My wife and I bought our first home this year. We got a good price and live modestly so our fixed expenses are only about half of our take home income. Due to Canadian mortgage rules we opted to put 20% down to avoid CMHC fees. This set us back to zero savings for a couple of months. As of my next paycheck our cushion fund will be back to status quo so we aren't worried about emergencies.

Moving forward I am wondering about how to approach home improvements as investment. I understand that things like kitchen and bathroom improvements often offer better than 100% ROI so we are planning on making strategic improvements to our property and building sweat equity wherever possible. I am wondering about, what is a safe percent of investment capital in a single fixed asset like a fixer upper home?

Additional info: Planning to sell in 4-6 years.

Edit: Not enough reputation to comment here, so in an edit. It's pretty annoying that the title was incorrectly edited and that all of the answers are to the title rather than the question I asked so I will elaborate.

My question is regarding the rate at which it is sane to do invest in improvements. I understand that it would be very risky to put all of our investment power towards home improvement. What is a safe split of future investing power between fixed assets (like a home) and liquid assets (like stocks and funds)?

  • 10
    I'm not sure where you heard that those improvements have more than 100% ROI. I've always heard that home improvements almost always have a negative ROI unless you are doing repairs.
    – JohnFx
    Aug 21, 2014 at 21:42

4 Answers 4


As someone who's done quit a bit of home improvement and seen positive ROI, I can speak from some personal experience. All of this assumes you do the unskilled labor yourself and shop around for relatively cheap plumbers, electricians, etc.

First, never underestimate the resale value added by a can of paint. This assumes you have, or know someone with a good sense of style that can help improve the aesthetics of the home significantly. White walls can be so boring to homebuyers and so many of them can't see through the 1/16 of an inch of white paint.

Second, look for shortcomings in the house as-is.

  • It doesn't matter how good your home looks on the inside, if the outside is bad, potential buyers will never see it. Make the lawn look wonderful. Curb appeal adds a lot!
  • Putting in a sprinkler system on a rental house is a must if you live in a dry area where the lawn will die if it's not watered. Many investment buyers won't consider a house without one. Doing that yourself can be a LOT of work. You will need a plumber for a minimal amount (backflow prevention). This is probably not a huge issue in Canada though.
  • I had a house with carpet in the bathrooms. Yuck! Having some tile put in helped significantly and was cheap. Vinyl flooring is also not viewed as very modern. Replacing flooring (or covering it in some cases) can be done relatively cheaply and add to resale (assuming you don't mess it up in the meantime).
  • Removing dated counter tops, is a good way to improve the value, though with countertops you can't do much of the work yourself so don't expect to get as much of a return (though it may be a basic requirement if the existing ones are bad).
  • Adding some outdoor living/cooking space can be a good way to improve resale-ability, though you'll still be hurting in comps because this doesn't add to measured square footage of the home. Buying new or near-new hardware on the cheap on Craigslist or ebay, etc. can save you a bunch.

Anyway, these are some common upgrades. The big thing is to find something you are reasonably comfortable doing yourself and that you will enjoy. Realize that if you're new to this most projects will cost twice what you budget and take four times as long! The pride of having done it yourself and put in the sweat equity makes it worth it though (usually).


To better answer your modified question, I'm adding to my answer. So if I understand it, your question is now "At what rate is it sane to invest in our house vs. outside investments". This is really just a matter of balancing risk vs. lifestyle. With most upgrades there is no financial benefit to investing in upgrading your home now vs. 5 years from now right before you sell. You could be making 10% in mutual funds until then and then invest in the upgrades right before you sell. There is obviously a physical limit to how fast you can do these improvements yourself, but front-loading this now at the beginning of your timeframe as opposed to the end is not an investment decision, it is a lifestyle decision. Not saying "Don't do it", but don't rationalize it to yourself as "we're saving money by doing this now." Maybe use the rationalization "We want to enjoy these upgrades and not just add them before we move out."

One exception to that - I'd plant any trees now and make sure they have a good water supply. Good trees take a while to grow, and doing that sooner rather than later will help.

  • I appreciate the answer. I wouldn't have considered it this way. This gives me a pretty good parameter to order my home "to do" list with based on what I want to enjoy (like basement workshop) and what I don't care about (like ugly washer/drier that still work). +10 for demonstrating reading comprehension :)
    – Myles
    Aug 25, 2014 at 18:26
  • @Myles Do keep in mind you won't get the same return on all improvements (some may have negative ROI), but yeah, do what you'll enjoy first. I also suggest starting with smaller projects to figure out what you can bite off yourself and build your confidence in home improvement.
    – Jared
    Aug 25, 2014 at 19:50
  • @ Jared Good advice. It's been a bit of a battle with my wife to quit starting projects that we aren't a in position to finish. If we can sit down together and work out the 6 month, 18 month, 3 year, 5 year plans we will both be a lot happier.
    – Myles
    Aug 25, 2014 at 21:18

Don't buy a house as an investment; buy it if/because it's the housing you want to live in. Don't improve a house as an investment; improve it if/because that makes it more comfortable for you to live in it.

It's a minor miracle when a home improvement pays back anything close to what it cost you, unless there are specific things that really need to be done (or undone), or its design has serious cosmetic or functional issues that might drive away potential buyers.

A bit of websearching will find you much more realistic estimates of typical/average payback on home improvements. Remember that contractors are tempted to overestimate this. (The contractor I've used, who seems to be fairly trustworthy, doesn't report much more than 60% for any of the common renovations. And yes, that's really 60%, not 160%.)

  • So this contractors customers get $0.60 back at sale for for every $1 they spend on renovation (to clarify your numbers). That's a fair number, but remember the OP is saying what if he does the work himself. If he can do the work for $0.50 on the dollar of what the contractor would charge if he does the labor himself then he'll make 20% on the investment. Still getting contractor bids for comparison isn't a bad idea.
    – Jared
    Aug 23, 2014 at 23:27
  • Agreed, "sweat equity" can change the equation... but remember that this does eat up time you could be spending doing other things. If you enjoy working on the house, great (I often do). If not, you have to figure the value of that time as part of the real cost of the project.
    – keshlam
    Aug 24, 2014 at 1:20

Realtor.com gives the following list of "best renovations for the money" and they include ROI numbers:

Home Improvement Job        Cost       Resale Value   Cost Recouped
Minor Kitchen Remodel       $17,928    $15,278        85.2%
Window Replacement (Wood)   $11,040    $9,416         85.3%
Bathroom Remodel            $12,918    $10,970        84.9%
Window Replacement (Vinyl)  $10,160    $8,500         83.7%
Two-story Addition          $105,297   $87,654        83.2%
Major Kitchen Remodel       $54,241    $43,603        80.4%
Attic Bedroom Remodel       $44,073    $35,228        79.9%

You can see that people generally get ~80-85% of their money back on home improvement projects.

If the housing market is just red hot in your area, and you bought a house with some severe issues that caused the sale price to be significantly undervalued per square foot, then you're more likely to get more than average returns on your investment. If you manage to save a lot of money on the renovations (ie, inexpensive materials or you DIY and save on labor) then your costs will be lower and your ROI higher.

You can see from the list above that the most profitable improvements tend to be kitchen, bath, windows, and adding additional living space.

However, it only takes a few hours of watching HGTV to conclude that renovations often cost more than homeowners expect. This is often due to unexpected issues or costs that were not apparent before the work started.


It depends entirely on what you're improving and what you're spending.

Taking the kitchen for example, if you're replacing a tired 1960's kitchen with cheap but functional IKEA units and appliances, and you're doing as much of the work as possible yourself, you will definitely see a good return.

However if you're spending $50,000 on a Poggenpohl kitchen to be fitted by professionals your ROI is going to be your enjoyment of the kitchen over the years and not financial.

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