Posted in: Home Application
Elbow Equity Expert!
I love to increase the value of my properties with elbow grease!
It can be as simple as paint and window dressings (aka lipstick and mascara), utilizing unfinished space, or reconfiguring the design. These can all make a huge difference in the feel, use and function & also increase your equity!
The other thing that I love to do with my own properties is buy 2nd hand kitchens from the wealthier parts of town, and U-Haul them to my little rental. Taking out the plywood cupboards & throwing up solid wood cupboards adds huge value! & as it’s a small rental & the kitchen came from a mansion, I had cupboards to do the kitchen, both bathrooms & the downstairs suite!
Even converting a garage or outbuilding into a studio can put your property above any others on the market, and you get to enjoy the space until you sell!
When my daughter was a teenager & we started getting into each others space, I looked at my detached garage full of storage & thought, “This is a waisted space!” So I started framing, insulating & drywalling. I found an old kitchen on craigs list & put in a little “bar”. Now I have a beautiful space that works great for garden parties, or as my studio. I even put in a bathroom & found a fabulous deal on a claw foot tub!
A total spa retreat from what was once a storage garage!
I offer my clients a Renovation and Resale Consultation which includes a Contractor List to help get the renovations done so you can enjoy your new home or to help you get ready to Sell. I find when you are doing renovations with the idea of selling, it is very important to do the right renovation and put the money in the project that will give you the best return for your dollar! A kitchen reno can give you 75% - 100% return on your investment dollar, yet a window replacement might only generate a 50% - 75% return. (although I wouldn’t recommend only doing the reno’s that generate a higher return, as regular maintenance on heating systems etc. won’t give great returns, they do help generate offers).
I have built numerous basement suites, which is a great way to unitize unfinished space as it gives value in the renovation and value in the cash flow that you can receive with rental income! A great way to help finance your 1st home & build equity for the purchase of your next....
The 1st thing you need is a house that can support a suite. Some would argue that you can put a suite in any home, & that maybe true, but it is a lot easier and cheaper if you get the right type and size of a house to start will. (You maybe able to put in a basement entrance, but it will save time & $$ to purchase a home that already has a basement entrance!).
There are several key factors to look for in a home if you are thinking of building a suite, even how the home is heated can be a factor, so having someone who’s done it themselves & knows what to look for and what to avoid advising you, would be a very smart decision!
There are city guidelines if you are making a legal suite. You will need to have your floor plan drawn up, all your permits in place and adhere to all safety codes & standards. I’ve gone through the process and it can be stressful and costly, but once you know the steps (& hoops to jump through) it can ensure you don’t have problems with neighbours, tenants or the city. Having a legal suite will also increase the value of your home for re-sale, as the income is guarenteed, which means the future purchasers can use that income to help finance their mortgage. Some banks may not consider rent as income, in an illegal suite as it can be shut down at any time.
Regardless of whether you make it legal or not, I would advise you use all the city standards & codes regarding fire barriers and hardwired smoke detectors. Get the permits, use the right materials and get it done right the 1st time! Believe me, it will save you thousands of dollars, time and stress!
If you are looking for a home that has a suite or suite potential, I would love to help. I have a value to renovation formula to determin if the cost of the renovation will be profitable. I also use this to determine the purchase price.
Knowing what the renovation cost will be going in will ensure you are making a profitable decision regarding your new home or an investment property.
Location, location, location. How often have we heard that this is the number 1 factor when purchasing a home.
And nothing could be truer.
You can change pretty much everything about the house, but you can’t change where the house is located.
Most important when purchasing, is to look at the neighbourhood. Schools, parks, recreation facilities, hospitals, shopping, transit all these should be considered as part of your purchasing decision as it has an impact on the value of your home, and on the resale value. t’s not just the young families who should be interested in the local schools, even if you don’t have kids, you’ll have a bigger market when your ready to sell, if you buy in the right neighbourhood.
If you are in a complex, there are better location within that complex (corner units may have more windows etc). Or the south facing backyard.
You maybe looking for up and coming neighbourhoods and need to confirm future development plans through the city and the OCP, official community plan.
Sometimes buying on the right side of the street is all it takes maximum re-sale value. Looking at surrounding developments and the location of services is also crucial as it shows the direction development is expanding.
There are several signs to indicate change within neighbourhoods, and it can be extremely profitable for both the home you live in and investment homes.
See you on the Flip Side!
If you are looking at doing a quick flip, you have to know the Market!
In an upward market you can invest more than you would in a downward market.
I’ll work in percentages. I expect to get at least 20% - 25% return on my flip.
Working backwards, if you expect to sell your reno’d house for $2M in a flat market, you can buy the house for $1.2M spend $250K fixing it up & use $50K for misc. (mortgage, insurance, utilities etc.) Total investment is $1.50M, which is 75% of the estimated resale value.
In an increasing market, you can invest a maximum of $1.6M, or 80% of the $2M
In a decreasing market, you can invest a maximum of only $1.3M, or 65% of the re-sale value.
After you determine what you can invest in a property, adjust the price accordingly.
Know your limit & play within it!
As you can see, it looks as if the profit is greater in a declining market, however you can never tell what the true market value is and we want to have a buffer incase it sells for less than the expected $2M. By adjusting your investment down to 65%, you increase your flexibility on the price and reduce your exposure to risk.
You can make money flipping in any market. If you see an area with recently reduced prices, this may indicate the market is softening, but this may also indicate a great buying opportunity.
I have developed a Property Score Card to help determine the hidden potential of homes which include specifics regarding the property, but also economic influences in the area. Using the score card along with my Profit Projector, we can determine what kind of lift you should have once the renovations are completed.
Of course I could give you a renovation and resale consultation which includes a list of local contractors.
I would also advise that you are flexible in what you do with the property. I’ve renovated for a flip, it didn’t sell, so we rented it out until we were ready to put it back on the market. If we were in a position where we had to sell, then our profit margin would have been lower. Having options with a property is always a good thing!
Categories: Home Application