My wife and I bought our first family home in 1997 in the West Mountain part of Hamilton Ontario. Our home at that time was only four years old. Our philosophy was to do some sort of project or renovation each year. To date, we have stayed true to our plan. With Canadian mortgage rates at record level lows, we have decided to do multiple projects. We are intending to do a cement patio in our backyard, renovate the bath in our ensuite, paint the home and finish the family room. Through all of these renovation plans, I found me asking myself if these changes add will value to our home.
Quickly, I went online to discover whether or not these renovations would add value. Well, let’s start with the positive, the improved, renovated bath. According to my research, this would add value at a 75-100% recovering rate. What does this mean? This means that if I were to spend $5000 on a bath, I can expect a return on my investment of between $3750 (75% or up to $5000).
I next looked at the painting of the home. I was pleased to find that the recovery rate of painting was 50-100%. Here is the actual breakdown…..
Now for the other side of improvements of which do not add much value. Our backyard cement patio, which I believe will cost me approximately between $8000-$9000, unfortunately will not give me much of a return. These types of renovations only have a recovery rate of 25-50%.
The following are renovations which do not bring a healthy return to your investment dollars….
Well what did I learn from all of this? I learned that you must be careful when doing renovations if your only objective is to get a rate of return. In addition to this, I learned that happiness is something that was not covered in the research. At the end of the day, regardless of your return, the bottom line is that you and your family need to be happy with your choices. For example, if a family buys a pool and they get years of use and enjoyment but a small return, well, that is priceless. In my example, although the cement patio will not bring me the return in which I would hope for, it will make for a very happy wife. And as we all know, a happy wife equals a happy life. What more could I ask for?
Robert Floris is an independent mortgage broker at Mortgage Architects in Hamilton Ontario.