According to a recent survey by CIBC, 25 per cent of British Columbians plan to make home renovations in the next 12 months and plan to spend an average of $19,000 for those renovations – much higher than the national average of $15,300.
Renovations can add significant financial strain to a household budget and stress to an already busy family, says Avi Kay, branch manager at Envision Financial. But with a bit of planning and research, much of the pain and uncertainty can be avoided and that long-awaited renovation can become a wise investment.
Plan ahead
Before undertaking any renovation project, you should have a clear understanding of the costs involved and the scope of the project. Kay recommends getting several estimates from qualified contractors and to anticipate spending an additional 10-15% for unexpected costs. It’s also important to make sure you have a signed agreement with the contractor you select.
“I’ve seen so many people go into a renovation without a clear plan in place,” says Kay. “By taking the time to really plan out your renovation with an experienced contractor, you’ll go in with a clear understanding of what’s being done and how much you’ll need to spend. You’ll also be happier with the final result and the overall cost.”
Ron Todson, president of the Fraser Valley Real Estate Board and realtor of 30 years agrees, “Your home is likely your most valuable investment so when you decide to renovate, you need to be strategic.
“If you’re updating one part of your house, make sure you leave some room in the budget to lightly spruce up the rest of your home as well,” Todson continues. “Otherwise the newly renovated section can make the rest of your house look outdated and become a drawback in the eyes of a prospective buyer.”
Educate yourself
“There’s a lot to consider and be aware of when undertaking a renovation,” says Kay. “You’ll need to check with your municipal building department to see if your planned renovations are allowed under current zoning and by-laws and make sure they conform to building code. If you’re changing the structure of your home, it’s also a good idea to use an architect so that your plans are structurally sound. Failing to do so could void your home insurance.”
Kay also encourages anyone undertaking renovations to consider greener options. There are often rebates and even tax credits available for eco-friendly renovations. Homeowners can visit the LiveSmart BC website for information on which renovations may qualify.
Choose renovations with good resale value
“The best and cheapest renovation you can undertake is to repaint your house inside and out and a close second is to replace outdated lighting fixtures,” advises Todson. “Paint and lighting, which can be quite economical, really spruce up an older home and make buyers feel like they are getting something fresh and new.”
“The renovations that offer the next best return on investment are kitchens and bathrooms—but the price tag on these items may be a lot higher. Energy efficiency is also a priority on buyers’ lists so it’s worth considering a new furnace or replacing windows,” continues Todson. “However, high-end multi-media rooms and elaborate outdoor spaces including pools do not provide a good return. These items should be added for personal use, not to try and sell your home.”
“Lastly, consider your neighborhood,” concludes Todson. “You don’t want to price yourself out of the market by having the most renovated house on the block.”
Fund wisely
After you’ve made a plan with a qualified contractor and drawn up a budget you feel comfortable with, don’t forget to take the time to make sure you have a cost-effective way to pay for your upcoming renovations.
“Once you have a budget in place, it’s important to make sure you have proper financing available,” says Kay. “The cost of your renovation will go up dramatically if you rely on high interest products like credit cards. Instead, take advantage of low interest rates by renegotiating your mortgage, taking out a home equity line of credit or applying for a personal loan. Take the time to meet with a financial expert you trust—they’ll work with you to find a solution that works for your family.”
