Why Those High-Cost Remodels Aren’t Always the Best Choice

If you’ve been saving for a major home remodel, I’ve got good news: Those high-cost remodels actually aren’t always the best way to go. According to the 2021 Cost vs Value Report, you’ll see more value from lower cost remodel investments. Here’s why:

The Cost vs Value Report 2021

The Cost vs. Value Report studies remodel projects of varying degrees for both exterior and interior upgrades. It tells us something about the housing market, as well as how remodels impact resale value. Every decision you make when renovating your home directly impacts the value of your home when you sell. Although the study is American, it still offers insight into how your renovations are viewed by buyers and realtors.

Forever Home vs Starter Home

Renovations for your “forever home” are a little different than upgrades to your starter home. Forever home renovations are designed to grow with you and adapt to your changing needs. You plan to live in your home “forever”, therefore investing more to meet your specific needs makes sense. That said, always keep in mind that unforeseen life changes could force you to sell your forever home unexpectedly, which means you could lose most of the money invested. Starter homes, on the other hand, require upgrades 100% focused on return on investment (ROI). Most people only live in their starter homes for two to five years. Therefore, you should look at the cost vs value of your renovations to see more bang for your loonie.

Major vs Minor Kitchen Remodels

Here is a breakdown of the cost, upgrades, and average return for a major upscale reno vs a minor mid-range kitchen remodel:

Major

Upgrades:

• 30 linear feet of top-of-the-line custom white cabinets with built-in sliding shelves and interior accessories
• Stone countertops
• Imported ceramic or glass tile backsplash
• Built-in refrigerator
• Commercial-grade cooktop and vent hood
• Wall oven
• Built-in microwave unit
• Undermount sink
• Designer faucets
• Water filtration system
• Updated general and task lighting
• Low voltage undercabinet lights
• New tile or similar faux wood flooring

Cost: Approximately $148,000

Return: 53.6%

Minor:

• 30 linear feet of cabinetry keeping the existing cabinet boxes and replacing fronts with new shaker-style wood panels and drawer fronts
• Cabinet hardware
• Laminate countertop replacement
• Energy-efficient cooktop/oven range
• Energy-efficient slide-in refrigerator
• Mid-priced sink and faucet
• Resilient flooring
• Fresh paint throughout

Cost: Approximately $27,000

ROI: 69.5%

As you can see with your minor renovation, you still get a beautiful new, fully functional and energy-efficient kitchen, but will see almost 16% more return on your investment.

Major vs Minor Bathroom Remodels

Bathrooms are another common remodel where homeowners often overspend. A mid-range minor bath remodel will cost about $25,000 and see a return of almost 60%, while a major upscale remodel will cost upwards of $76,000 and see a return of just under 55%.

Master Suite Additions

A major master suite addition sacrifices other space in the home. This actually downsizes your home in homebuyers’ eyes who see a one- or two-bedroom home in an area where most have two or three. That’s why upscale master suite additions see the lowest ROI at 46%.

Keep in mind that all these stats are from a report from the US that generalizes across markets. In certain markets, catering to a higher level of emphasis on style (typically urban markets or higher value markets like Toronto and the GTA), people will pay for well designed and executed renovations. So the take away message is that renovations have to be relevant to the neighbourhood. Major upscale investments will never pay off in a neighbourhood where people aren’t willing to pay for them. The best way to avoid overspending on your remodels is to speak to a real estate agent familiar with your location, surrounding areas, and the buyer demographics. They know what potential buyers in your neighbourhood are willing to pay for, and what they aren’t.