Lately I’ve been quite impressed with the house prices in our area but at the same time know that if we sell the cost to renovate and buy weigh heavily on our minds.
Not only that but the real estate market in Canada might be hot right now but if you have renovating to complete that might set you back with missed money opportunities.
The top 3 questions next to time-frame that you need to answer before putting your house up for sale are;
- Should we renovate our home to get better return?
- How much will our renovation budget be?
- Do we want to upgrade or downsize buying a new house?
WHO IS BUYING THESE HOUSES?
Most of the home buyers that have moved in are in their late 30’s and up with and without children. It’s near impossible for the Millennial generation to buy a house in Toronto most of which start in and around the million dollar mark. Most of these houses could do with upgrades and renovations which means more work and more money.
With University and College loans and a war of an employment market finances can become a struggle. If it’s hard to pay for rent you’ll never make it through a mortgage. This is why more and more younger adults are opting to rent instead of buy. They can’t afford it.
Everywhere we look house prices have skyrocketed especially in our area. In our net worth update you will see we have our house set at $365,000 but a comparable home just sold for $575,000 on our street.
That number would certainly boost our net worth over one million dollars however we know that we still have to live somewhere. Owning a home is like sitting on an egg and when it hatches you’ll either make a mint or cry all the way to the bank.
Even moving to smaller neighbouring cities might not get us much more than what we’ve already got unless we’re prepared to pay more. Living in a small village appeals to me more than the city but these days even the country properties are into the millions. Pair all of this with increased commute time and stress level waiting in traffic longer than needed every single day.
A fan wrote to me looking for some advice about renovating his house before selling it or just sell it as is? Let’s see what he had to say first.
RENOVATING OR RUN
My wife and I have lived in our house for 10 years now and have done minimal renovations. We bought the 4 bedroom 1500 square foot bungalow for near one million dollars knowing that it needed some work doing to it. We have 2 bathrooms in the house both with shower and a tub, single garage and parking for 2.
At the time the price was right and we needed somewhere to live close to work and renting was not something we wanted to. Sadly we know that was a silly mindset to cling to as it could have ended terribly had we not had a budget.
I’m the type of guy that fixes stuff as it’s needed or hires someone to do it. The other day my wife and I got talking about types of renovations we should complete before we put the house up for sale. We’re just not sure if we should bother with renovating the house or just sell it and move on. We’re in no hurry but the real estate market seems to be HOT in our area.
Ideally we’d like to move somewhere close to where we are now in a Toronto Suburb but somewhere cheaper. This means that getting the most out of our house when we sell it is important to us. What we’re not sure about is whether it would be worth it to renovate or let the new owners do this?
Do you or any of your readers have any personal experiences they want to share with us?
First off, talk to you’re real estate agent and see what he/she has to say about renovating a house in the area you live in.
If your house has potential then I’d certainly invest in making sure that the key rooms in your home get a face-lift including a fresh coat of paint. Whichever rooms you want to renovate depend on your renovation budget plus your motivation.
Buying from big box renovation stores such as Rona, Lowes or Home Depot will yield you the more affordable kitchen and accessories. However, remember that what ever you spend on a kitchen, you’ll only see a certain percentage back from your initial investment.
Most people will shop at those stores when renovating their home. Don’t go to high-end stores to frost your renovations but keep the budget reasonable so that the new owner isn’t dealing with a crap job and paying for it.
Most of the houses around here have had minimal renovations and yet still yield sale prices higher than the original asking price. A hot market can pretty much sell any house.
RETURN ON INVESTMENT
In other words, Is It Worth It? Will you make any money back from it if not more is up to you and the real estate market at the time of selling.
Not one person I know wants to spend the time and money to renovate a house they want to sell unless they are trying to hook more money from the buyers. There are plenty of buyers who fancy a house renovated top to bottom.
Return on investment doesn’t just include the financial aspect of the deal either but also the physical investment. Renovating a house is not a small undertaking unless it’s a quick fix. When renovating the name of the game is to “Do it right the first time” however trusting someone else’s work is another story.
Not all home inspectors catch things that are wrong with a house during inspection nor do they check everything. There’s always that risk of buying a renovated lemon which has to be torn down and the renovating process to start over.
Personally, I’d like our dream home to be a dream project that I can get finished. If we had the money I’d rather go for a custom-built home from the get-go although I do like older homes but they come with greater financial risk depending on age and how well it was taken care of.
What does this mean for you?
This means that if you want to renovate your house before selling you have to face living through it not just once but potentially twice if the new home you buy is in need of repair. The main goal of renovating is to make money. How long are you willing to live through renovating and possible renovations of your new home?
There are many questions that must be answered BEFORE you sell and BEFORE you buy a house.
LIVING THROUGH RENOVATIONS
When you’re already living in the dwelling that you will be renovating there are inconveniences that you and the family would have to endure. This might force speed on renovating which causes mistakes to happen. They might not fail for you but the new home owner. If your renovation does fall apart you will end up paying for it twice.
With contractors in and out of your house that turns into a mess zone with dusty air can become an environment you might not want to keep your family in. Some people move into their basements while the main level of the home is having renovations done. This is a great option but you’re still not free from the above inconveniences.
Opting to move into a temporary accommodation such as a hotel or short-term rental lease may be the ideal option. Keep these expenses in mind when deciding on your renovation budget. Don’t be in a mad rush to move in with family unless you’re prepared to deal with potential for arguments. It happens to the best of us although if rent is free or inexpensive that might be the best option for you.
HOME RENOVATIONS THAT ADD VALUE
Home improvements such as a garage addition, stamped concrete driveway, pool or even a metal roof might not bring you the return you were hoping for when you sell your house. What will sell your house is how big your property is and the size of your house.
You can easily add more money to your real estate investment by making the right moves when upgrading or renovating your home for sale. Not all renovating projects will give you a 100% return if any but there are certain ones that score bonus points with buyers.
Fix the obvious stuff if you really want to make an impact when the For Sale sign goes up.
What you want to avoid is overbuilding for your neighbourhood. Right now we have a friend who is struggling to sell a gorgeous home in an area with older homes. It’s clear the house is different because it’s still a young house and it looks out-of-place as it’s modern looking and bigger than every other home. This will be a home they will struggle to sell for that reason.
Now that we’ve seen what’s inside some of the homes on our street we know that the renovations we want for our home might be a bit much right now. We aim to keep it simple and save our money for renovating that appeals to us.
BEST TYPES OF RENOVATIONS
Enhance your home renovations by sticking to the main rooms that cause the most fuss for potential buyers. Almost every buyer gravitates to the kitchen and bathrooms. The flooring and tile work is another renovation that will not only bring the house to life but call on the buyers to bid.
The worst thing you can do is renovate a house to sell without keeping the renovations neutral or current. Any buyer will see that they will have to renovate again to update the house and honestly people don’t have the time nor money to do so. Don’t imagine living in the house dream about selling it and the green in your pocket.
Now that I’m a dad I’m struggling to get any renovating done around our house. Our son keeps me busy as does both my jobs. I could do some rush renovation to add more sex appeal to our house if we had to drop everything and sell it tomorrow.
Where the money is at:
You will almost always recoup your money for the above 3 renovations for the competitive housing market in your area. If you over-renovate you risk recouping less money because your house compared to Joe’s house across the street where he renovated for half the price and selling for a high price-tag.
Catch my drift? Don’t emotionally invest in your renovations if you plan to move.
This is one of the main reasons your neighbours scout through open houses. They want to see what you did to your home and how much they need to renovate their own to see similar return if not more. Be mindful of the home renovation products used as well.
There’s no point buying hardwood to renovate the floors if the entire neighbourhood is laminate or carpet. Yes, you may get a bit more money but odds are you’ll get what everyone else is getting and that’s a comparable of the houses with laminate or carpet. Then again the right buyer might pay the extra for the luxury of hardwood. Will you risk it? Choice is yours.
Keep your dream home renovations for your final home and keep your nose out of fancy renovation magazines unless you’re prepared with a healthy renovation budget. What looks nice might not fit what everyone else has.
Quality home renovations don’t come cheap and if you do get an unusually low renovation estimate I’d put the brakes on and investigate further. If you have a carpenter, plumber or electrician in the family call on them maybe they can help you out for a discounted price or you could help them in return for free renovating.
RENOVATIONS TO DITCH
If you don’t plan to stay in your house stay away from invisible renovations and those that are custom to your home that will narrow your selling potential.
All those little fixes you do around the house likely won’t matter much. I won’t walk into your house and say oh look there’s a new furnace. These are more home maintenance types of renovation projects you will see limited return if any.
Blowing more insulation into your attic, installing new plumbing, duct work or other bits and bobs will likely go undetected when you go to sell your home. Fix what everyone can see unless of course you must repair what you can’t.
Even then a massive landscaping project might sell a home but it won’t yield returns like other areas of the home. Spend your money wisely. I’m not saying to cover up repairs I’m simply suggesting that you to put your budget into areas that will make money for you.
Source: Canadian Budget Binder