your home, it’s important to understand why you’re doing it. Are you doing it to boost the resale value of your home or for pleasure? If it’s for pleasure, you don’t have to be as concerned about how it will affect the value of your home in the short-term (although I suspect you’ll care eventually when you decide to sell it!). If you’re renovating your home to boost its resale value, you’ll want to spend your money wisely. That just makes sense.
Some renovations help the resale value of your home, while others, not so much. Here are my top-3 renovations that increase the value of your home and three more that don’t.
3 renovations that increase the value of your home
Are you currently using your basement for storage? Then you might want to renovate it and consider installing an in-law suite. Not only can you bring in some decent rental income short-term, with the high cost of housing in big cities, it can open up your home to a larger pool of prospective homebuyers who might otherwise be unable to live in your neighbourhood without some extra rental income.
Finishing your basement can be a major financial endeavour. Before going ahead, there are a few things to consider – as a homeowner myself who lived in the basement of my own home; renting out the main floor.
- Is the ceiling high enough? If not, you’ll have to pay a pretty penny to hire contractors to dig down deeper.
- Does the basement have a separate entrance? If not, again, it can cost tens of thousands of dollars to install one.
If your basement is already finished? Then you need to add a bathroom and/or kitchen, which may or may not be straight-forward.
Just make sure your city/town lets you legally rent out part of your home. Not all cities/towns do.
Add an extra bedroom
Is there an oversized room in your home? Then you might want to consider installing a new wall and adding an extra bedroom. Sometimes the layout of your home isn’t ideal, but there’s nothing stopping you from changing it – structural assessments aside.
While removing a wall can be risky, adding walls shouldn’t be too much of a problem. Although homeowners tend to favour open concepts, if you can say that your home has four bedrooms instead of three and they’re decent sized, you may be able to sell your home for tens of thousands of extra dollars.
When it comes to selling your home, curb appeal is everything. You want prospective homebuyers to be impressed the moment they walk through your front door. Painting your home is the perfect DIY renovation when it’s done right. That said, a sloppy paint job can hurt the resale value of your home.
While there’s nothing wrong with painting the walls yourself, you might want to hire professionals to paint the ceiling. Likewise, make sure you buy some painter’s tape to avoid painting on light switches and choose neutral paint colours (sorry, that means hot pink is out!).
3 renovations that won’t add value to your home
“Can we have a pool, dad?”
If you’ve ever seen the classic episode of the Simpsons where Bart and Lisa relentless ask Homer for a swimming pool, you’ll be familiar with this phrase. Although your kids may want a pool, other homebuyers may not share your tastes. Not only is installing an in-ground pool expensive, it costs a lot to maintain. Always consider the operational and maintenance costs for such a big purchase.
Don’t forget people see risks differently than you do. While pools may be great and very enjoyable they can come with a much higher home insurance bill. Some homebuyers wouldn’t even consider a home with a pool, so they’re best to avoid, especially if you’re planning to sell your home in the not-too-distant future.
Skylights are a very polarizing home renovation. Some homeowners love them, while others hate them. There seems to be no middle ground. My sense is, when someone sees a skylight, their first concern is probably, does it leak? My parents used to own a house with a skylight and guess what – it leaked. My father was afraid of heights, so my mother had to go on the roof of our three-story house to repair it. Not a fun experience for them…
That’s why most homeowners tend to avoid skylights.
If you’re looking to let sunlight in your home, you’re probably better off with a bay or bow window. Those are more widely accepted (and loved) than skylights.
Carpeting used to be popular a few decades ago but it’s not the 60s or 70s anymore.
Not that this is any guidepost but if you watch any home renovation TV show, usually the first thing they’ll do when renovating a house is tear out the old carpets. Homeowners these days would much rather have hardwood floors over carpeting.
If your hardwood floors have taken a beating over the years, you’re probably better off refinishing them rather than installing carpeting. If you have carpeting in your home and the floors are in decent shape underneath, you might want to tear up the carpet and expose the hardwood floors. This isn’t too costly and it might help your home sell for higher value.
Those are my three “dos” and “don’ts” when it comes to home renovations. No doubt there are more but these are definitely starters.