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Know your renovation ROI

We asked the experts which home upgrades pay off when it’s time to sell

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Real estate agent Michael Poczynek doesn’t hesitate when asked the worst thing a homeowner can spend money on when renovating: granite countertops.

“If you’ve got a $230,000 house and you add a $20,000 countertop, it’s unlikely you’re going to see any return on that countertop, even though it looks very nice,” says Poczynek, who works with Century 21 Northumberland Realty in Charlottetown. If you’re looking to add value to your home for an immediate or eventual sale, there are lots of opportunities to see a return on your investment. Poczynek says to start from the outside in.

“If someone’s buying a house, or they’re interested in looking at a house, they’re going to drive by it or they’re going to drive up to it,” he says. Simple touches like landscaping and a newly paved or painted driveway will make a good first impression.

Bill Balsom, an appraiser with Kirkland, Balsom and Associates in St. John’s, N.L., ticks off other exterior features that should be first on your to-do list: siding, windows, and the roof.

“If you are dealing with renovations or refurbishing on an older home, the roof is almost critical these days, because people have inspectors that go in and say the roof has got a certain lifespan, and typically that would have to be addressed prior to sale,” he says.

But don’t spend money on the outside if it’s not crucial, Balsom says. Make a list of wants versus needs, and take care of the needs first.

“If you’ve got a relatively new house and you’re looking to change the siding just for the sake of colour, well, that’s not a cost-retentive renovation,” he says. “Conversely, if you’re looking to take off old wide-gauge vinyl or, for that matter, clapboard that’s worn and tattered and put on new siding, you may get back 80 cents on the dollar, as opposed to the former, which may be 10 or 15 cents on a dollar for simply a colour change.”

Replaced windows make up for their cost in increased housing value, he says.

Inside, says Poczynek, look down by your feet: Refinish scuffed-up floors and replace worn-out carpets. Balsom also advises keeping the market in mind; the last of your children may have moved off to university, but don’t necessarily rip out the walls between their rooms to create the den you’ve always wanted just yet. The most important (and expensive) rooms in the house to renovate, he says, are kitchens and bathrooms. So how do homeowners stay on budget?

Dan Monk, owner of Monk Renovations in Bedford, N.S., says clients need to do some research and have a budget in mind before approaching a contractor.

“It’s easy for us to come in as a contractor when a client has a wish list, but if they’ve got a $10,000 budget and a $50,000 kitchen in mind, we’re not going to sync very well,” he says. “It’s good for them to either do a little bit of research first, because there’s lots of information out there on what kitchens and bathrooms and additions cost per square foot or per room.”

Charlie Dyer, owner of Case’s Renovations in Fredericton, says homeowners should have a clear vision of what they want to see; talk it over, look through home renovation magazines and websites for examples.

“See what’s out there, and then from that, get a good understanding of what you’d like to have,” he says.

Some clients have no idea how much the job is going to cost, while others have a certain amount of money set aside with little idea of what $20,000 worth of kitchen renovation will get them, says Monk.

After your research, start planning, says Jason Roy of Jason Roy Home Renovations in Halifax. He says he’s wary of taking on jobs where a client isn’t certain what they want, as those are more likely to end in dissatisfaction.

“I would advise you hire a planner, unless you’re keen and you can do that yourself, and a lot of people are,” he says. “A lot of people can do their own plans in their minds and they get it really close, and they take it to someone like myself to get a price.”

Monk says clients should expect a detailed quote from a contractor, one that lists all materials, what’s being removed and replaced. “It shouldn’t be a handwritten ‘BATHROOM—$15,000,’” he says, laughing. “But I have seen those! I have literally seen those, and people have hired that contractor. It’s kind of scary.”

Dyer says a contractor should be willing to walk through the quote with the client, as well as providing different options to achieve what the customer wants.

Research the contractor, too. Hire a company with an HST number, that pays its taxes, says Monk. Get references, and check those references, he says. (See below for tips.) A reputable contractor can show you proof of up-to-date liability insurance and Workers’ Compensation Board accounts. Check with any trade associations the company cites, plus the Better Business Bureau.

“I believe these are all foundational for a company to be out there and telling people that they’re a reputable company,” he says. “They should be able to prove it.”

Take into account companies’ reputations and reviews when comparing quotes, says Dyer. A common mistake is picking a contractor based on price. “They get a quote from someone who maybe is just working on their own doing part-time work but aren’t willing to give them a solid quote on the work they’re doing, or would sooner work by the hour, that’s a red flag,” he says.

The older the home, the more likely a renovation will find problems that contractors can’t see until work begins. Water damage is the most common, but electrical or plumbing issues are not unheard of.

“I always tell people that you don’t want to run to the top end of your budget,” says Monk. “You should have some contingency there.” He recommends setting aside 10 per cent for potential cost overruns.

And when it comes to resale value, don’t forget some of the simplest, and least expensive, improvements provide a big return for a little effort, says Poczynek: cleaning, decluttering, and painting.

“You will get 100 per cent return out of all those,” he says.

Do your research

The most important questions a homeowner should ask when selecting a contractor isn’t for the contractor, it’s for the company’s references.

Ask references one simple question: Would you hire this contractor again? Says Halifaxbased contractor Dan Monk. “And then shut up and listen. Sometimes the pause is the answer.”

Potential clients need to accept some responsibility for hiring a reputable outfit. “A lot of the time, the reason bad things happen is [homeowners] hire the cheapest guy,” he says.

Don’t assume that checking provided references is a waste of time, either. It’s a mistake to presume that any contractor can come up with at least three satisfied customers. Monk provides potential clients a two-page list of references.

“The bad contractors out there don’t know they’re bad,” he says. “They don’t know that they’ve pissed people off. They think they’re doing a good job. They don’t know that they don’t communicate. They don’t know that the client was really unhappy with being charged 50 per cent more for the job than what they were quoted. They think it’s just normal and the cost of doing business.”

If even one of just three provided references turns out to be less than glowing, walk away. “Thirty-three per cent of their best jobs are bad,” he says. “They gave you their best! That should scare you right there.”

  1. Granite or other solid surface countertops are actually great investments, depending on your market. It used to be that you would only see this type of finish level in higher-end homes, but that is changing. More and more, first-time buyers are able to purchase homes with nicer finishes. The other good news is that solid surface counters are becoming more affordable. ROI is more than a calculation. Upgraded finishes can lead a buyer to pick yours over the competition’s. You can’t get a better return on investment than that!

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