Jealous of your neighbours’ new master bath? Who wouldn’t be? It’s got heated floors, a sauna, and a massive whirlpool tub. To be honest, your own bathroom looks like the shower station at the public pool in comparison. And you have been thinking about renovating it. Maybe a sauna isn’t such a bad idea after all. And how about one of those new tube lights? Yeah, that’d be cool.
Actually, doing the opposite — resisting the urge to keep up with the Joneses makes you the smarter neighbour. Just ask the one homeowner who added a spa with a downtown view to his home, which was way out of sync with his urban neighbourhood, making the home difficult to sell.
While he was able to sit in the tub with his Belgian ale and look over the city while it was snowing, the feature decreased the home’s value significantly. Needless to say, when it was time for the property to sell, it sold after a year — with a significant price reduction.
Renovating your home into the nicest digs in the neighbourhood comes with big risks. Best to think twice before replicating the Joneses’ extravagant additions, lest you end up with an over-renovated house that’s undervalued by the market.
Here are the questions to ask yourself before one-upping the neighbours:
Is This Your Forever Home?
It’s hard to believe, but the average person living in North America moves 11.4 times, and according to the data-crunchers at opinion poll analysis website FiveThirtyEight, most 25-year-olds still have more than six moves (!) remaining. So, statistically speaking, you’re going to move.
And you’ll need to sell your house when you do. Which means you should think about how any project will affect your home’s value. It’s not as simple as you think. Just because you improve, doesn’t mean you recoup.
On the other hand, you may truly plan to stay put. Newer studies find that today’s first-time buyers want to stay in their first homes longer than previous generations. So if you’re one of the ones bucking tradition, then by all means, do what you want to do without regard to resale value.
Some people just want to buy a house, and live in it and turn it into a giant, English estate. Of course, that’s their prerogative.
But if you’re planning a move anytime between now and eternity, let the Joneses keep a good lead on you in the renovation race. You’ll come out better financially. Guaranteed.
“You don’t want to be the best house in the neighbourhood,” says Cristine Lefkowitz-Jensen, interior designer. Otherwise, literally every other house around you looks like a better deal. It’s only smart to keep up with the Joneses if everyone on your block does. Keep an eye on comparable properties nearby, and use those prices to know how much is too much to invest in upgrades.
“Don’t put in Carrara marble and $80,000 cabinets in a market that won’t bear that selling price,” she says. It’s just not smart.
If the average home in your area sells for $500,000, and you purchase a fixer-upper for $400,000, don’t invest more than $100,000 — otherwise you’re wasting cash.
Are You Tempted to Finance Your Project?
As a general rule, taking out a loan for a renovation is a bad idea. Any large-scale upgrades that require begging the bank for cash should get an automatic “no” (sorry!). Even if you know for a fact that the Joneses financed their dream bathroom, that’s just all the more reason to march to your own home ownership drum.
Think about it: Even if the Joneses are increasing their home’s value a bit, they’re also paying interest, which eats into the benefit.
That said, don’t feel guilty about financing smaller, low-risk projects that are sure to increase your equity. For example, upgraded insulation may not be sexy, but according to the National Association of REALTORS’® “Remodelling Impact Report,” its median cost is just $2,100, and it recovers 95% of its value in a sale. So a small loan (that you can pay off quickly) might make sense, especially when you consider the energy savings.
Other good bets that add good value to your home include new roofing, new garage doors or new vinyl siding.
Have You Done Your Research?
Some projects — like refinishing your hardwood — are no-brainers because they’re relatively small and recoup most of their value in a sale.
Other, bigger investments, like updated kitchens, are a big draw for future buyers.
Old, dated kitchens are “the number one killer of all deals,” Lefkowitz-Jensen says. According to the “Report,” a typical kitchen remodel costs $35,000 and recovers $20,000 in equity. And no, that $10,000 difference isn’t wasted. You’ll love the upgrades while you live there, and get most of your money back when you move. (And enjoy a shorter selling time, too.)
Other popular projects such as HVAC replacement or closet renovations can be a big draw for buyers. Ultimately, a REALTOR® will know what’s best in your neighbourhood.
Another equity-rich option is creating an open floor plan. Not everyone eats dinner like Norman Rockwell, but that’s how the properties were designed at that time. Increase the home’s value by knocking down those walls and adding square footage.
Will Your Project Add Curb Appeal?
Improved curb appeal can increase the price of your home up to 17%, according to a recent study, so don’t shirk away from jazzing up your patio and lawn. So if the answer is “yes,” go with the Joneses on this one.
“That’s 50% of the sale,” says Lefkowitz-Jensen. “You only have one chance to make a first impression.”
Get a sleek and modern exterior by replacing your crumbling wooden front door with a gorgeous steel model, which looks stunning and recoups 75% of its cost in a sale, according to the “Report.”
Adding trees and bushes brings dimension to your lawn. Even just maintaining your yard makes a big difference. Additional lighting along the walkway is a worthwhile investment, too — in addition to making your home safer.
Will Your Remodel Bring You Joy?
It’s your retreat, your place. It should bring you joy when you walk in the door. You can’t put a dollar figure on the value of that.
However, the “Report” does give some insight into what projects homeowners are happiest with, regardless of cost. REALTORS® asked some of their clients what renovations brought them the most satisfaction.
You only have a short time on this earth. If you want to paint your house purple and put in a hot tub, that’s your choice. It’s your property. Enjoy.