Home Improvements That Pay
How do you get the best return for your renovation dollars? We asked the experts.

BY STUART FOXMAN

Given today's home prices Canadians are finding that remodelling instead of moving can be the answer when a family's needs change. Indeed, according to the Canada Mortgage and Housing Corporation, in 2002 we will invest some $24 billion in home renovations -- about 46 percent more than we did a decade ago.

Many homeowners approach renovations with an eye to resale value. But just what will that new bathroom or kitchen remodelling add to the price of your home?

To find out how much of your investment you're likely to recover -- whether you hire a contractor or do it yourself -- Reader's Digest assembled a group of professional real-estate appraisers from across Canada. They evaluated 11 popular renovation projects, based on a 25-year-old home with three bedrooms and 1-1Ž2 baths.

Along the way, they provided a few words of caution. "There's no point putting gold faucets in a house that's falling apart," says Georges Lozano, chief executive officer of the Appraisal Institute of Canada. And renovations are only one element when it comes to the value of your home. "If I listed the ten most important factors in real estate, nine would have to be related to location," says Jerry Kirkland, an appraiser in St. John's, Nfld.

Still, the smartest renovations not only will provide a significant payback but can help your home sell more quickly when it hits the market. Here are some guidelines to help you do your homework.

The Interior Face-Lift
Repainting all ceilings, walls and trim; new carpeting for the living room, dining room and three bedrooms; new linoleum or vinyl flooring for the kitchen and bathrooms.
Professional job: 85 percent payback.
Do-it-yourself: 100 percent payback.

This kind of improvement offers the best bang for the buck. Compared to other renovations, an inside face-lift is relatively inexpensive, yet it makes an immediate impact. "A purchaser wants to feel that their potential new home is clean and fresh," says Diane Delves, an appraiser in Abbotsford, B.C. Keep colours neutral or consistent with today's styles.

Sprucing Up the Exterior
Scraping loose paint off; painting siding and trim with one coat of paint; installing new vinyl-sash, thermopane windows.
Professional: 65 percent payback.
Do-it-yourself: 80 percent payback.

Most purchasers are more concerned with the interior of the house and put off exterior work. But first appearances do count. Keep colours in line with your neighbours'. "New vinyl-sash windows look modern and attractive but are expensive," says Delves. Change the windows if they're past their useful life, especially if you're planning to stay more than a few years. But be aware that purchasers may not care about your upgrade.

The Bathroom
New fixtures (toilet, fibreglass tub, vanity and fittings); medicine cabinet; partition to enclose the tub or shower area; vinyl flooring; paint for walls, ceiling and trim.
Professional: 70 percent payback.
Do-it-yourself: 95 percent payback.
Make the bathroom modern without being outrageous. Keep fixtures white or neutral in colour, but put some colour on the counter or use a patterned surface to hide nicks and stains better.

The Kitchen
Moderately priced wood cabinets; mid-priced appliances; laminate countertops; linoleum or vinyl flooring; paint.
Professional: 75 percent payback.
Do-it-yourself: 90 percent payback.

The kitchen is the heart of the home, and if yours looks worn and out-of-date, this is a good place to spend some money. Flat-panel wood cabinets have the same warm feel as their more expensive raised-panel counterparts. Keep counters neutral, maybe using a pattern. Stone-look laminates are popular right now. Also consider the functionality of this room. "Can it be opened onto another room or take advantage of a view of the backyard? Can a breakfast island or centre island be added to make better use of the space? A well-planned renovation in this area could make a big difference in the marketing and value of your property," says Ottawa appraiser Leonard Carty. But it's easy to go overboard, so watch your budget.

Heating, Ventilation and Air-Conditioning
Install an energy-efficient furnace; replace old thermostats with programmable models; improve cold-air returns; upgrade the hot-water system; install a mechanical ventilation system to provide adequate air exchange; upgrade insulation, air sealing and exterior shading devices; upgrade or install an air-conditioning system.
Professional: 45 percent payback.

Having a newer furnace will usually add to the overall appeal of the property, as it's one less thing the purchaser has to be concerned about, says Carty.

"But when it comes to heating, ventilation and air-conditioning, most people are of the attitude that if it isn't broken, let's not fix it," he says. "I've seen housing in which the heating systems are still functioning well after 30 or 40 years."

While an energy-efficient home is a bonus, it isn't a big priority for most purchasers, especially in milder climates like the West Coast.

Hardwood Floors
New floors for the living and dining room, foyer, hallways and stairs.
Professional: 75 percent payback.
Do-it-yourself: 100 percent payback.

Hardwood floors are attractive and trendy, and a bonus for allergy sufferers. Light or medium woods and stains are suggested, as dark wood can come across as too formal. But this can be a costly addition and would have a limited payback if a potential purchaser prefers carpeting. Laminate flooring can be a cheaper option. "It gives the attractive look of wood at a moderate cost and is easy to care for," says Delves.

Fireplace Addition
Direct vent, natural-gas fireplace; ceramic glass doors; mantel; trim. Or: masonry fireplace, including flue installation; frame and fittings; fire-resistant drywall; facing; hearth; mantel; chimney top; labour.
Professional: 70 percent payback.

Gas fireplaces have become cost-effective alternatives to traditional masonry fireplaces. Michel Colgan, a Montreal appraiser, says that with a good ventilation system, they are safe and attractive, and provide warmth -- in the atmosphere they give to the room and as a secondary heat source. A nice tile or brick surround, with a painted wood mantel, will give a modern appearance.

Basement Finishing
Three rooms and two closets or storage areas; carpeting; wall and ceiling insulation; drywall ceiling and walls; prehung doors; trim; wiring; light fixtures; two-piece bathroom.
Professional: 60 percent payback.
Do-it-yourself: 80 percent payback.

A finished basement greatly increases the living area of your home. While neutral colours are always best, there is more flexibility in a basement as this is a secondary living area. "If you can get a great deal on dark-blue carpet, hey, go for it!" says Delves.

Siding
Bevelled cedar siding or vinyl clapboard siding over asphalt felt paper.
Professional: 55 percent payback.
Do-it-yourself: 80 percent payback.

New siding increases the curb appeal of your home but won't get you a great payback. Vinyl siding is popular, looks modern and fresh and, best of all, is low maintenance. On the other hand, "Cedar siding is attractive but requires periodic staining or treatment for its protection," says Delves. Stick with pale colours, and put a dark colour on the trim for contrast.

Adding a Deck
Posthole excavation; concrete footings; pressure-treated lumber; stairs with brick landing; handrails; benches.
Professional: 65 percent payback.
Do-it-yourself: 100 percent payback.

Wood decks serve as an extra "room" in warm-weather months, and the cost of materials can usually be recovered. If the design is above the norm for the neighbourhood, and if you have great access from the kitchen or dining room, you'll boost the recovery value of the deck that much more.

In-Ground Pool
Excavation and site work; plastic liner; grading; grass seeding; sidewalk; contractor's fee.
Professional: 30 percent payback.

Kirkland captured the overall sentiment of the appraisers: "This is the worst place to spend money on your property." Unless you're selling your home on the hottest day of the year, many potential buyers see a pool as more of a liability than an asset because of the constant maintenance costs and the safety hazard.

Pools are looked upon more favourably in certain parts of the country, such as Quebec, Colgan notes, and get a higher return when they're installed on a large lot in a high-end neighbourhood.

 
When weighing whether to proceed with your next renovation project, there are several other considerations, our panel suggests.

• If there's a lot of competition in the real-estate market, many of these projects will give your home that needed edge to sell, even if you don't get a full payback on your renovation costs.
• Any proposed renovations should take into account the neighbourhood market. "The biggest recoveries can be made by correcting deficiencies and performing required updates in properties in the lower- to middle-price range, as opposed to investing money on a property that is at the high end of the neighbourhood market," says Carty.
• Don't overimprove or underimprove. For example, a granite kitchen countertop in a starter community would be an overimprovement and therefore generate a lower payback, says Janet Aspinall, an appraiser in Calgary. Conversely, a laminate countertop in an executive community may be an underimprovement. "A prospective purchaser may view it as something they would have to upgrade, and so give little or no value to the new countertop," says Aspinall.
• Consider if a do-it-yourself job is acceptable. In higher-end neighbourhoods, a renovation completed by the homeowner may not be considered worth as much as one done by a professional contractor, due to the quality of finish or material.
• Most home purchasers do not want to tackle large fix-up projects -- or if they do, they want a discount on the asking price to make it worth their while. "You don't need to make your home look like a showcase," says Delves. "New carpets, paint and good maintenance are the best ways to enhance your home's salability. And be sure to fix that loose doorknob or broken light. If you haven't addressed these little problems, a purchaser might wonder how many significant items have been overlooked that may not be apparent."

Remember, how much of your investment you can recoup should be only one factor in any renovation plans. It's hard to guess what will appeal to a potential buyer, so make sure that the renovations suit your own wants, needs and tastes first. Who knows, you may end up staying longer than you think.