Energy Efficient Renovations and Your Return on Investment, Part I

Realtors are often asked to suggest improvements that will make their clients' homes more saleable and provide the biggest return on investment (ROI).

Kitchen and bathroom upgrades still offer some of the best ROI. However, now, according to the 2008 Appraisal Institute of Canada (AIC) RENOVA survey, energy efficiency upgrades are top on the list of highest paybacks. AIC surveys its members every second year and then compiles a list of renovations that yield the highest recovery rate, according to the opinion of professional appraisers. Recovery rate is what is defined as the likely increase in a home's resale value which could be attributed to a renovation as a proportion of the cost of the renovation. For instance, if a $10,000 renovation increases the home's value by $6,000, the recovery rate would be 60 per cent.

For instance, refurbished kitchens and bathrooms can typically bring in between 75 and 100 per cent of the investment at resale, provided the renovations are professional and tastefully done.

Since energy savings are on the minds of most people these days, this year's AIC survey asked respondents to rate five energy-efficient upgrades in terms of their influence on the resale value of a home. 'Green' renovations were cited most frequently as having an average recovery rate of 61 per cent. High efficiency windows received the highest level of agreement among respondents as the energy-saving home improvement that would have a significant positive impact on the appraised value of a home.

The type of heating system, heating system efficiency and insulation were also considered to make a significant difference. Efficient hot water heaters, on the other hand, were judged to have only minimal influence on a home's resale value.

Several other improvements were identified as having higher recovery rates, including using neutral paint colours (67 per cent), the addition of a cooking island in the kitchen (65 per cent), and installing a Jacuzzi or whirlpool bath separate from the shower stall (64 per cent). Spa-style showers were cited as being very popular upgrades. However, while stylish and trendy, their recovery rate is at a low 36 per cent. Not surprisingly, adding a swimming pool also scored very low. In fact, the addition of a pool, hot tub or skylights were not only considered to contribute very little to the resale price of a home, they sometimes had a negative effect.

Tomorrow, I will elaborate on other renovations and upgrades and what they will get you when you sell your home.