One of the most common questions I get is:
“Should we renovate before selling?
And if so, what should we renovate?”
The short answer is “No! Don’t renovate!”
Some realtors may tell you to renovate everything because they want to sell the home quicker. My goal is to maximize your return on investment for my clients.
There are the 3 reasons why renovations are BAD:
1. The Return on Investment is a Bad Best-case scenario, you are getting back 52% on a kitchen renovation or 50% on upgrading your Principal Bedroom.
Financially, spending $50k to make $25k seems like a VERY bad investment!
*2019 Remodeling Impact Report from the National Association of Realtors
2. Upgrading an Investment Property is Bad Someone asked me the other day whether upgrading their investment property made any sense.
Not only is the typical return on an update very poor, investing in an asset where you have to pay capital gains doesn’t seem smart to me. You might as well upgrade your primary residence and have that appreciate tax-free!
*This assumes that if you’re thinking about optimizing your investment properties, then you are in a tax bracket where capital-gains might matter to you
3. You are Paying 100% Retail
What I mean by this, is that most homeowners are NOT professional remodelers. You will have to pay full price for designers, materials, and labour, and as I said above, you make back about 50% of your money.
Even worse, if you pick the wrong type of flooring or paint colour, the new buyers may value your renovation at $0 and you actually get back 0% of your money.
That’s not to say that all renovation is bad. Next week I’ll go through the situations when you SHOULD renovate before selling your home.