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Whether to renovate before you sell should really be based on one reason: return on investment, or ROI.
If you are going to sell, you want to get the best bang for your buck, correct? Keep in mind that how much ROI you get from a certain renovation depends on how bad it was when you started. In fact, most renovations won’t give you the ROI or payback that you probably expect.
A recovery rate is essentially the percentage of the cost of a renovation that you can generally expect to get back in the resale price of your home (so a 50% recovery rate on a $20,000 renovation would mean you could expect a $10,000 increase in the value of your house).
Keep in mind the estimates below are based on average condition to start with. For instance, the worse condition the kitchen is in before you start the renovation the higher ROI there is after it is done. Many times the ROI can be above 100%. If this were not true, buying a fixer-upper would never pay off, and it very often does.
Lastly, it is important to note that the ROI on a renovation also depends on how well the renovation is done. I have been in houses where the sellers have done an entire renovation themselves, and I am certain the house was worth more before they started.
According to the Appraisal Institute of Canada, most home owners can expect the following recovery rates on their renovations:
Kitchen renovation: 75% to 100%
Bathroom upgrade: 75% to 100%
Interior painting: 50% to 100%
Roof replacement: 50% to 80%
New furnace or heating system: 50% to 80%
Expansion (addition of family room): 50% to 75%
Doors and windows: 50% to 75%
New Deck: 50% to 75%
Installation of hardwood floors: 50% to 75%
Construction of a garage: 50% to 75%
Fireplace (wood or gas) 50% to 75%
Central air conditioning: 50% to 75%
Finished basement: 50% to 75%
Wood fence: 25% to 50%
Interlocking paving stones on driveway: 25% to 50%
Landscaping: 25% to 50%
Asphalt driveway: 20% to 50%
Pool: 10% to 40% (ouch)
Skylights: 0% to 25%
Bill Hubbard is a real estate broker and the owner and broker of a four-office real estate firm in the Okanagan-Shuswap. He has been in real estate for 30 years, and has been an owner and broker in Vernon for more than 20 years. He is just as passionate about real estate as the day he started.
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