How to reno and save dough

1. Start smart

Embarking on a renovation is a big commitment, so take your time when looking for the right contractor. According

to Evan Sversky, the owner of Winchester House, a building and contracting firm in Toronto, the best way to find a contractor is through word of mouth. Ask friends who have renovated or talk to professionals in the industry, such as real-estate agents, designers, architects and home inspectors. At the same time, "a contractor should always have references to give prospective clients," he says. Instead of relying on phone conversations with references, invite yourself over to see projects equivalent in scope to yours. "I'll take my prospective clients to show them the work I've done. It gives them an opportunity to talk to my previous clients directly," Sversky says. Finally, when deciding on a contractor, never underrate your gut instincts - always look for good chemistry.

2. Get the paperwork

To protect yourself in case something goes wrong later, make sure the contractor has the proper licensing and insurance, insist on a contract, and "never, never deal in cash, because you need paper trails," says Sversky. (You'll also need receipts to take advantage of

the federal government's new home-renovation tax credit.)

3. Beware of too good a deal

Try to obtain at least three estimates, but beware of the bid that sounds too good to be true. "The best price isn't necessarily the best contractor," says Sversky. "And a lot of contractors, whether legitimate or 'non-legitimate,' will give you a lower number to get themselves in the door." A good contractor should be able to complete the job without going over the quote, but you should always be prepared for extra costs. "Have a range or comfort zone, because things never cost exactly what you think," says Arren Williams, a Toronto-based freelance home stylist. "Once you open up a wall, best estimates can go out the window." Sversky agrees: "The client has to be prepared for the unforeseen, so it's best to have about a 10 percent buffer."

4. Pick these upgrades...

When it comes to increasing your home's value, kitchen and bathroom renovations are at the top of the list. Still, it's important to be sensible. "The quality of materials you use should be relevant to the house," says Rory McGlade, a Re/max Chay Realty sales representative in Tottenham, Ont. "There's no point in putting a $30,000 or $40,000 kitchen in anything other than a detached home. If you had a townhouse and put in things like granite countertops, you'd go way beyond the value of the house," he says. Other upgrades that increase the value of your home are flooring (but not carpets), roofs (especially for smaller homes), windows, landscaping (for larger homes) and paint.

5. ...But ditch the hot tub

If you're thinking of adding a hot tub in the backyard to make your house more desirable, think again. "Upgrades that are terrible dollar for dollar are pools, hot tubs, deckings and saunas," says McGlade. These are luxury items that aren't key to the house, and, he explains, "for a lot of people, these types of things aren't even considered a positive."

6. Splurge and save

In a kitchen, relatively inexpensive classic cabinetry from a big-box store and a backsplash of white ceramic subway tiles - which are as "cheap as chips," says Williams - will gamely hold their own next to a luxurious quartz countertop and high-end plumbing fixtures. For smaller dwellings like condos and townhouses, good-quality laminate flooring can be used in place of more expensive hardwood. And adding architectural details for interest is always key. Much of it, like applied panel moulding or wainscotting, can be done at relatively low cost. "Really simple things that buyers expect to see now include chunky baseboards, attractive deep-panelled doors and crown moulding," says Williams.