Toronto real estate prices have reached an all-time high in 2016, meaning that many homeowners simply can no longer afford to move. According to the Toronto Real Estate Board, September saw the average selling price for a single-family detached home reaching $952,983!
This seller’s market is making home renovations increasingly popular, as it can be much more economical to stay where you are and update your current home. First-time home buyers are also trying to get into the market by buying lower priced fixer-uppers. On the flip side, homeowners wanting to move are given the added incentive to renovate before listing their homes to try to increase their property value before selling.
At a time like this, it is critical for homeowners to make the right choice on whether to renovate or relocate. There is a lot of money at stake and making the wrong decision for your family can be devastating. We have put together the 6 most common FAQ’s about home renovations and real estate value and asked some local experts.
Starting out as a real estate investor in 1985, Al Sinclair quickly became one of the most successful investors and landlords in Toronto. Fully licensed in real estate by 1987, Al became the agent of choice for many other investors because of his vast experience with multi-units and house flips. Al is now the host of CP24’s “Hot Property” where he serves as the show’s real estate expert.
Lindsay and her sister Melanie Wright founded The Wright Sisters Team in Toronto in 1999. They have been recognized as the number one real estate team in Toronto for Remax since 2007 and continue to be recognized for their outstanding sales achievement.
Since purchasing his first rental property with his wife in 2003, Jared has been managing all aspects of a dynamic and still-growing real estate portfolio. With LLR, the Hopes are able to share their practical perspective, processes, and business systems to help their clients have a successful real estate investment experience.
Richard leads the Torontoism Team at Sotheby’s International Realty Canada. He is designated as an ABR, e-PRO and a Certified International Property Specialist (CIPS). Speaker and writer, Richard was named one of the “Top 100 Most Influential people in Real Estate for 2013” by Inman News.
When it comes to the decision of whether to renovate or relocate, there is a simple rule of thumb according to Al Sinclair: “If the location is ideal, you stay and remodel. It is so much cheaper than moving. Moving costs of real estate commission and land transfer tax on purchase, as well as actual mover costs, could afford you an amazing renovation.”
Richard Silver adds, “Have a discussion with a good architect and see if your present house can fit all your needs with a renovation. It is also a good idea to have an honest discussion with your partner about how your relationship can weather each choice and which will be the easiest and best.”
Lindsay Wright opines, “In this market, things are trading for big prices regardless of whether it is a fixer upper or move in ready. A fixer upper won’t always be the better opportunity for a buyer from a value standpoint, especially if the buyer is relying on contractors to do the updates. Many will lean towards buying a home that has been freshly redone already – it is easier for them to get the needed financing when done this way.”
“This really all depends on how much experience a person has with renovations or who they have on their team that can manage such a project,” Jared Hope adds. “You can buy a house and do all the renovations, and by the time you move into the house you could have many thousands of dollars in equity. The risk with this approach is if you buy the house and then the market starts to trend downwards, by the time you are done the renovations your spread is less or even in some cases gone. However, buying a fixer upper is a good way to get what you want in a home.”
He continues, “Buying a house already done is a good, easy way to move. You will usually pay market dollar for the house, but it’s an easy transaction. For people with a low stress tolerance or lack of renovation or building experience, this may be the best way to go.”
Meanwhile, Al Sinclair provides an interesting insight regarding one exception to the rule: “The Courcelette school district. Houses are so expensive in this pocket that buyers have to settle for fixer uppers just to get in the area. However, every couple is different. Power couples working 10 to 12 hours a day want it all and want it now. Couples who consider themselves taste-worthy like to put their own stamp on things.”
As a general rule, Al states that he “wouldn’t suggest to renovate but a mini facelift always increases selling price. New kitchen cupboard frontings, painting, carpet cleaning or replacing. Hard wood floors freshened. Yard clean up and planting.”
Richard adds, “Do not renovate but stage the house. For every dollar you add in staging, expect three dollars back.”
“The worst home improvement is anything that is a huge display of personal taste, or anything that caters to the current owner’s personal needs,” Al Sinclair indicates. “Tearing out a third bedroom to combine it with another bedroom, essentially creating a two bedroom home, would limit your buyer market. And a pool: You will never get back in selling price what the pool cost you.”
Richard Silver agrees: “Swimming pools are not everyone’s taste as they are a lot of work.”
“Base boards, doors and trim,” Jared adds. “I see lots of people put in very expensive base boards, doors and trim, and for the most part most people do not even notice them.”
Both Al and Richard agree that finished basements offer a major bonus on your investment. “Biggest bang for your buck as far as getting a lot more in selling price than what you put in,” Al explains. “#2 would be updated kitchen. #3 would be bathrooms.”
Jared believes that, “Kitchens and bathrooms are still the most important thing in renovating. Spend the time here! Granite counter tops, tiled back splashes, new appliances, etc. If your house has an old roof, you may want to consider replacing this too.”
Meanwhile, Lindsay shares that, “Paint is the number one along with new light fixtures.”
Al lists a number of options: “The cheapest way to finance this would be a line of credit, as it has the lowest interest and flexibility in payment. The second option I would choose is to increase the first mortgage. If that was not possible – a second mortgage, but then you are hit with a higher interest rate. I advise that you have a budget, arrange a line of credit and stick to it.”
Jared adds, “Most banks will have a product to help pay for the renovation. This is sometimes referred to as a mortgage plus option. It is best to consult with your bank.”
Lindsay and Richard agree that the best option is taking the equity out of your current home. “It is best to use the equity that is already there, getting a line of credit from your bank, or refinancing your existing mortgage,” Richard concludes.
We at Norseman Construction & Development hope that these expert insights have given you ample food for thought when it comes to your impending “relocate vs. renovate” decision. If you indeed decide to renovate, rest assured that our expert team is here for you for detailed consultations and custom solutions.