Kim Mullan Blog
Why and When Renovation Decisions Matter
Sometimes I will come and view a property when I am doing a comparative market analysis and the home will have had extensive renovations and upgrades. Sometimes I am shopping with buyers and they love a property location/layout but it would require extensive renovations. Many times I asked by property owners whether they should look at finding a new home or renovating the one they have.
What matters in the long term?
1- Where does the neighbourhood "cap out" for price point in the buyers perception. Will you be over-improving for the neighbourhood? What would a maximized property with current/popular design/layout/mechanical & structural amenities fetch on the market? Then work backwards. When you reduce the purchase price and other costs from the maximized potential you have your Reno budget. Don't forget land transfer costs, lawyers etc. If you are considering flipping the property you need to consider additional costs to market and list after upgrading. Make sure you factor in a buffer for market conditions.
2- What is appropriate for the neighbourhood? If you are looking at an area that has a certain price cap where no garage, vinyl flooring and laminate counters are standard expectations it probably doesn't make sense to throw money at granite and solid hardwood - you may be over improving for the area. If the expectation for price point in a given neighbourhood is to see hardwood, stone/granite, pot lighting, and upscale ensuites then you will probably be dismissed by renovating with lesser choices.
3- What are popular "buyer-choices"? What are the builders putting in their model homes? This is a good clue. If you are putting in hardwood and opt for honey-tone oak as opposed to graphite, espresso or driftwood tones you may be very disappointed in the buyer response to your renovations. Likewise, if you opt for salmon colored counters where neutral designer tones are favored you might be wasting your money. A bad decor upgrade costs the incoming buyer as much or more than no decor upgrade if they have to add the cost of an uninstall to the tab.
4- "But it's my house- it's for me and I will stay here forever". Maybe. Sometimes things change. I have listed several forever homes within a few years of their purchase because of changes to employment, relocation, downsizing, upsizing and other life events. Regardless, you can spend as much money as you like on your home creating a "lifestyle" that suits you. Lifestyles are different and unique design ideas may have very small audiences. What you need to accept is that you may not see that money back or see it appreciate. If you are ok with that and can afford to make "lifestyle" decor/design choices than by all means create what you love - just make sure you are prepared for every possibility should you go to market in the future.