Put the ROI back into Ren-Ovat-Ions.
Some PMG clients bought a house not too long ago and have been slowly fixing it up with the intention of selling it and moving into a bigger place. Their house has around 800 square feet of living space and a very dated kitchen. We were discussing his plans for the house, and they were having a difficult time making a decision on what to invest in next.
The couple had a budget of $25,000 and had two projects left on the horizon: the kitchen and the basement.
The kitchen was dated, but functional. The basement was unfinished, but useful as a storage space.
Since living space was limited, they proposed that a finished basement might help to open up what was otherwise a cramped house. They also wondered whether a new kitchen would be nice to enjoy right now and help give them a boost on the resale value.
$25,000 is not enough to do both. What should they do?
Really this is a question of RETURN ON INVESTMENT – how much am I going to increase the value of my property by doing these renovations? That’s a question that everyone should ask themselves before doing renovations, if it’s their intention to sell in the next few years.
Certainly I was leaning towards the kitchen, but I wanted to hear what the professionals had to say.So I reached out to three senior realtors in our area to see what they would say: Tom Fleming from Sotheby’s Realty, Elizabeth Parker from Judy Marsales and Ellen Boyce from Royal Lepage.
Given a scenario where they had clients with $25k to renovate and had to choose between the basement and the kitchen, here was their response:
“As a realtor with 39 years experience, it has always been the kitchen. The wow factor. The once you move in the partner always finds other places to put the money. Modern updated kitchens less than 5 years old are always the reason people will gravitate to a home.”
“I would suggest the client update the kitchen. Although extra living space in the basement can be a bonus, I find a fair amount of buyers don’t find subterranean living space appealing. A dated kitchen will be more of a detractor for the majority of buyers.
Having the beautifully updated kitchen affords both a wow factor for the buyer and a move in ready main living space.
I would also suggest the seller obtains some design ideas & renovate the kitchen in a manner that will have the most appeal to Buyers. The sellers are renovating to sell and so a design and style that will be attractive to the majority of buyers should trump their own tastes. Go for the kitchen Reno!”
“My advice would be as follows: keep the $25,000 and use it toward improvements on your new home. Allow the new owner of your home to make their own choices of where they want to spend money. There is no guarantee you will recoup your investment in renovations on the sale.
If the seller were to insist on going to the trouble and expense of doing one of these projects, I would suggest the following:
Kitchen – a slightly safer place to put your money. You can’t do a full on kitchen reno for $25,000 but you might consider replacing counter tops, backsplash, flooring and having the cupboards professionally spray painted. Switch out dated looking hardware and install some new lighting, especially under-cabinet lighting. A fresh paint job in a contemporary colour will make a huge difference. If the appliances are dated or in rough shape consider replacing them. Be aware that some buyers will want to blow out the kitchen in spite of your efforts, in which case, good-bye $25,000 because they will factor the cost of a full reno into the price they offer.
Whichever option the seller chooses, always use reputable, professional trades people and keep invoices and guarantees. A poorly executed DIY improvement is worse than no improvement at all. Most importantly, hire a professional designer to ensure you are making good decisions – it is the best money you are going to spend.
So I guess I would circle back to my initial advice and say keep your money and spend it on your new home where you can enjoy the results!”
THE RESULTS ARE IN!
Given a choice between creating additional living space in the basement vs. upgrading the kitchen, the experts unanimously choose the kitchen. Depending on how bad the kitchen is, I might also think long and hard about Tom Fleming’s advice to hold onto your money instead, especially in this market.
Excellent food for thought and thanks to Ellen, Liz and Tom for sharing their thoughts.