If you are thinking about making a few major home improvements, there are a few that help to increase the value of your home. You might be considering putting your home on the market, or you just want a few upgrades to your home. Return on investment is always something to keep in mind. A potential buyer views home renovations as money saved. If you are looking into home renovations that increase home value, here are 5 ideas to get you started.

Key Takeaways

Quality planned, designed, built, and executed renovations are the key to seeing a good ROI.
The quality of your project’s craftmanship, materials, finishes, and installations, the scope of your project, the market conditions, and the location of your renovation will all affect your ROI.
Determine what renovations would improve your current lifestyle and combine these with high ROI renovations to improve your everyday life and maximize your return.
Research local market conditions including real estate prices, population growth, and the projected job market within a commutable distance of your home before starting your renovation.
Minor renovations can increase home value without costing too much.
Painting is an underrated home improvement that can be done with or without a professional. Neutral tones are best when planning to sell.
Always consult with a licensed and experienced contractor for the best ROI renovations.

What Is ROI and Why Is It Important?

ROI stands for return on investment. This term is used when discussing what you stand to gain in return of an investment such as a renovation. When you invest in a home renovation, you can improve the overall value and attractiveness of your home.

This can increase the resale value of your house should you decide to sell in the future. The size of the ROI will vary depending on the type of renovation, materials used, selected finishes, and quality of the work. For example, some of the best ROI renovations include kitchen remodel, bathroom updates, and HVAC upgrades.

Does Renovating a House Really Add Value?

Wondering “does renovating a house add value to your home?”, the short answer is yes and no. Renovations have the potential to be of significant value. When talking about renovation ROI, it’s crucial to understand that not every renovation will add the same amount of value to your home. It’s also worth noting that bigger and more expensive projects don’t always lead to a higher ROI.

Quality planned, designed, built, and executed renovations are the key to seeing a good ROI. There are also certain areas of the home that can result in a greater ROI than others, such as renovating the kitchen, bathrooms, or basement. If you include energy-efficient solutions in the renovation, that can also lead to a better ROI.

Understanding Renovation ROI

Your renovation return on investment is about more than just the work being put into your home. There are many outside factors that can impact your ROI. For example, if you’re not selling yet but want a high ROI later, it’s important to balance your current needs with renovations that will increase your home’s value regardless of the future market conditions. Take a look below to review the most influential factors for renovation ROI as well as a breakdown between balancing ROI versus lifestyle demands and desires.

Factors That Impact Renovation ROI

Many factors can alter your ROI, some of which you can control, and others you cannot. The following is a list of factors that can impact your renovation ROI:

Quality of Work: The quality of your project’s craftmanship, materials, finishes, and installations can have an influence over the ROI.
Scope of Project: Different renovations result in different ROIs. The size of the renovation and types of improvements made will affect potential buyers’ interest as well as overall property value.
Market Conditions: The market conditions at the time of your renovation or when you choose to sell, such as whether it’s a buyer’s or seller’s market, will impact your ROI.
Location: Neighbouring real estate prices, local population changes, property taxes, and local job prospects can affect your ROI, regardless of the amount of time and money put into the renovation.

Balance Between High ROI Renovations vs. Lifestyle Wants

Depending on the type of renovation you invest in, you could greatly improve the comfort, curb appeal, functionality, and/or storage capacity of your home. By achieving one or more of these improvements, you can also increase the resale value or your property. Renovations that increase home value don’t always provide you with the lifestyle improvement you desire. For example, repainting the exterior of your home, replacing your roof, and refinishing your front porch can all boost the value and curb appeal of your home, but they won’t improve the functionality, flow, or storage capacity of your home. Here’s a collection of tips to help find a balance between renovations that will increase property value and lifestyle:

Mix Lifestyle and High ROI Renovations

Determine what renovations would improve your current lifestyle, such as adding more storage in the kitchen or modernizing your bathroom fixtures. You can then combine your these with specific ROI renovations.

For instance, you could also update the look and layout of your kitchen and upgrade your bathroom plumbing systems. This creates a balance between practicality and comfort. Additionally, these renovations can improve your everyday life while waiting to sell.

Examine the Market Conditions

Research your local market conditions, including current and projected real estate prices, estimated population growth, and the projected job market within a commutable distance of your home.

This can give you a better sense of what to expect moving forward, such as when the best time to sell is and which renovations will be most valuable. Remember that your renovation can take can anywhere from a couple weeks to a few months depending on its size and scope. During this time, the market conditions could change.

Consider Historically High ROI Renovations

There are certain renovations with a proven history of increasing ROIs, regardless of market conditions or location. If possible, consider including one or more of these renovations to help ensure you get the best return out of your money.

These renovations include replacing garage doors, converting to an electric HVAC system, replacing steel entry doors, and using manufactured stone veneers.

Incorporate Design Trends

Consider including trending interior and/or exterior designs into your renovation.

For example, adding a few personal touches, such as accessories and furniture that resemble your unique style, while incorporating materials, fixtures, and finishes that will attract future buyers.

The Best ROI Investments to Increase Home Value

In addition to outside ROI influences, there are also factors within your control that can affect your return. Some renovations are more likely to have a higher ROI than others. Here is a list of the best return on investment home improvements:

Build a Home Addition: Building an addition to your home not only increases the square footage, but it will also increases your home’s value. Adding an extra bedroom, expanding your kitchen, or turning your garage into an additional room can make a big difference. Home additions are one of the best investments you can make to your home, whether you are selling or not. You may need the extra room for a growing family or a granny suite to rent out.
Revamp Your Kitchen: Everyone wants a bigger kitchen. However, not just bigger, but also more efficient. You want to increase the workspace, upgrade your lighting, and maybe expand the kitchen by removing a wall. If you are in an older home, it’s important to upgrade the plumbing, electrical and add more modern appliances. Smart appliances can end up saving you money and they are so easy to use, it makes your life much easier.
Redo Your Bathroom: A tired, dark, and cramped bathroom isn’t very pleasant. Your bathroom is a home remodeling project that will always pay for itself. You can upgrade fixtures, faucets, and plumbing. Consider removing the tub if you have more than one, getting multiple lighting options, and new tiles on the floors and walls. Heated floors are a welcome addition when you live in the GTA.
Transform Outdoor Space: Any home builder in Toronto will tell you that adding a beautiful outdoor space will increase the value of your home. It’s a pleasure to be able to sit outside in a beautiful space. You can entertain guests, cook outside, and expand your living space a great deal. A covered deck with heating can extend the time you are able to use your outdoor space.
Improve Accessibility Options: By improving the accessibility of your home, you are not just increasing the value but its overall appeal. It is more welcoming for guests, makes life easier for you, and you don’t have to worry about doing it as you age. Wider doors, alternatives to stairs, easier access to bathtubs, or a new walk-in shower stall can make the world of difference. Making your kitchen bigger makes it easier for you and everyone to move around comfortably.
Kitchen Renovations: The average Roi on kitchen remodels is 80%, with the potential to be higher depending on the scope of the work.
Bathroom Upgrades: The typical bathroom remodel ROI is 75%. Specific renovations that get you a 75% or higher ROI include vanity replacements, plumbing upgrades, new flooring, and lighting fixture updates.
Finished Basements: Finishing a basement in Ontario has a 70% to75% ROI. This percentage can vary depending on the materials and finishes used, total square footage, and added features such as bathrooms, a walkout, and a full or partial kitchen.
Flooring Updates: Refinishing and/or replacing flooring has an ROI of 100% to 150%.
Energy-Efficient Upgrades: The ROI of energy-efficient renovations differs greatly based on the type of upgrade. One example is installing energy-efficient windows, which has an average ROI of 60% to 70%
Decks: Decks average an ROI upwards of 80%. The size of your deck, along with the materials and finishes used, can impact the ROI.
Roofs: Professionally installed roof replacements have an average ROI of between 60% and 80%.
Front of The House: Exterior renovations, such as installing new siding, landscaping, and updating the front entrance door, fixtures, and finishes, typically have an ROI of 75% or higher.
Garage Doors: Garage door replacements recoup upwards of 100% of the investment. It’s one of the most cost-effective renovations as you can see an ROI of 150% or more.

Cheap Upgrades to Increase Home Value

Investing in a bigger and/or more expensive project doesn’t necessarily mean you’ll see a better ROI. Minor renovations such as those that improve the comfort, efficiency, flow, functionality, and/or look of the home can go a long way without costing you too much. Here’s a list of cheap upgrades to increase home value:

A Fresh Coat of Paint: Painting is an underrated home improvement. It’s a great inexpensive job that can be done with or without the help of a professional, depending on the size and complexity of the paint job. The typical ROI for painting is 60% or higher. However, it’s best to stick to neutral tones and finishes when you’re planning to sell. This ensures the next owner can repaint if desired. Neutral tones are also easier to pair existing furniture with.
Lighting and Fixtures: Modern lighting can completely revitalize a space, whether it be the kitchen, bathrooms, dining room, or all of the above. Good lighting improves the appearance, comfort, and functionality of a room. You can also consider energy-efficient lighting such as LED bulbs or smart-home lighting, as these are both attractive long-term cost-saving features for potential home buyers.
Small Touches with Big Impact: Small touches are an effective way to boost the appearance and functionality of your home all at once. For example, replacing outdated cabinet hardware can enhance your kitchen’s aesthetic without costing thousands of dollars. Other great options include adding crown molding and installing backsplash in the kitchen and bathrooms.

Renovations to Approach with Caution

Here are some tips on what to avoid when seeking a high renovation ROI:

Over-Customization: When your goal is to sell your home and get a high ROI, it’s best to avoid over customizing your renovation. The new homeowners may have a different preferred style that contrasts with your customized features. Over-customization can also make the new owners feel that home isn’t truly theirs.
Luxury Additions: Adding luxury features or additions to your home can have the opposite effect when trying to get the most out of your investment. For example, installing a pool or a multi-car garage. These additions can stick out if the other homes in the neighbourhood don’t include similar features. This puts you at risk of over-improving your home for the current market.

How To Get the Most Out of Your ROI Home Improvements

In addition to investing in high ROI renovations, there are a few steps you can take during the planning stage to ensure you have a good return. The following are a few tips and suggestions for getting the most out of your home improvements:

Consult Local Experts: Talking to local contractors and real estate experts can give you a better idea of what to expect from your renovation and help you determine the best time to move forward with your project.
Work with Professionals: Licensed contractors will adhere to all safety regulations and comply with building codes throughout the renovation. Working with an experienced and respectable renovation company also guarantees higher quality work.
Plan with ROI in Mind: Consider the upfront costs of your renovation and the potential ROI. Compare different potential outcomes for each renovation and make your decisions based on the current and projected market conditions.
Stick to A Realistic Budget: Overextending your budget can lead to little or no ROI. Remember that spending more on the renovation doesn’t guarantee a higher ROI.

Can You Finance Home Renovations?

Yes, there are a variety of financing opportunities you can look into for your home renovations. Options include:

Federal and Provincial Incentives: Canada has a variety of government grants and programs that help homeowners with renovations. One example is the Home Renovation Tax Credit, which offers tax relief on eligible home improvements.
Home Equity and Line of Credit: A home equity loan lets you to borrow against your home’s equity. A home equity line of credit allows you to access funds secured by your home as needed, similar to a credit card, but with your home’s equity as collateral. These options often have lower interest rates than other financing options.
Specific Renovation Loans: There are specialized construction loans for financing substantial renovations and new home building projects. Detail and loan amounts vary based on individual circumstances and project scope.

Think Long-Term to Get the Best Renovation ROI

You should always think long-term when planning your renovations. This involves staying up-to-date on the latest market conditions and trends. It’s also vital to remember that the best ROI renovations are the ones that take the new homeowners’ interests into consideration. For example, energy-efficient fixtures lead to better long-term savings and upgrading plumbing, electrical, and HVAC systems reduces maintenance requirements.

Highest ROI Home Improvements–Our Final Thoughts

Choosing a renovation with high ROI potential helps ensure you get the most out of your money. The best ROI renovations offer you a great return while also improving the lives of the new homeowners. Take the next steps towards a high return renovation with trusted professionals. Lumara Homes is a top renovation and home building company with years of experience and a track record for high-quality results.

Call us today to learn more about investing in renovations that balance your personal needs and wants with the changing market trends.

These 5 Renovations Will Increase Your Home’s Value