The federal government is offering a new tax credit to help make it easier for Canadians to care for adult relatives in their own homes. The multi-generational home renovation tax credit took effect Jan. 1 for expenses related to building a secondary suite for a family member who is a senior or an adult with a disability. The credit will provide a 15 per cent tax refund on expenses of up to $50,000 to a maximum of $7,500.
The secondary suite must be for a related adult over the age of 65 or living with a disability, including a grandparent, parent, child, grandchild, sibling, aunt, uncle, niece or nephew. The secondary suite must be a self-contained housing unit that includes a separate entrance, bathroom, kitchen and sleeping area. 
Additionally, the home being renovated must be inhabited or reasonably expected to be inhabited within 12 months after the end of the renovations. 
Certain things cannot be claimed, such as:

• furniture;
• household appliances and devices;
• costs associated with landscaping, housekeeping, or security—in other words, anything not integral to the unit itself;
• costs of financing a renovation, such as mortgage interest costs; and
• construction equipment, tools, mortgage interest costs, and any costs associated with routine repair or maintenance.

In addition, claims are subject to reduction pending other forms of government assistance. 
To find out more on the Government of Canada website  CLICK HERE

There are many things to consider when renovating a home. What should I renovate to get the best return? Wall colours, flooring types, cabinet styles…The list goes on and on.  There are also a few simple rules that need to be followed. Doing a great, professional job is among them, but the single most important rule is “Do not over develop”.

Here is an example that will illustrate my point. The current market value of a house is $400,000.  The owners decides to do a complete renovation of the home. New roof, new windows, new mechanical, new kitchen, new baths, new flooring, new lighting, new baseboards, trim and doors are all on the list of things the owners wants to do.   The budget for the renovation is $130,000 dollars.

After the renovation the owners have a beautiful home and they lists the house at $570,000, hoping to gain a profit and get paid for the hard work, time and effort of renovating.  The house sits on the market for months with very little interest and they finally have to take it off the market or lose money on the endeavour.  What went wrong?

Before the renovation begins, the owners should have researched to find out what the market value of the house will be when the renovation is complete. If the completely renovated house in their neighbourhood has a market value of $500,000, the owners will be out $30,000 in equity for the house and they gain nothing from the work that was completed. There is a difference between the cost of the renovation and the value of the renovation.

I know this does not seem fair, but it is one of the realities of the real estate market. Cost and value are independent of each other in the real estate market. There are definitely situations where cost is lower than value.  Those are the properties that people who flip houses search for. It is a very competitive market for those homes.

I have seen a similar over development and wasted renovation dollars in neighbourhoods where there is prevalent infill redevelopment.  Home owners, knowing properties in the neighbourhood are in high demand, will renovate their home to try to maximize their return when they sell. They might do a few simple updates like a fresh coat of paint and some new carpet and maybe even replace the worn-out roof. They might spend anywhere from $5000 - $15,000. At the time of sale, they end up getting a similar selling price to the neighbour who did not renovate before they sold.

Why did this happen? Because the highest and best use for the property is redevelopment.  Properties are being purchased in the area for the value of the land and the condition of the home has little effect on the value of its highest and best use.

My best advice for people who want to renovate is to understand the context of the market and know the market value of a property before a renovation begins. Then be sure to understands how the renovation affects the market value.

Don't assume that a there will be a profit for a renovated property or even a 100% return on the renovation dollars spent. In Calgary as in most cities, the closer to the core you go, the more valuable a renovation is, except in neighbourhoods where the zoning makes highest and best use of most properties, redevelopment. But even in neighbourhoods where this is true, certain properties can still benefit from renovating because not every property in those neighbourhoods has redevelopment as its highest and best use.

You might be asking a few questions after reading this.
1.       How can I avoid over developing my property?
Engage the services of to a real estate appraiser to learn what the property is worth now and what it will be worth once it the renovation is complete. This may cost a few hundred dollars, but in the end, it could save thousands. As an alternative, If you are planning to sell after the renovation, get advice from a real estate professional like me who can explain the market and help you make some decisions.

2.       What renovations should you do to get the best return? 
That is another blog topic to come.  That really depends on your house and what it needs.  Generally, I would say that the roof, windows, siding and mechanical should be your starting point. If all of those are OK, the rest depends on your budget. Some house flippers just do cosmetic changes (Commonly know as lipstick on a pig) and seem to profit.  I like to steer my buyer clients away from these properties unless they are willing to take on the big ticket costs after they buy.

Feel free to contact me if you have questions.  If you are renovating to sell, I would be happy to do a walk through of your home and advise you on the best place to spend your money to get the best return on your renovation dollars.

Want to learn more about the value of your house?

Jim Perks is a REALTOR in Calgary, Alberta, Canada. He uses his expertise in Internet marketing and real estate experience to service both buyers and sellers throughout the city of Calgary. He can be reached at RE/MAX Real Estate (Mountain View) 403-247-5178 or by email at [email protected]. His website is www.calgaryrealestateagent.ca

​Having been involved in renovating houses for both my personal use and for profit as well as seeing many renovation projects completed by home owners prior to selling their homes, I have put together what I feel are the top five regrets people have when it comes to renovations of their home.

1. Not keeping a budget for unforeseen costs.  This is a very common regret that I see with most renovation projects. Try as you might, there will always be unforeseen costs and it is important to set some money aside to cover these costs.  Whether it is for mechanical that needs to be replaced or simply an upgrade to finishing you decide to undertake, have the extra dollars in the budget is a necessity.
2. Not hiring professionals.  I cannot stress the cost in time and money of a job that is not done to the quality of a professional.  In the end, if something is not done correctly and has to be done again the cost is more than double and so is the time it takes to complete the job.  On the resale side, when something is not done correctly it turns buyers away and the smallest of renovation mistakes can cost thousands of dollars in resale value.
3. Not getting a quote in writing. When you are hiring professionals to do the work, make sure you get a quote for everything in writing and the scope of the work is clearly outlined in that quote.  I also recommend more than one quote, so you can compare pricing and compare what the scope of the job is based on that quote. The more information you have, the more you will understand cost and value.
4. Not having a well-planned design and a timeframe for completion. Renovations can go on and on if a firm plan is not in place. This can create stress on the family.   If you take the time from the start to plan out a schedule of work and define the scope of the work it takes stress off and gives everyone in the household a vision for the completion.  Having a vision significantly reduces stress.
5. Not considering the resale value of a renovation.  Everyone has their own personal taste and their own ideas about what they want to do to improve their home, but it is a good idea to spend a few dollars on an interior designer, or at the very least, bring in a real estate agent to discuss your ideas before you finalize plans. Renovating for the enjoyment and use of family and renovating for the purpose of resale are not the same activity.  There are many choices to be made during the process and the decisions are influenced by what is motivating the work. In both situations the goal should be the same. The renovator should be focused on a well planned, professionally executed renovation project that will enhance the value of the home.

Want to learn more about the value of your home