How do I increase the value of my property? That’s the question on every homeowner’s mind. Market fluctuations can push your property values sky high, or they can diminish them to below what you originally paid.
How do you avoid being subjected to this volatility? There are two key survival strategies. The first is to think long term, have a plan and stick to it. History shows that this plan of action can pay off.
The second tactic is to outperform the market. This means ensuring your property increases in value at a greater rate than those in your surrounding market. One way to do that is through renovations – but not all projects are created equal when it comes to generating a return on investment (ROI). Focusing your renovation budget on key aspects of your home, then, will garner you the best ROI.
Here are the top five “renos for ROI”:
1. Building an income suite
Also known as a rental suite, basement apartment or ‘granny flat’ in some circles, converting your basement or another section of your house into a rental unit is by far the most profitable reno a homeowner can undertake. This may be the first time that an income suite option makes it to a home renovation ‘top five’ list.
In fact, it’s almost impossible to find any statistics on this subject. However, there’s no denying that housing prices have been increasing significantly faster than income. This means new buyers are finding it more difficult to penetrate the market. An income suite may provide the solution, since it increases both the value of the home and generates real income, making it easy to measure ROI.
In addition, a home with an income suite is often more attractive to a greater number of buyers. Potential homeowners who would otherwise be unable to afford a mortgage payment may be able to do so with the help of a renter. With the ability to both increase the value of your property and generate cash flow, income suites typically have a 150% to 250% ROI.
Tip: Building an income suite generates positive cash flow every year, making it the renovation that keeps on giving. Your initial investment is often recouped with the increased value of your home. The rent money is icing on the cake.
This is an inexpensive way to freshen up a property. Picking neutral tones and doing a good job are key. This simple reno project is an easy task to undertake as a do-it-yourself project, and it can dramatically improve the look and feel of a space at a low cost. That gives it our number two position with about 100% ROI.
3. Renovating kitchens and bathrooms
These areas are subject to intense examination when the time comes to sell a property, so it’s time and money well spent – earning it our number three ranking in terms of best bang for your buck.
Kitchens should be bright and spacious with a smart layout. Replacing old appliances with inexpensive and more efficient newer ones also adds a lot of appeal.
Bathrooms are equally important. The more you have, the better the ROI. Bathrooms with neutral tones and bold fixtures score highly. A beautiful faucet can take a bathroom to a higher standard.
Renovating kitchens and bathrooms delivers about a 75% to 100% ROI.
Tip: A smart renovation adds value to your home, but over-renovating may have a diminishing rate of return. A kitchen reno can cost between $5,000 and $100,000, but over-investing in a kitchen can actually create a negative return on your investment. Keep the kitchen modern, but don’t overspend on appliances and elaborate cabinetry. Inexpensive, fresh and new will deliver the best return on your investment.
4. New flooring
This has a dramatic impact and hard surfaces are the way to go. Laminate flooring is inexpensive, easy to lay, durable and looks great. With modern styles and improved design, it has become the flooring of choice for real estate investors.
Stepping things up a notch and using real hardwood can deliver an even greater impact. Tiles are best in bathrooms and can also work well in the kitchen. Refinishing existing hardwood with a modern look presents the best possible scenario, cost-wise, for updating floors.
New flooring can generate an average of 70% to 90% ROI.
Tip: Real estate investors often look for hardwood hidden under wall-to-wall carpeting when scoping out investment properties. If you suspect hardwood under the carpet, sneak a peek by removing a floor vent and lifting the edge of the carpet and under pad. Refinishing existing hardwood can save you a fortune and it looks incredible. Don’t be floored to see a 200% ROI in this scenario.
5. Light fixtures and door hardware
These can reveal the true age of a property. Installing proper lighting and a few nifty fixtures in the right places, namely the kitchen and dining room, will brighten up the space and create atmosphere.
Touching door hardware is unavoidable when walking through a property, and since it may be the only thing prospective buyers or renters will touch, it could have a significant impact on their first impression of the home.
With the right touch, updating light fixtures and door hardware can generate a 60% to 75% ROI.
Courtesy of Canadian Real Estate magazine – canadianrealestatemagazine.ca