Our studs-to-shingles primer on buying a house-in-progress.
You know those glorious words “turn-key condition”—as in, here’s a snazzy house with no repairs needed, and all you have to do is turn the key and sort out your Netflix? Forget those words. It may be time to purchase your own place, but unless you make (or your granddaddy made) obscene amounts of money, you won’t be looking at pristine abodes. In fact, you probably won’t even be looking at ordinary abodes, at least not while the average price for a detached home in the 416 hovers around $784,000.
Step away from the Craigslist rental listings: You can still buy a house in this town for much less than that. But to get one, you’re very likely going to have to get your hands dirty. And then you’ll almost definitely need to pay people a bunch more cash to get their hands dirty. Yes, there is something terrifying about committing to a fixer-upper—all those nights of navigating missing floors, Hibachi grills, and corners of the house that were in no way meant to be used as a bathroom. But we (or, more accurately, our expert panel) can help ease 10 of the most common reno concerns. Take a deep breath, you budding Mike Holmes, and read on.
1. Why should I even buy this beat-up old house?
No matter how many times someone says the word “bubble,” home prices in Toronto stay lodged in the stratosphere—the average home went up more than five per cent in value in the past year alone. If you aren’t independently wealthy or a recent lottery winner, chances are very good that you’re going to have to make some compromises in order to land a place of your own. And for many first-time buyers, that means taking on some mild to serious renovations.
Location is the number one reason our experts and renovation survivors give for considering a fixer-upper. “We bought the worst house on a good street, as they say,” says Robin Marwick, who went in on a former boarding house in the Beaches eight years ago with her cousin Jen. “With prices the way they were, beat-up was the only way to go.” It took them a year and a half to make it livable, meaning turning three dark, grotty apartments into two clean spaces with one working kitchen and one working bathroom between them. In the past six years, they’ve done just about everything else. “We gutted the place to the studs, took out the knob-and-tube and the lead pipes, had people put in spray-foam insulation, upgraded the wiring, and put in copper pipes, all new drywall, and a lot of new woodwork,” says Marwick. Now the two are happily enjoying their lovely duplex and ever-appreciating neighbourhood—their costs were about $170,000, but since home prices in the Beaches have risen about 50 per cent in the past five years, the economics are totally solid.
“You’ve got built-in equity if the repairs can be done affordably,” says lawyer Jeffrey McLaughlin. Contractor Victor Nichols points out that overseeing the renovations yourself means knowing just how carefully they were done. “With most houses, even if they’re bought new, you don’t know exactly what you’re getting,” he says, adding that his sister decided to redo her floors and bathroom, which she felt were outdated even though her home was just seven years old.
2. Is there such a thing as a “HELL, NO” reno?
That comes down to cold hard cash. It’s not worth it if the original price plus the cost of renovations adds up to more than the house will be worth when you’re finished. (Your realtor can help you figure this out by looking at the recent sales of fancy, fixed-up homes in the neighbourhood.) And if you’re planning on financing your purchase with a mortgage, that limit is up to the bank, not you. “Any lender will make sure the home is marketable to the next buyer, not just yourself,” says Farhaneh Haque, director of mortgage advice at TD Canada Trust. You might be certain that you’ll live here for 20 years and need three Jacuzzi tubs right now, but the bank wants the house to sell profitably if you move out in eight months.
So what are the most expensive renovations? Everyone knows that a house should have “good bones,” making structural damage a major concern: Watch out for an uneven or cracked foundation, or a house that’s settling more on one side than the other. Leaky roofs can be pricey, but they’re not unusual. Mould can be a sign of a former grow-op and is impossible to know the extent of until walls get ripped down. “We do have certain types of property damage we’re not able to lend against, and mould brings up a lot of health issues,” says Haque. “From the lens of the lender, we’re protecting the buyer.” Asbestos, vermiculite (an insulation found to be carcinogenic), and old wiring are also big concerns, says agent Anna Oliver.
If your starry eyes keep seeing past the problems, get a contractor or home inspector to estimate the costs of fixing up the home (and how long it could take). Then crunch the numbers with your lender. This unromantic exercise will help you decide whether it’s time to dive in—or move on.
What’s the deal with knob-and-tube wiring?
Outdated electrical systems can eat up a lot of your time and money. They’re also very common: Either knob-and-tube wiring or equally old-school aluminum wiring are still found in about half of Toronto’s un-renovated houses built before the 1950s. “The wiring heats up a lot, so you don’t want to put too much load on it,” says contractor Victor Nichols—and that’s a problem, since people use a lot more electricity now than when these houses were first constructed. “These are issues insurance companies care about.”
Some insurers flat-out won’t consider homes with old wiring. Others will give buyers a timeframe (usually 30 to 90 days) during which they must redo all of a home’s electrical systems and pass an inspection by the Electrical Safety Authority. If you’re making less than a 20 per cent down payment, it might be the Canada Mortgage and Housing Corporation that gets on your case, so be prepared for wiring to be the first thing you tackle in your reno.
Tales from the fixer-upper trenches: ”We had to replace all the knob-and-tube wiring in our house because the CMHC insisted on it, even though we managed to find a home insurer that was willing to take us on. It was a $10,000-plus job that we certainly weren’t keen on doing immediately and from which we got absolutely zero satisfaction, unlike, say, a $30 paint job in the living room.”—Marco Ursi, 30, Corso Italia
3. How do I find a contractor?
To clarify: The contractor is probably not the person who’s actually going to do all the work. His or her job is to contract out to other tradespeople, hiring the right experts to get things done well. “Any guy who tells you he knows everything is full of shit,” says Nichols. That said, it’s more cost-effective if your contractor can do one of the jobs you need, since he (or she) makes a profit off of every other worker hired. Nichols has been a carpenter for 24 years, and does all of the woodworking himself. He became a contractor 15 years ago because his clients kept asking for referrals to reliable electricians and plumbers.
Word of mouth is the usual way to start, followed by checking out the ratings on a site like Homestars.com, which is basically like Yelp for the trades. Next, do a few in-person interviews to make sure the communication channels flow nicely. And then get every single thing in writing: a contract that details the roles and responsibilities of the parties, lists deadlines, and sets out dispute-resolution procedures. Have a lawyer review the renovation contract before any paperwork is signed, and make sure your contractor is insured and bondable, too.
“In general, be wary of contractors who ask for all or most of the reno money up front,” says McLaughlin. “It’s much better to pay for work on a progress basis, which will at least reduce your financial exposure if the contractor starts missing deadlines.” He suggests a contract that could even provide financial incentives for timely completion—and perhaps penalties for work that isn’t done when it should be.
Tales from the fixer-upper trenches: “We were really concerned about the quality of work and reliability of any potential contractor. We turned to RenoMark [an online database of licensed contractors] to look at websites, then visited the Fall Home Show so we could meet some of them in person. We ended up with a very meticulous designer who we knew wouldn’t recommend a contractor unless he or she was 100 per cent reliable.”—Jennifer Potvin, 42, Leslieville
4. What can I DIY?
You tell us. Do you enjoy getting messy and problem-solving, or do you freak out when the first drop of paint hits your pants? Be honest about your comfort level and expertise, since the whole point is to end up with a solid, attractive home. “Legally, you can do anything that doesn’t require a permit,” says inspector Bob Papadopoulos. But both he and Nichols advise against attempting anything structural, electrical, or involving plumbing, unless you really, really, reallyknow what you’re doing.
The average Jill can usually handle cosmetic stuff—painting and drywalling for sure, probably new flooring, and even tiling, if there isn’t too much cutting to be done. “We’ve painted, wired lighting, built cabinets, installed trim, tiled a backsplash, repaired walls, ran dryer ventilation, and are embarking on a landscaping project by ourselves,” says Claudia Gale, who bought a two-bedroom semi in the Junction with her boyfriend last year. “It has taken us a lot longer than it would have taken a professional, but we are super proud of what we’ve accomplished on our own.”
5. How much will it cost to make the house livable?
That depends, of course, on how big of a house it is and how bad its guts are. We asked Papadopoulos and Nichols for some ballpark figures:
› Roof: $5,000–$10,000.
› High-efficiency furnace and boiler: $5,000–$10,000.
› Copper piping, if the watermain leading into the house is made of lead: $1,500–$2,000.
› Galvanized steel piping, if there are lead pipes inside the house: $1,500–$3,000 per floor.
› Replacing knob-and-tube wiring: $1,000–$2,000 per room.
› Replacing knob-and-tube wiring: $5,000–$10,000.
› Brand-new washroom: $3,300.
› Fancy sloping roof with a skylight: $11,000.
› Furnace and A/C: $3,500 and up.
› Basic kitchen, from studs to completion (including appliances): $18,000–$25,000.
Tales from the fixer-upper trenches: ”We wanted to save our old woodwork, but it wasn’t worth it. We had a slow, temperamental genius of a carpenter who made all new door and window frames and did a gorgeous job—good carpentry is definitely worth the money. Energy efficiency is also worth spending on, especially if you’re in it for the long haul. If it’s an old house, there’s only so much you can do, but an energy audit can help you figure out where to spend money on upgrades.”—Robin Marwick, 39, The Beaches
6. How much will it cost to make the house pretty?
Well, the sky’s the limit. But some splurges will be worth it when it’s time to sell, while others won’t make anyone happy but you. “Kitchens and bathrooms always get a return,” says Oliver, who says added storage space, kitchen islands, and quality wood cabinets tend to increase their value. “I have a friend who spent lots of money on a laundry room, but anything personalized doesn’t really pay off.”
Oliver advises her clients to stick with classic looks, especially if they plan on selling relatively soon: A few years ago, everyone went crazy over built-in shelving to show off their electronic devices, but she finds they already appear dated (and, given how fast gadgets change, will probably end up being a pain). Good hardwood floors also enhance a home’s overall look and value, though if you’ve got kids or pets, the real stuff might not be worth it right now. Consider carpet or engineered hardwood for the time being and upgrade later.
“Decide early on what’s non-negotiable—you’re going to have to economize elsewhere,” says Jennifer Potvin, who bought in Leslieville five years ago and redid her entire house. She was adamant about installing wide-plank oak floors and quartz countertops in the kitchen, as well as opening up the back wall of her house with a pair of French doors. The tradeoff? Saving $3,000 by having just one of the doors open. “I think in some ways we regret not opening both,” she says. “But we recognize that it was a compromise we needed to make with a budget that was rapidly escalating.”
7. What kind of paperwork do I need?
First, make your offer to purchase conditional on a home inspection. We know, you’ve lost two bidding wars and a fussy offer could mean losing another one, but that’s better than getting stuck with a money pit. (Yes, it is.) Once that land title is yours, so are all of a house’s problems. “No court is going to award you damages if you could have reasonably discovered the problem,” says McLaughlin. The only exception is if the seller is purposely hiding an issue that should have been disclosed, but that’s hard to prove. “Never waive the home-inspection clause and don’t go cheap on your inspector.”
Sometimes, buyers make their offer to purchase conditional on certain problems being remedied before closing day. If that’s the case, make sure your agent writes into the offer that a final inspection is mandatory, and that if the issue isn’t fixed, the deal becomes null and you get your deposit back. McLaughlin also suggests title insurance, which costs $350–$375 for houses up to $500,000—it’s optional, but it can protect buyers if defects are discovered later on and the purchaser ends up suffering a loss. Title insurance can also cover the costs if the vendor was ignoring city orders to get certain work done.
Oh, yes, the city—you’ll also need permits for any serious work you want to do, and getting them can take a while. (Permits start at $105, with incremental costs added for each job to be done). It’s best to shop around for a contractor at least a season before the renovation is going to happen (the good contractors get booked up fast, anyway). That way you can line up permits in advance, then get started on the work as soon as the snow melts.
A partial list of what needs a permit
› Any additions to or demolitions of a building.
› Any structural alterations.
› A new garage, balcony, or a deck more than 24″ above ground.
› New openings for (or changes to) doors and windows.
› Basement excavation and basement entrance.
› New or modified chimneys and fireplaces.
› New or modified heating, plumbing, and air-conditioning systems.
A partial list of what doesn’t need a permit
› Re-insulating or adding new insulation.
› Re-roofing (unless there’s structural work or a bunch of new material involved).
› Window or door replacement (as long as the opening isn’t enlarged).
› Furnace or boiler replacements, add-on cooling systems, gas fireplaces, and hot-water tanks.
› Wooden decks and skylights (with some stipulations).
› Finishing basements (unless you’re fussing with structural work or plumbing, or creating a new dwelling unit).
8. Can I fold the cost of the renovation into my mortgage?
Sort of. Lenders have what’s called a “purchase and improvement program” that’s based on what the house will be worth when everything’s done. Your post-reno pad must also be comparable in value to similar homes in the neighbourhood. “The borrower needs to source estimates and quotes from a professional contractor, which we validate through an appraiser,” says Haque. After being approved, you still only get the purchase cost of the home up front—the bank doesn’t release the rest of the money until after the appraiser ensures that the work has been done properly.
If the mortgage route doesn’t work, there are other options. “A Home Equity Line of Credit is golden,” says Catherine Pembroke, who’s constantly improving her Little Italy home. HELOCs are available at most banks to people who have at least 20 per cent equity, since the amount of the loan is based on the market value of the house minus what you still owe the bank. “I was able to use a portion of the loan and lock in the amount used, which is helpful if you get worried about making payments on time or rising interest rates,” Pembroke adds. “Then you still have the remaining credit available if needed.” The interest rate on a HELOC is usually lower than on credit cards, but remember: Like a mortgage, it’s a loan against your house. If you don’t pay it back, your lender can sell your home to recoup its money.
9. Can I live in it during the work?
Again, that depends your personal temperament—for some people, Hibachi cooking is an adventure, while others can’t survive without access to two toilets. A bathroom project might only last two weeks, but a kitchen could take two months (or more), and a full gut job could take half a year. (When discussing timeframes with your contractor, remember that you get a choice of two when it comes to fast, cheap, and good. You’re not going to get all three.) Tarps can separate living quarters from the noise and dust, but if you’re pregnant or have little kids running around, talk to your contractor about fumes and other health risks
Tales from the fixer-upper trenches: ”As soon as our hardwood floors were done, we moved in. We didn’t have a kitchen or laundry or even lights in certain rooms, but we lived there during the reno. We hoped it would motivate us to finish sooner, and also guide some of our decisions since we could already see how we were using the space. I think as long as you have a safe and comfortable place to sleep and clean up in the morning, it’s doable.”—Claudia Gale, 30, the Junction
10. How long will it take?
Longer than you think. Every single time.
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