Skip to main content
household finances

Listen, I'd be the first person to tell you that I'm not normal, but when all the rest of the world is diving into bathroom redos or kitchen makeovers with gusto, I stand alone: I really dislike renovations.

It's not because they don't make a house prettier or more functional. It's great to see the before-and-after shots of a reno, just as I get a kick out of seeing bodies transformed when people start a new diet or exercise plan. The problem is that one of these things is a true investment, while the other is nothing more than conspicuous consumption – justified as an investment.

Eating better and getting proper exercise is a great investment in your health. It doesn't have to cost much either. A friend of mine recently showed me his rock-hard six-pack abs, which even "The Situation" would envy. My friend's entire workout routine requires a chin-up bar ($50) and two chairs. He started out more like the rest of us, with a mid-section that a mutual friend refers to as "the predicament." This is the kind of investment I like to see. Low investment, great return.

Renovations are a different kettle of fish. I'm well aware of projects that can increase the value of a house, and flippers can make a great living finding hidden gems and quickly turning them around for a substantial profit. But let's be serious. The rationale behind many home-renovation projects is falsely justified on the basis of being long-term investments. It just helps some people rationalize their urge to spend and consume and upgrade.

If your finances are in order, go ahead, build a staircase of ivory (synthetic, natch) if you wish. I couldn't care less what floats your boat when you can afford it.

The problem is that many people can't afford it. They take on debt to finance it. And here is where it gets tricky. Borrowing money to invest is speculative. If you did the same thing with a stock portfolio, your risk tolerance would be rated by your adviser as somewhere between medium-high and "I play Russian Roulette for fun." The amount of paperwork you have to sign to acknowledge the risks is cumbersome because financial institutions want to cover their butts if things go sour.

Borrowing to invest in a home renovation is different than a investment portfolio. You can enjoy tangible benefits right away. Your house is easier on the eyes and more functional. It makes you feel good. Perhaps you've one-upped your friends. Now you're the ones with a "situation" and they're the ones with a "predicament."

For the last while, this type of "investment" worked out, at least psychologically and potentially financially given the bull market in real estate in Canada and persistently low interest rates. But this is because you had a tailwind of rising house prices.

If the housing market never changed, we could easily tease out the value of renovations by seeing how much more you sold your house for compared to the purchase price. If the increase was more than the reno cost, it worked out.

But since the housing market is dynamic, and does not keep going up forever, no matter how long the current trends are, you might find that one day your house value is declining more than the increase attributed to a reno.

This is where people will chime in that the reno was for themselves, not an investment. And this is where I will say, yes, that was the real reason all along. If you financed it over many years, you couldn't afford it – it was just conspicuous consumption.

Preet Banerjee, B.Sc, FMA, DMS, FCSI is a W Network Money Expert, and blogs at You can also follow him on twitter at @PreetBanerjee