Since the COVID-19 outbreak, mortgage rates have hit near all-time lows while property values continue to climb. As a result, many homeowners are taking this opportunity (and excess free time) to complete deferred home renovation projects.
If you own a home at some point you have probably wanted to change a specific feature you just feel is a little bit out of date or functionally limited. You even may envision adding a new feature such as an in-ground pool or a decked-out entertainment room.
But whether you desire to install new hardwood floors, replace your kitchen countertops, or install a state-of-the-art wet bar, when starting a new project, it's important to know what improvements will actually add value to your home and which ones can negatively impact your bottom line.
In short, if you are looking to complete a few modest (or extensive) updates and add value to your home here are three of the best and worst projects that will impact your property’s value.
Best #1: Complete Kitchen Renovation or Upgrade
Tired of living in the same old space? One of the best ways to fall in love with your home again is by renovating or upgrading your kitchen area. Updating your kitchen can make if functionally better as well increase your enjoyment when you are at home.
According to a recent survey, 55% of real estate experts surveyed mentioned that upgrading your kitchen can increase the sales price of your home by nearly 12.5%1.
While a complete kitchen renovation isn’t cheap, costing upwards of nearly $50,000 on average, you can often expect to recoup anywhere between 75-100% of your total project costs2.
Best #2: Bathroom Remodel
If the kitchen isn’t the most used room of your home, you may find that your bathroom is. Bathrooms can be an important selling point to new prospective buyers so keeping them clean and updated can add tremendous value.
One great thing about completing a bathroom remodel or renovation is that it can be done for fairly cheap. A new vanity, updated mirror, and a pop of colorful paint can really make your home shine.
The cost to renovate a smaller, 5’ x 8’’ bathroom could be as low as $9,200-12,300; redoing a larger bathroom with high-end luxury features may run you over $40,0003. While you may not recoup as much on splashier projects, remodeling or renovating your bathroom can still net you one of the higher returns on your investment.
Best #3: Dedicated Home Office Space
More and more people are working from home as a result of the recent pandemic. As companies continue to invest in technology and resources to accommodate employees being able to work remotely, more new buyers are searching for dedicated office space when buying a new home.
A 2017 study found that nearly 47% of Canadian employees work remotely meaning adding a formal office to your home can really increase its resale potential4. In fact, an office space will continue to be marketable as the business environment becomes more digital and a younger generation of home buyers seek remote opportunities.
Worst #1: Backyard Patio and Landscaping
The reason realtors use the phrase “curb appeal” is because you want a home to draw the attention of potential buyers at first sight. But amenities located toward the back of the home and out of eyesight of prospective buyers aren’t the most effective way of adding additional value to your home.
While you may be tempted to roll up your sleeves and put your DIY hot on, most backyard landscaping and patio projects don’t measure up in terms of resale value. You would be lucky to recoup half your investment on any modest project using average materials.
Worst #2: Installing a Backyard Pool
Installing a new inground or above ground pool in your backyard may sound like a great idea, until you see what kind of price tag it comes with.
National Bank notes that the average cost to install an inground pool is between $25,000 and $40,0005. But what you might not realize is the amount of money that goes into maintaining this asset.
General maintenance for the chemicals and cleaning as well as increased water and power usage will end up costing you hundreds of dollars a year. Furthermore, homes with pools generally cost more to insure, so expect to see a bump in your monthly homeowner’s insurance premium.
Worst #3: Combing a Second Bedroom and Creating a Larger Master Suite
One of the worst things you can do that will really lower your home’s resale value is to knock out a wall to combine rooms into one larger master bedroom suite. While you might think this is a perfect luxurious option for the right buyer, the truth is that it lowers the functionality and utility of the home.
Typically, homes with more bedrooms will appraise for more money. Removing a room may decrease the number of comparable homes on the market and can really impact your bottom line.
Similarly, removing a room can impact the overall floor plan of your home in a major way. This is often a common pitfall for those seeking to install a new addition or add a second story. Try to stick to projects that won’t tangibly impact the floor plan on a grand scale.
1 Alini, E., & Global News. (2018, July 23). Kitchen or bathroom reno? One is likely much better than the other for your home value. Retrieved February 5, 2021, from https://globalnews.ca/news/4314336/kitchen-bathroom-reno-best-value/
2 Ontario Securities Commission. (2017, June 19). Adding value with home renovations: Real estate. Retrieved February 5, 2021, from https://www.getsmarteraboutmoney.ca/invest/investment-products/real-estate/adding-value-with-home-renovations/
3 Sclafani, L. D. (2019, December 23). Bathroom Renovation Cost in Toronto & Montreal in 2020: A Breakdown. Retrieved February 5, 2021, from https://www.renoassistance.ca/en/bathrooms/bathroom-renovation-cost/
4 Staff | BenefitsCanada. March 9, 2. (2017, March 09). 47% of Canadian employees work remotely: Survey. Retrieved February 4, 2021, from https://www.benefitscanada.com/human-resources/other/47-of-canadian-employees-work-remotely-survey-94694
5 National Bank. (2020, July 30). How much does an inground pool actually cost? Retrieved February 5, 2021, from https://www.nbc.ca/personal/advice/home/pools-true-cost.html