Buying and selling houses requires thoughtful planning, a concise budget, and a course of action. And contrary to popular belief, throwing a lot of money into a renovation project will not automatically guarantee a substantial return on investment. In fact, small improvements have been proven to earn big money by creating a perception of value.
What if you’re not under pressure to flip your house?
Even if you’re not buying and selling homes quickly as a means of turning a fast profit, you likely want to make sure your investment does provide a substantial return when you are ready to sell.
So, do the same principles apply? Can you do small renovations and still earn big money?
With the average Canadian homeowner considering a move every five years, it’s likely you’ll want to have a five-year plan in place to renovate your home to maximize profit.
While you’ve probably heard that kitchen, bathroom and basement renovations provided the best ROI, that doesn’t mean you must gut the rooms and spend thousands of dollars adding all the latest design trends.
To obtain the best possible outcome, you’ll need to take a few facts into consideration:
Have you looked at real estate ads lately? Notice how different the house descriptions are. Instead of stoically identifying the 3 bedrooms and 2 bathrooms as the key features of the home, now real estate professionals recognize that potential buyers are anxious to find the perfect home to fit their lifestyle.
Your five-year plan should include “niche marketing” as a means of attracting specific buyers who are willing to pay for the unique features your home offers.
According to analysts at ProBuilder.com, here are some keywords that often pop up in today’s homebuyer internet searches:
- Vintage styling
- Basement media centre or game room
- First-floor master bedroom
- Old-world charm
- Upgraded trim work
- Solid wood cabinetry
- Private home office
- Comfortable elegance
- Family pet station
- Relaxing spa
- Original, solid hardwood flooring
- Kitchen island breakfast bar
- Convenient mud room
- Extra storage
- In-home fitness centre
- Backyard retreat
- Energy efficiency
- Natural lighting
By focusing your reno projects on enhancing specific lifestyle elements (often without spending a fortune), you’ll be guaranteed a larger market and return on investment when you sell your home.
Don’t Get Emotionally Attached
Owning a home generally elicits an emotional response from the people who reside there. Your kids were pretty excited to be able to choose their own room when you first moved in, and you and your spouse took turns deciding what rooms you wanted to personalize with new paint colours and furnishings.
So, why is it important not to get emotionally attached when you’re planning to sell your home? In a word… Money!
In order to attract buyers willing to pay top dollar for your home, you must make sure they can envision living there. That means that your affinity for polka dots or elephants needs to be reined in. In other words, you need to appeal to the masses with your decor selections. That’s not to say that everything should be white, or worse, boring shades of beige. Complimentary colours and patterns will encourage potential buyers to see the possibilities instead of the momentous amount of work needed to make it their own.
Obviously, you’ll want to enjoy living in the home too, so consider personalizing items that are easy to change or move. Don’t select a deep purple kitchen countertop or matching fireplace ceramic tile surround like the interior designer did at a model home I worked in—true story. After two years on the market, the builder finally had to replace everything purple and take a huge loss before finally selling it.
Before finalizing the reno budget in your five-year plan, take the time to research property values in your neighbourhood. Contrary to popular belief, a total overhaul may not be necessary in order to gain the biggest return—especially if your neighbourhood can’t support a higher price. If you purchased your home at the low end of the market, you’ll want to be sure your renovation work incorporates the components buyers are looking for in your community.
Think of it this way…
When you buy a used car, you expect it to have decent tires on it. But, you wouldn’t expect a 10-year old sub-compact to have high-performance racing tires that cost $1,000 each, and you certainly wouldn’t want to pay for them. The same principle applies to your home. While you may have always dreamed of having a high-end, designer kitchen with top-of-the-line materials and appliances, but if other homes in the area are modestly priced, you may fall short of recouping that large investment upon its sale.
So, before undertaking a huge project, find out what homes are selling for in your community and how they compare to your home. You can get a rough estimate of your home’s value through The Globe & Mail – House Price Data Centre or by contacting the Canadian Real Estate Association to find a local real estate professional who is familiar with your area. Don’t forget to discuss your plans with friends, family and neighbours. It’s important that you do some extensive research on what buyers are looking for and what they’re not. Personal tastes and preferences you really love can be a turn off to buyers, so keep an open mind when determining what reno projects MUST be done.
So, what can you do to earn big money?
Small reno projects and upgrades can provide a great look without the huge expenditure. Consider these:
A major kitchen renovation should not exceed 10 – 15 percent of your home’s value; but if your room just needs updating, you should:
- Replace or refinish cabinet and drawer fronts
- Replace hardware
- Update the faucet
- Update light fixtures with trendy pendant lights, recessed ceiling lights and under-cabinet utility lights
- Replace a chipped or dated countertop with a high-definition laminate
- Add a decorative backsplash
- Remove old wallpaper and refinish with warm paint colours
- Update appliances like a built-in dishwasher and microwave with stainless steel or current finish and features
- Update flooring – refinish hardwood or replace old sheet vinyl with an updated laminate
Master Bathroom Suite
A private Master Bathroom Suite is a huge selling point for most homes, but it can be extremely costly to add or completely renovate one. A full remodel shouldn’t cost more than 10 percent of the house value. If possible, limit updates to:
- Replace loose or broken shower tiles
- Update the faucets; add hand-held sprays to shower
- Replace vanity handles and pulls
- Add a ceramic backsplash
- Update light fixture
- Replace floor with large ceramic tiles
- Replace old ceramic towel bars with decorative styles
- Add decorative wall mirror to replace old rectangular design
- Update toilet with new, water-saver type
- Repaint room with warm, natural colours
- Add some live plants to soften the space
Main Bath/Powder Room
The same rules apply for the Main Bath and Powder Room, so you’ll want to update instead of renovate if possible. A 5 percent investment of the total selling price of your home should be the maximum spent for renovation work in these rooms. Minimal updating can go a long way toward creating a beautiful first impression. Consider these changes:
- New vanity with one or two vessel sinks in main bath and pedestal sink in the lav
- Replace faucets and add a shower massage in the tub/shower area
- Add new light fixtures and add dimmer switches (you’ll be grateful not to be blinded each morning)
- Replace the floor with a water-resistant laminate
- Replace standard mirror with decorative style or mirrored medicine cabinet
- Repair any broken or cracked ceramic tiles
- Remove any old wallpaper and repaint the room with bright, popular colours
Living Room/Dining Room
These more formal spaces in your home could use a makeover, and you can change the entire look with a few simple ideas:
- Change the ceiling—add crown molding or add some texture with coffered ceiling trims
- Add some wainscoting and paint it white
- Uncover any original hardwood flooring; refinish if necessary and add area rugs under tables
- Paint the rooms in neutral shades with one wall reserved as the bright, focal area
- Add live plants or colourful florals
Attic or Basement
Simplicity in both areas is the key to recouping any dollars spent. A complete finish project should stay within 10 – 15 percent of the entire house value. If these rooms have already been finished, make sure all materials are meant to be used in basements or attic areas. Remove or replace anything that shows signs of moisture damage or warping. Install a dehumidifier to remove excess moisture from the air.
If your basement is unfinished, inspect the foundation walls for cracks or leaks. Have a professional waterproofing company inspect it and repair any damaged areas.
Deck, Patio and Landscaping
Don’t spend more than 2 – 5 percent of your home’s value on these items, but definitely make sure the deck, patio and landscaping are in top condition. More and more potential buyers are looking for homes with outdoor features that extend living space. Add a pergola over your deck to provide shade on sunny days or a firepit to create a cozy area to entertain friends and family.
Consider hiring a professional landscaper to create a simple design for added curb appeal. Always keep your yard well manicured and flowerbeds weed-free.
Windows and Doors
Windows should operate easily and be free from rotting or warping. If not, you can add energy-efficient, vinyl replacement windows that will still give you an 80 percent return in added home value. While you may not need to replace all the windows in your home, make sure the new units match the old units for a nice curb appeal.
Replacing the front entry door with a brand new steel door has been proven to recoup 102 percent of its cost, so you have everything to gain and nothing to lose. Paint it a bright contrasting colour or select a stylish finish to provide the biggest impact.
While the garage door doesn’t have the same effect as the entry door, it can be a huge deterrent if it’s left in disrepair. At the minimum, repaint the door. At the maximum, replace it with a brand new style.
The Final Word on How to Earn Big Money
Aesthetically pleasing first impressions are going to earn you hefty returns when you sell your home. Preparing a five-year plan and creating a game plan for simple improvements will ensure you get the most for your investment of time and money.
While the components behind the walls such as electrical wiring, plumbing pipes and insulation should all be in good working order and density, making huge improvements to these systems will not offer a larger return. Focus your reno budget on updating rooms that show wear and tear or old styles. Although vintage and retro themes are gaining popularity, the majority of buyers are looking for new products that look old.
Sticking to well-budgeted, simple renovations makes good, financial sense and will give you enough funds to move into the home of your dreams.