What Renovations Increase Home Value and Why Should You Do Them?
Why Should You Renovate Your Home?
The main reason homeowners do a renovation is to increase their property’s value. Home renovations cost on average $20,000. While this may seem like a significant upfront cost, it is really an investment. However, there are many less expensive renovation options that can improve your property’s value.
A well-done home renovation can significantly improve the value of your home, making your property a valuable asset to you. With the right kind of renovations, you can even profit significantly from the renovation investment by selling your new and improved home once the renos are complete.
But not all home renovations are created equal. If you are selling your home, renovation efforts may not be worth it if they are the wrong kinds of renovations or are too expensive for you to recover your investment.
You should consider a number of different factors when deciding whether or not to commit to renovating your home. To make sure your renovations will yield a high return, take a look at the top renovations we have identified for 2021.
Factors to Consider When Renovating Your Home
When renovating your home, you want to make sure that you will be getting a high return on investment (ROI). This means that whatever amount of money you spend on the renovation project will result in a significant increase in your home value after renovating.
Your rate of return is determined by economic trends, real estate market conditions in your local area, the caliber of the work performed, and the type of renovation projects that you embark on.
Before you decide to take the leap and renovate your home, here are a few important factors that you should take into account to help increase your chances of receiving a high rate of return.
- Practical Improvements
Renovations that improve the structure or layout of your home are much more likely to fetch a higher return on investment than expensive construction projects unrelated to your home’s functionality.
Renovating your kitchen, fixing your plumbing or heating, or adding an air conditioning system are practical fixes that can add much more value to your home in the long run than building a pool in your backyard.
A larger, more expensive project does not guarantee bigger profits. - Historically Reliable Renovations
Some renovations have a long history of adding value to homes. Year after year, the most profitable renovations have included building a backyard wooden deck, remodeling bathrooms and kitchens, and replacing windows.
For a relatively fool-proof renovation strategy, try out one of these renovations. If history repeats itself, you could stand to make a strong profit. - Property Type
Renovations may be more worth it depending on the type of property you have. If you are selling your home, your only chance at recovering the cost of renovations is at the point of sale.
For property owners remodelling their rental properties, you can make back your renovation investment not only at the point of sale, but also through the higher rental rate you can charge with a newly renovated property. - Your Location
Major renovations on your home are likely to garner a lot of interest among buyers hoping to move to your neighbourhood. But that does not necessarily mean prospective buyers would be willing to pay that much more above the average selling price in your neighbourhood for the added perks.
Prospective buyers have chosen your neighbourhood because of the services and amenities available there, as well as for the selling prices that fit into their price range. If you improve your home too significantly above the average value of a home in your area, you might not be able to make back your investment.
When deciding whether to renovate your home, make sure you are aware of the average housing conditions and prices in your neighbourhood. A knowledgeable and experienced mortgage broker can help you assess whether a renovation would make sense given your location. - How Much Time Has Passed Since Your Renovation
If your renovation is intended to add value to your home in the long term, it will likely result in a higher return for you.
Updates like increasing living space with a conservatory or finishing your basement will last for a long time, as opposed to a paint job, or certain kitchen and bathroom changes, which become outdated much more quickly.
Top Home Improvements That Add the Most Value in 2021
Taking into account the relevant factors that go into deciding whether or not to renovate your home, certain improvements produce, on average, a higher return on investment.
Here are the best home improvements you could be making to add the most value to your home in 2021:
- Add an Extra Living Space
Average Return on Investment: Above 100%
One of the most popular renovations Canadians have been making in 2020 and 2021 is building an addition onto their property. With the COVID-19 pandemic keeping many of us at home, there is a strong desire for extra living space.
To keep up with competing sellers that already built their additions, and to increase the value of your property, make a profit when selling your home by creating an extra space to live in. - Create an Open-Living Space
Average Return on Investment: Above 100%
An open-concept layout allows more light to travel through, making a living space seem larger and more inviting. Prospective buyers doing remote work from home are looking for airy, spacious homes.
Reconfiguring your home’s layout is an excellent strategy for increasing its value and getting a larger return on your renovation investment. - Install Hardwood Flooring
Average Return on Investment: Above 100%
No prospective buyer wants to purchase a new home with wall-to-wall carpet. To add value to your home, get hardwood flooring professionally installed.
You could be getting a rate of return as high as 150%, making the renovation expenses well worth it. - Replace Your Garage Door
Average Return on Investment: 94%
Renovations big or small can give a high return on investment. For a few thousand dollars, a new garage door can give your home the curb appeal it needs to increase in value.
With at least 94% of your costs likely to be recovered, replacing your garage door is a small but mighty investment. - Add Stone Veneer to the Front of Your House
Average Return on Investment: 92%
You can increase the value of your home by swapping the vinyl veneer for stone on the outside of your home.
The long-term upgrade to curb appeal will be profitable, especially since you can recover essentially all of your costs. - Remodel Your Kitchen
Average Return on Investment: 75 to 100%
One of the best ways to increase your home value is by remodelling your kitchen. Prospective buyers are well aware that a new kitchen is perfect for everyday cooking, hosting dinner guests, and providing entertainment.
Improvements such as buying new appliances, refinishing cabinets, and adding a backsplash might be expensive upfront, but many sellers recover their investment without a hitch. - Install Vinyl Windows
Average Return on Investment: 75%
Replace your old windows with energy-efficient, vinyl windows to increase property value. The new owners will avoid the expense of having to replace the windows themselves and the overall look of your home will be better.
New windows can make a difference to your home value, and the cost of the change would be recovered at the point of sale. - Finish Your Basement
Average Return on Investment: 75%
To further increase the selling price of your home, renovate your basement. This long-term improvement is sure to be attractive to prospective buyers, who get an additional living space which could even be converted into a rental unit.
The new owners would be enjoying the benefits of a finished basement for years to come, so the return on investment for your renovation is particularly high.
Renovate To Increase Your Home Value
Investing in renovations in your home can raise its value significantly. Assuming the factors are right to make a renovation worth it, you could very easily make back your home improvement costs and more with the value you are adding to your property.
Get an expert mortgage broker at Clover Mortgage to help you determine how to best improve the property value of your home. Remember, not all renovations guarantee an increase in your home value. Our professional mortgage brokers will help you choose the right improvements to make so that you stand a greater chance of profiting from your investment. For all of your renovation questions and mortgage needs, contact our reliable mortgage brokers at Clover Mortgage.
