Will Renovating provide a good Return On your Investment?


We recently gave a potential homeowner advice that cost Integrimark a $45,000 project. We provided them an estimate for a new bathroom in their basement. They said they were planning on moving in a year or so and wanted to increase the value of their sale by that amount or greater.

We advised them not to invest that amount of money with the expectation it would necessarily increase the value of their home by the same amount. Yes, it would increase the value somewhat, but not likely as much as the investment itself. Would it increase the chances of them selling their home? Absolutely, but not necessarily for the increased value they might hope for.

There are some renovations that will quickly increase the value of your home equal to or greater than the investment. An investment in paint, some flooring, a modest main bathroom reno, or a modest investment in remodeling a kitchen are usually good investments. But sometimes it’s wiser to forgo an investment if you plan on selling your home in the near future, especially if it’s a large investment and it’s being made with the expectation the value of your home will rise equal to or greater than the investment.

Most of the time a renovation in your home provides greater value if you look at it from the longer term and from a personal enjoyment of the renovation. For example, if the homeowners mentioned above planned on staying in their home for another five to ten years it would be sound to move forward with putting a bathroom in their basement. Mainly because they would have years to appreciate the convenience of the additional bathroom and allow the value of their investment to grow over time. Would the value of their home be higher years later because of it? Yes, though not necessarily equal to the original investment if compounded. But we can’t always put a value on the convenience and pleasure a renovation can bring to a home.

Investing in home renovations will more than likely make the home easier to sell, and this might make a difference in a slower market, but it should not be the primary factor in a home owner’s decision process if getting a strong financial return is critical. A home being easier to sell, because it’s more appealing, is not the same as getting a strong financial return on an investment.

In weaker markets the chances of selling your home are greater if your home has more appeal. However, in stronger markets the appeal of your home plays a smaller role.

In summary, if you plan on moving in the near future after a large renovation investment do your research as to what increased value the investment will bring. If you plan on staying in your home for years to come, the enjoyment of the renovation will likely be more important than the financial return of the renovation.

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