How you invest your money over the long run can ensure you build up enough equity to retire comfortably. Trouble is, it’s not always easy to figure out how to maximize the value of your investments.
Take your home, for instance. It’s true it will probably be the most important investment you ever make. But while it’s a long-term investment, it’s also your home, the place you live in and raise a family. The catch is, some of the improvements that make it more comfortable don’t necessarily add that much value when it comes time to resell.
You may love the idea, for example, of remodeling your kitchen, but while it may cost you $100,000, it will likely only get about half that amount back if you sell. Buyers love a shiny new kitchen, but many figure they can do it themselves later and don’t really want to pay for yours.
Then there are the not-so-sexy improvements like changing the roof or updating plumbing – you won’t likely recoup these costs because prospective buyers expect these basics. Still, they’ll ding you on the price they offer if the roof or pipes are leaking.
Another no-no is adding improvements that are out of character with the neighbourhood – for instance if everyone on your street has an asphalt driveway, upgrading to expensive brick might make you happy when you roll into the garage every night, but it won’t likely increase your home’s value.
So what are the best ways to add value to your home? Here are five smart ones:
1. Let there be light: Nobody, except maybe vampires, likes dark and gloomy rooms and hallways. If you’re living in an old home with lots of small rooms, consider knocking down some walls to create a more open configuration or one with fewer rooms.
2. Add a bathroom: Families might be smaller these days but we all want our space in the loo. If your home only has one, adding a full other bathroom – or even a powder room created out of closet space — is a great way to increase your home’s value. If that’s not possible, consider his and hers sinks or a whirlpool bath.
3. Add a sunroom: A quiet, backyard sunroom adds more light and square footage – an unbeatable combination – and can cost a lot less than a full-scale extension. Adding a modern deck or patio and maintaining a healthy garden can also all help increase your home’s value.
4. Update your home office: As more companies allow employees to work from home, home offices beyond a desk by the bed have increased in importance. Converting an unused bedroom into a basic office space is easy and inexpensive but you’ll want to make sure it’s done tastefully and practically – a large desk, ergonomic chair, bookshelves and plenty of light are all important. And remember, home office space can often be used as a deduction on your taxes.
5. Watch out: Last but not least, they say you shouldn’t judge a book by its cover, but we all do. If your home looks rundown and unwelcoming from the outside, most potential buyers will drive on by. A fresh coat of neutral-coloured paint is a simple and cost-effective way to give your home some curb appeal, so are a well-paved driveway and a landscaped lawn. Remember, be mindful of the home’s style – grand columns outside a bungalow probably won’t work.
Whatever improvements you make to your home, the key is finding just the right balance between those that add value when it’s time to sell and those that simply make your house a home.
For a range of home ownership topics, be sure to visit the RBC Advice Centre.
Photo courtesy of MicheleTurbin.