October 9, 2024

Best ROI renovations

Why renovate? A few reasons include making a space bigger, modernizing the aesthetics of your property or optimizing functionality. However, not all renovations offer the same return on investment. Some home improvements significantly increase the value of your home while others have less impact. We surveyed more than 1,000 real estate brokers to find the best ROI renovations. If you’re thinking of selling soon, check out the best renovations to maximize your return on investment.

Kitchen renovations are a sure thing

It’s not surprising that 92% of the brokers we surveyed ranked kitchens at the top of the list for the best ROI renovations. A functional, modern kitchen is a great selling point because it’s one of the most used rooms in a house. Most buyers appreciate a practical, beautiful kitchen.

	Return on investment 75% to 100%

Bathroom renovations are a must

The bathroom is another main room that can strongly influence a buyer’s decision. Bathroom renovations were ranked second by the brokers we surveyed. Aging equipment or a poor use of space can deter potential buyers, especially since a bathroom renovation is a complex project that often involves several types of professionals. A modern, well-designed space is a considerable advantage when selling.

	Return on investment 75% to 100%

Energy improvements are an investment in efficiency

With rising environmental concerns and energy costs, buyers are more likely to look for energy-efficient homes. Plus, some of the costs for these home improvements—for example, changing the heating system, improving the insulation, or replacing inefficient windows with Energy Star windows—can be reduced through tax incentives or subsidies. Brokers ranked replacing doors and windows in third place for renovations that add the most value to your home.

	Return on investment 75% to 100%

Remodelling the basement creates a larger living space

Transforming an unfinished basement into a functional room such as a family room, bedroom or even a home office can increase the resale value of the home and attract more potential buyers. This type of renovation ranked fourth by the brokers we surveyed. Although you’ll need to invest more for this renovation (especially if there’s a bathroom), it can increase the living space and generate a ROI of 50% to 75%.

	Return on investment 50% to 75%

Exterior improvements protect the house’s structure

Redoing the roof and changing the exterior cladding are not only strategic investments, they’re also essential to ensuring the durability and strength of the house’s structure. Plus, this work prevents costly damage, such as water getting in or the foundation degrading. The ROI for these types of renovations can be significant, often in the range of 50% to 80%. But if structural problems are neglected, they can significantly decrease your property’s value. Not fixing structural issues can cost a lot more in the long run.

	Return on investment 50% to 80%

Home improvements with a moderate or low return on investment

Some home improvements increase the quality of your day-to-day life and provide certain benefits but don’t necessarily increase the property value.

A pool or hot tub: Adding a swimming pool may not offer a good return on investment, especially if you live in an area where swimming pools are not in high demand. Furthermore, the maintenance and costs associated with a swimming pool or hot tub may discourage buyers.
A home theatre: Redoing a basement can certainly add value to your home, but adding a home theatre appeals to very specific tastes. Potential buyers often care more about improvements to main rooms and elements that improve everyday comfort, such as good insulation or a functional kitchen.
Expensive landscaping: Although landscaping is important for curb appeal, an excessive investment in luxury landscaping doesn’t always guarantee a good ROI. Buyers may prefer functional interior spaces over elaborate gardens that require maintenance.

Other factors to maximize your investment

There are several important factors to consider when choosing the right renovations for your property. Make sure to take them into account before making a decision.

Assess the market

Beyond the type of renovation, it’s important to consider the market value of your home and compare it with properties in your area. For example, if your home is appraised at $350,000 and you invest in a high-end kitchen more suited to a million-dollar property, it’s likely your investment won’t be profitable. Conversely, installing a low-end kitchen in a home valued at $850,000 may not only fail to add value, it may actually cause your property to lose value. This is called the principle of conformity, which is about finding a balance between the quality of the materials and the price range of the property.

Optimize your renovation costs

Managing costs is crucial to maximizing your return on investment, so make sure to get quotes from multiple contractors to find the best price. Assessing multiple contractors helps you to compare both prices and the quality of their services. If you optimize your costs, you’ll avoid paying too much, increase your chances of completing your project on budget and improve your property value. Consulting with professionals such as an interior designer, architect or technologist is a smart way to make informed decisions, especially for major projects.

Prioritize

It’s better to repair a leaky roof before you renovate a bathroom or kitchen. Assessing what work needs to be done before you start renovating makes it easier to prioritize. It’s important to distinguish between minor home improvements, such as replacing or upgrading something outdated that still works, and essential repairs that will help you avoid serious damage.

Depersonalize

Something to keep in mind when selling is that future buyers might not have the same tastes as you. To maximize your chances of selling, choose neutral, universal decor that will appeal to a wide range of people.

Renovations are a personal choice

Ultimately, while some improvements are generally considered to be very profitable, it’s important to choose renovations that suit your property, your budget and the local market. Every house is unique, and the needs of potential buyers vary from one area to another. Remember that while renovations can increase the market value of your property, they must also increase your comfort and improve the quality of your day-to-day life.

If you’re ready to sell your home, contact a real estate broker to help you get started.

Methodology: To identify the renovations with the highest return on investment in real estate, we conducted a survey of 1,000 real estate brokers over an eight-day period. We also conducted independent research to validate and compare data collected from various sources, such as the Appraisal Institute of Canada.

Renovation subsidies available

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