There are many reasons to renovate your home. To improve your quality of life through a home remodel project that functions better for you and your family, to continue or stay ahead of essential maintenance, and to protect what is, perhaps, the most significant investment of your life.
There are many reasons to renovate your home. To improve your quality of life through a home remodel project that functions better for you and your family, to continue or stay ahead of essential maintenance, and to protect what is, perhaps, the most significant investment of your life.
When selecting projects for your home, it is worth considering your expected home renovation ROI.
Along with your primary home, if you have an income property, a renovation can help you increase your rental income. If you were to renovate your property chances are your property will fetch a higher rent value. In addition, when you opt to sell your income property, it should fetch a higher resale value.
Before we dig into the details, we’ll briefly explain what home renovation ROI is. ROI is the acronym for “return on investment”. When you renovate, whether, with a contractor or DIY project, your renovation will require a budget. The ROI, or return on your investment, is the amount you can expect to increase your home’s value by when the renovation project is complete, either through appraisal or resale value.
When you choose to renovate your home, you expect ROI. However, unless you’re conducting an extensive remodel to address a structural issue or design flaw, most home renovations will not return value above the budget of the project (ie: over 100% ROI). The good news is that most of the sought-after renovations return between 70-95% ROI, and in some cases close to 100% ROI.
We recommend any of the homeowners we work with consider the following items when starting their project.
When finalizing the budget for your renovation project, research what other renovations might be occurring within your neighbour. Ask your contractor if they’ve worked with other houses near yours, what those projects consisted of, and the average budget. For your renovation to be ROI-effective, you must stay within the limits of what your home’s market value can support. If you improve your home beyond what buyers may want to pay for it within your neighbourhood, you will have an issue in recovering ROI.
Do you have savings to cover your home renovation budget or will you require a loan? If a loan is required, then factoring your repayment schedule and the amount of interest your loan will cost should be deducted from your renovation’s ROI. If you have equity in your home, look into a home equity loan as a way to finance your renovation project. These types of loans can typically come at a lower interest rate, closer to your mortgage’s interest rate.
If you’re sticking with your home for the long haul, completing a renovation can help you enjoy your home more. Imagine creating meals for loved ones in a bright and spacious kitchen or relaxing after a long day’s work in your private ensuite’s soaker tub. All of this is possible when you renovate your home.
We also advise that your renovation focuses on high-traffic areas – not only for resale value but for your enjoyment. For example, if you’re choosing between your basement bathroom or your ensuite, consider which will bring you more joy. Your happiness should be an important aspect when completing your renovation.
When possible keep your renovations neutral, using tried and true trends. Working with an interior designer can have a massive impact on how your layout, design features, home functionality, and materials and colours selected come together.
The space you select to renovate has a huge impact on the ROI your renovation may fetch for you. We recommend renovating high-traffic, often-used spaces in your home, such as your kitchen or bathroom. As well, other renovations, such as exterior renovations, can have an impact on your home’s curb appeal.
Below, we will cover estimated expectations for ROI with a few of the most popular renovations. However, please note that every situation is different with numerous factors influencing your renovation budget and potential ROI.
There is great variety in a kitchen renovation or remodel ROI. If you’re looking for a kitchen renovation that goes through demolition, receives a fresh take on the interior design and layout, and then is upgraded entirely with new finishes, you may expect a return in the ballpark of 80-95% on your investment.
So that means, if your kitchen renovation budget is $100,000, then you should recoup anywhere between $80,000-$95,000 in equity or resale value.
Similar to a kitchen renovation, your bathroom renovation or remodel ROI can be a wide range based on many factors. Which bathroom, ensuite, powder room, main bathroom, or basement bathroom, in your home you’re renovating can also affect your ROI. However, in most cases, you may expect a return in the ballpark of 80-90% on your investment.
Considering a bathroom renovation budget of $25,000, then your ROI will likely be in the range of $20,000-$22,500 in added equity or resale value.
Exterior renovation ROI will ultimately depend on what part of your exterior you are updating. Windows, doors, and siding typically have a strong ROI of anywhere between 60-100%. Compared to other outdoor renovations like landscaping, wooden fencing, or garage building might not bring in as much of a return in the range of 30-60%.
As mentioned in this article, while ROI can be an important decision factor, it’s not the only factor in your decision. Landscaping, garages, or a fence can have an impact you how you’re able to enjoy your home.
Here is where it can get exciting. Depending on your plans for your main floor renovation or whole home renovation, the ROI can exceed 100% in some situations. Updating an entire floor will allow an interior designer to make more impactful decisions about how your home flows and functions. Wall removals, re-configuration of plumbing and electrical, creating open concepts, adding or combining rooms (ie: adding a bathroom or combining formal dining rooms with your kitchen) – along with the other benefits of remodeling – give your home renovation a big boost in ROI.
We observe anywhere between 70-110% or more in ROI. It really comes down to what rooms you’re including in your renovation and how you transform the space.
Basements can be the added space that your family grows into, used to entertain guests or to host epic movie nights. While a basement renovation can be important to your family, the ROI for a basement renovation is lower than the other renovations on this list. But, it can also be difficult to put the value on a freshly updated laundry room or if your basement renovation includes a bathroom the ROI projection can be above average.
For most basement renovations, you can expect an ROI between 50-80%. Like the other renovations on this list, it will come down to how the space is transformed during the renovation.
Now that we’ve covered the basic expected returns, let’s jump into a couple of fictional scenarios to help illustrate what you as the homeowner might receive from the ROI of your renovation.
Our example will be based on a home value pre-renovation of $500,000 and in both scenarios will use a renovation budget of $125,000.
Based on a $500,000 home and $125,000 renovation budget you choose to fully renovate your kitchen with wall removal and mid-to-high-end finishes. In addition to your kitchen, you also update your living room with pot lighting, wall-mounted flatscreen TV, and a custom-tiled fireplace as the focal point. For purposes of this example, we will consider this to be a main floor renovation project.
Based on the description above, you might expect your return to be in the ballpark of $105,000-$120,000. In this scenario, roughly $110,000 of the budget went into the kitchen renovation and wall removal to open the space, along with the purchase of some above-average finishes.
After your renovation is complete, your home’s value will be in the $600,000-plus range
Based on a $500,000 home and the same $125,000 renovation budget you choose to fully renovate your kitchen with wall removal, using modest-priced, quality finishes, and completing an expansive ensuite bathroom renovation that includes a soaker tub and large walk-in, a custom-tiled shower that’s ideal for accessible living.
For this scenario, your renovation included finishes that are in line with your neighbourhood’s average and your kitchen renovation with wall removal came in at $85,000. The remaining $40,000 was devoted to creating an oasis of an ensuite. In this situation, your estimated expected return could be in the ballpark of $110,000-$120,000.
With the renovation complete, your home’s value should pop above the $600,000 mark as well.
When it comes to renovating homes for ROI, Hammerdown believes that our customer’s home is their biggest investment. Clients come to Hammerdown knowing that their homes will be respected throughout the renovation process. Our clients believe that their home deserves the very best, and we agree.
With any extensive renovation project, Hammerdown’s team consisting of project estimators, interior designers, and project supervisors works closely with our clients to guide them. We can help you determine how to plan your project, transform your space, and select materials that offer quality, durability, and value.
You can trust that your home renovation will be in the hands of individuals that share the same values as you because, like you, we love and care about our home.
While Hammerdown is always interested in discussing projects, Hammerdown might not be the right choice in some scenarios. For us to do our best work and help you transform your space, we typically steer clear of simple aesthetic renovations, like repainting or “just flooring”.
As well, we feel adamant about our belief that your home is your number one investment. Oftentimes, if the property you’re seeking to renovate is an income property, the quality, attention to detail, and finishes you might select won’t be as important as in your own home. While we do take on income property renovations from time to time, often the owner of the property is looking for ways to save by using materials we can’t endorse.
When you’re ready to start your journey to transform the space in your home, it’s easy! You can reach the team at Hammerdown via phone at 204.793.0500 or via our contact us form. We’ll happily discuss your project with you and offer some guidance as to what your ROI could be when the project is complete.
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