How Home Equity Works

Renovating Your Home Is A Strategic Move

Getting ahead in real estate is not just about buying properties - the most strategic move for you may be to improve the value of a property you already own, namely your home. If you are happy where you are, renovation can be a sound financial strategy. When you renovate your own home, you win twice - once when you enjoy the benefits of a better home, and once again when you sell the home.

When it comes to resale value, however, not all renovations are created equal. Let's look at an example. Suppose you fancy a hot tub on your back deck, and decide to invest $10,000 or so. Will that add $10,000 to the value of your home? Likely not. The truth is, not everybody wants a hot tub. In fact, somebody bidding on your home might not want to bother with the maintenance, and may be inclined to get rid of it. Their bid, therefore, will not take your investment into account - it might even be seen as a negative.

The lesson here is that when you're prioritizing your renovations, make sure you consider which ones add the most value to your home. Here are some guidelines:

• Chose improvements that are most popular with prospective buyers. Kitchens and bathrooms are at the top of the hit list according to statistics gathered by the Appraisal Institute of Canada. The institute also has a useful on-line guide on their website which shows you the return on any renovation you are considering. The guide is called "Renova" and can be accessed at www.aicanada.ca.
• Keep your home in top shape. Homes that are not looked after deteriorate rapidly in value. A leaky roof, for example, can cause damage to your hardwood floors. Siding that is in bad shape can lead to squirrels and other pests getting into your attic and causing further damage.
• When the time comes to sell, put your maintenance operation into high gear. Painting the exterior, repairing the roof, and re-doing the gutters will ensure that buyers get a positive impression.
• Rental suites are a big plus: As mentioned above, renovations that make it possible to derive rental income are generally big plusses for potential buyers.
• Avoid amateur reno jobs. The "do it yourself" reno market is all the rage in Canada right now, but if you put an addition on yourself, and the roof leaks, a prospective buyer won't be impressed. If you can't do a professional job yourself, hire somebody who can.
• Invest in energy efficiency. With rising energy prices, you can be sure that the payoff from investments in insulation will give a return that keeps rising. If you improve your energy efficiency, you also may be able to qualify for a grant through the Government of Canada Office of Energy Efficiency. Use your eco mortgage for renovations that are eco friendly. For more information, visit their web site at http://oee.nrcan.gc.ca/corporate/incentives.cfm?attr=0

Step by step guides to renovating are available from the Canada Mortgage and Housing Corporation website at http://www.cmhc-schl.gc.ca/en/co/index.cfm. Another useful site is the Canadian Homebuilders' Association website at www.chba.ca. Financing Your Renovations

One of the preferred ways to finance a renovation is through a home equity loan. This allows you to use the equity in your home to build more equity - a sound wealth-building strategy. Capital Direct has helped thousands of Canadians pursue this approach.

Web site content is for informational or illustrative purposes only and is not be considered or used as a substitute for professional financial advice from an accountant, lawyer or certified financial planner. Click here to view our full legal disclaimer.