Planning to buy a diamond-in-the-rough and make it your own? Whether you’re looking to flip your new house for a profit or make some upgrades to your long-term living space, it’s important to get in the right mindset, make a plan and stick to it.
For many first-time homebuyers, buying a fixer upper can be an attractive option because it enables them to potentially purchase a larger house in a better location. The caveat being: work needs to be done to transform it from drab to fab. And that costs time and money.
A new home is a big expense on its own and adding on renovations can stretch any budget to the limit, especially for first-time homebuyers. Before you make the move to buy and renovate, it’s a good idea to talk through your financing options with a professional.
In the meantime, this handy guide will walk you through some simple steps to follow as well as a few pitfalls to avoid as you transform your fixer upper into the home of your dreams.
DO: CHOOSE A GOOD LOCATION
You hear it from real estate agents all the time - the most important factor when buying a home is the location. If you’re buying a fixer-upper, you’ll want to make sure your investment in your home improvements is worthwhile. While there’s some debate whether ‘buying the worst home in the best neighbourhood’ is the way to go, if you can find a fixer-upper in a good area with manageable upgrades, it can prove to be a wise investment.
DON’T: BUY A HOUSE WITH BAD ‘BONES’
You should avoid buying a home with poor structural integrity because your renovations can become much more complex and likely reveal some costly surprises. You may remember the Tom Hanks film ‘The Money Pit’ in which Hanks buys a distressed mansion with the idea of restoring it to its past splendor. Unfortunately, each project he starts reveals more work that needs to be done, and before long the costs snowball out of control. To avoid this, it’s a good idea to get an inspection done on your property and avoid houses with any telltale signs of poor structural integrity, like sloping floors, cracks or leaks.
DO: KNOW WHEN TO CALL IN A PROFESSIONAL
It can save you a lot of money if you can do your own renovations, but it’s also important to know when it’s time to call in a pro. Easy fixes that most people might be able to handle are often things that are relatively easy, but just take time and effort. One of the easiest, which also provides a great return is patching walls and painting. It’s amazing how a fresh coat of paint will spruce up a home. But when it comes to trickier jobs like, electrical or plumbing, it’s best to leave it to the professionals who’ll ensure that everything is done safely according to code.
DON’T: SPEND MONEY WITHOUT A PROMISING RETURN
When choosing where to spend your money, consider what will add the most to the resale value of your home. Traditionally, updating kitchens and bathrooms gives you the best bang for your buck but they’re also the most expensive.
Some simpler projects that also give you a great return on your investment include repainting, landscaping and sprucing up the exterior of your home. Also think about projects that extend your living space, like transforming unused attic or basement space into an extra bedroom or adding a deck in the backyard.
If you’re wondering what other Canadian homeowners are doing: In the past year, outdoor projects led the way with 50% of the renovations, while the bathrooms accounted for 16%, followed by basements at 10%, according to a Homestars Reno Report 2020.
DO: SET A BUDGET AND TRY TO STICK TO IT
Before you start any home improvement project, you should first figure out how much you can afford to spend on renovations. Then price out your project. If you are having professional work done, it’s best to get three quotes to help ensure you’re getting a fair price. Also, vet your contractors, if possible, to see what others are saying about their work. Then, once you have all the costs mapped out, make sure you have a little contingency money set aside for any surprises. It’s also wise to account for delays as they’re often inevitable.
DON’T: CUT CORNERS WHEN IT COMES TO MATERIALS
Before you order materials, first and foremost, measure twice. It’s important to ensure you order the right amount to avoid extra cost and effort later. Also, avoid buying second-rate materials to save money. Although it may save you a marginal amount in the short term, they could likely end up being more costly if they break or require repairs or maintenance. When you pick up your materials, you should also inspect them for any defects. And it’s a good practice to order more materials than you need, just in case.
DO: DECIDE ON THE BEST WAY TO FINANCE YOUR RENOS
Finally, it’s time to figure out the best way to pay for the upgrades you’re planning. If you have the cash on-hand to cover the expenses, without digging into your emergency fund, that’s a great option.
If you are planning to buy then renovate, consider rolling your home improvement costs into your overall mortgage amount. This is often called a Purchase Plus Improvements Mortgage, and can make these big-ticket expenses more manageable by spreading them out over time.
If you’ve already purchased your home, a Home Equity Line of Credit might be for you. It allows you to borrow against the equity in your home. This is an especially good option if you’re planning on ‘flipping’ your home soon, making it easier to pay back your loan quickly.
When you’re tackling major renovations, it can be a good idea to talk with a professional, who can walk you through your financing options and find the best possible solution for your individual circumstances.