Most Canadians are either in the midst of, or are planning a renovation at some point in the near future. Some of us will update our kitchens or bathrooms, while others will finish basements. People will build additions to increase the living space they have in their current home, or even replace their homes entirely with a brand new one. In reality, few of us plan to stay in the same home forever, so why do we put so much effort into our current domiciles? Because real estate has become a popular pastime - almost a sport. We buy, hold, renovate, sell and prosper. If we play the game right, our homes can be a very profitable retirement savings plan. Deciding on a financial, moral and sustainable strategy that's successful however, can be difficult and confusing.
A lot of people ask me how and where they should spend their money to maximize their returns when renovating. Most people involved in real estate or design will tell you that you get the best returns on kitchens, bathrooms and basements - and in most cases they're right. But the answer isn't as simple as ‘granite countertops and stainless steel', because every home, and every homeowner's situation, is different. As the general public becomes more aware and educated about the environmental impact of our homes, the financial impact of increasing energy costs and the liabilities of home ownership, I'm happy to report that I've felt a slight shift in the way that people distinguish between the real, and the perceived value of a home. Granted, it's a very slight shift.
Consider two older homes on the same street - one with a shiny new kitchen, hardwood throughout, updated bathrooms, crown moulding and a finished basement, and the other in original condition with outdated fixtures, shag carpets and an unfinished basement. Of course the renovated house will have a much higher perceived value, and will likely fetch a higher dollar on the market. But should it? Not always.
This is the moment when we need to identify both the real and perceived values in order to make the right decision between the two, because looks are often deceiving. The following questions will get you started, but by no means is it a complete list.
Was the house renovated with permits?
Let's face it - there are a lot of renovations done in Canada every year with no permits, by inexperienced (albeit well intentioned) homeowners aiming to stretch their dollars and maximize their profits, often with frightening results. There's a great show on HGTV about this exact scenario - it's called Disaster DIY. If you are buying a home, demand to see permits and inspection reports. Permits and inspections ensure that the home is safe and up to today's efficiency standards. As a buyer, that's peace of mind. As a seller, permits add real value by legitimizing renovations and releasing you from future liability. Permits - get them, demand them.
Were the electrical, plumbing and mechanical systems updated?
When the walls are open, it's a lot easier (and much more affordable) to update the internal organs of your home. New technology has supplied us with much more efficient and safer ways of electrifying, supplying water to and heating our homes. No one wants to endure the chaos or expense of ripping out a custom kitchen, sparkling bathroom or brand new basement to upgrade the nuts and bolts of a home. Responsible, and ultimately the most valuable renovations take advantage of the opportunity to access those areas relatively affordably when the walls are open, even if that means giving up luxury items (for the time being) to stay on budget.
Was the foundation inspected and waterproofed if necessary?
A freshly finished basement can definitely increase the value of a home. However, having to rip out, repair and refinish a basement due to mold or moisture issues isn't cheap. Pay close attention to the permits and inspection reports - if there are leaks or moisture issues mold will eat a new basement as quickly as an old one. Mold doesn't discriminate, and many older homes have foundation moisture issues. When it comes to buying an older home (and given the choice) I would pay more for a home with proper waterproofing, weeping tile and sump system than I would for a home with a finished basement and original foundation. Why? Because it will cost me less to repair in the future, which means it's worth more today.
Were efficient windows and doors installed?
Just like the mechanical systems, it's more affordable to replace windows and exterior doors during a renovation. Old windows and doors have a huge impact on the energy consumption of a home when it comes to heating and cooling - they are essentially giant holes in our walls. Replacing them with something like Jeld-Wen's Energy Star qualified windows and doors can save you several hundreds of dollars a year, forever! Not to mention, there's nothing worse than a freshly renovated house with tired looking windows that cost you money.
Was the insulation upgraded?
When the walls are open, upgrading your insulation is a no brainer. In our old 900 square foot bungalow, Sarah and I would spend about $600 / month on heating in the winter. Now we spend less than $50 / month to heat our home, and we've more than tripled the size. We used BASF's Walltite Eco spray foam - yes, it's more expensive than conventional insulation, but it will pay us back every month without fail, and will never go out of style. As a buyer, consider the monthly operating costs and factor this into the cost of the house spread over the time you plan to spend there. If you are renovating to sell, lower operating costs will add more real value and should increase the sale price of your home more than granite countertops. As energy costs continue to increase, our priorities will change. You know what they say - today is yesterday's tomorrow.
As always there's much more to say, but only so much paper to go around. The moral of this brief story is that we all need to see past the perceived value of our homes, and give more credit to the real value hiding inside the walls. Homes are just like books, or people - it's what's on the inside that really counts. A well built and efficient home will always be worth much more than a pretty one that's inefficient and expensive to operate and maintain.
Imagine owning an investment, and living in home built so well, so healthy and so efficient that future renovators never have to dig deeper than the drywall to update the interior. Oh wait, that's my house! Only 90 more years of payments, and she's all ours...