Golbe and Mail
In the 30 years Bill Hurren has owned his Cabbagetown home, he has completely renovated and restored it (and a coach house in back), using the best materials, and, by his reckoning, spending more than $900,000.
As an agent with Bosley Real Estate Ltd. in Toronto, Mr. Hurren is well aware of the rules about spending money on your home: It’s his business to advise people on matters such as which renovations will yield the best payback at sale time. “The rule of thumb [is] if you spend money on the kitchen, you will likely get it back,” he says.
But his own renovations have ranged from the purely aesthetic and unessential to necessary in terms of return on investment. In the first category is a second-floor wet bar whose walls are covered with infinitely reflecting mirrors that create a trompe l’oeil effect. Most recently, he has had his kitchen completely redone, creating a stunning space with white granite countertops, coffered ceiling and French doors opening to his garden.
Has he over-renovated? Apparently not. He bought his house for $128,000 and, although he’s not selling it, he was recently offered $2.8-million. “I have worked on my home mostly for my own enjoyment over the years, but it seems like it will be a good investment.”
Mr. Hurren’s approach and experience is not typical. Houses and neighbourhoods vary widely, and not everyone can spend what he did.
When asked which home renovations yield the highest return on investment, Dorothy Wong of Toronto-based ReMax Goldenway Realty Inc. doesn’t skip a beat. “Kitchens and bathrooms,” she states firmly.
“The woman is the main decision-maker in the purchase of a home and she sees herself spending two to three hours a day in the kitchen,” she says. “Why will a bathroom renovation pay off? Take a look at a four- or five-star hotel and what will you see? Spa-like bathrooms!”
Ms. Wong’s advice contains a strong dose of caution. “Don’t necessarily use the highest-end fixtures and materials,” she stresses. “Only do that for your own enjoyment. Be careful not to spend too much. If all the houses in a neighbourhood are worth $700,000 and you bring yours up to $1-million, you won’t be able to get the money out.
“The buyers will reason that they won’t be able to resell for that high a price. I’ve seen people spend $300,000 and only get $100,000 back when they sell. You always have to consider resale value.”
And who better to give advice on the value of home improvements than appraisers? They’re the men and women the banks call on to assess the value of a home when money is going to change hands, for example at refinancing time.
Louis Poirier, the Calgary-based chairman of the Appraisal Institute of Canada’s communication committee, says there are a lot of factors to consider. “To determine how much return on investment a renovation will bring, you have to consider the state of the item that will be renovated,” he says “If you put on a new roof to replace a roof that was shot, you will get most of your money back. But if, for example, you change your carpet just because you don’t like the colour, you may not get anything back at all.”
Jan Scott-Charles of Guild Manor Realty Ltd. in Toronto offers a unique perspective as an agent with 15 years experience as an accredited appraiser. “I would add finishing the basement to your list of renovations that are a good investment,” she says. “Also, adding parking, such as a parking pad where they are allowed. In areas where parking is scarce, these are valuable!”
So it’s yes to the kitchen and bathroom, and add parking and finishing the basement. How about a pool for those hot summer days?
“People think of the amount of maintenance [required by a pool] and they get worried,” Mr. Hurren says. “Hot tubs are not good money-makers at resale time either.”
A great tool for homeowners that can help take the guesswork out of which renovation will give a good return on investment is RENOVA, an interactive guide found on the Appraisal Institute’s website (www.aicanada.ca).
It deals with 20 popular renovations, and all that’s required to get a guide as to the expected return is type in the cost of the project. Or, as the website suggests, an appraiser can be hired to estimate the projected added value before the first nail is ordered, let alone hammered home.
The top 20 renovations include replacing the furnace, roof and windows, upgrading the flooring, and adding a fireplace and skylights.
And what about cosmetic improvements? “There’s a saying about not trying to put lipstick on a pig,” says Mr. Poirier of the institute.
The RENOVA tool will be updated this fall, when appraisers across Canada are surveyed again about their professional opinions. But it’s easy to see what the coming trend will be.
“Anything in a home that is green or energy efficient will give a house an edge,” Mr. Hurren says. “Solar panels will likely be popular and a good investment all round.”
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