Many are finding it difficult to find that “perfect” home in Guelph right now with prices soaring in this competitive market. The resale market is tough right now, there is no disputing that. The houses that have the floorpan, upgrades, and big lots are the homes that everybody is looking for. Seller’s are holding back offers for a week and then all hell breaks loose as multiple offers fly in all at once on offer day. The result: these sought after homes are selling at record breaking prices per square foot, and to stay competitive aside from price, buyer’s are also coming in firm (no conditions in their offer). Ultimately, buyer’s are paying a significantly higher premium than we are used to seeing to lock down these updated homes in times of short supply.
With the rise of HGTV viewership over the past decade, especially with respect to renovation oriented shows, buyer’s comfort levels are ever-increasing when it comes to tackling large renovation projects. There are still deals to be had in this market, but they require creativity and careful planning.
Now that you’ve decided an already renovated house is off of the table and you have committed to a fixer-upper, where do you begin? First of all, give your realtor a call and let them know you are ready to start seeing some properties in need of some TLC. The best deals to be had will generally be the roughest looking properties which have been sitting on the market for the longest. There are deals out there – if you know where to look. Estate sales, for example, can prove to be a great find from time to time. Not always in this current market, but with proper eyes on the ground working for you – this is a real possibility. Although not the theme of this article, it is something I thought worth mentioning here.
So, after seeing a few houses, you and your realtor have narrowed down the options to one property in particular. As the wheels start turning in your head, it dawns on you, does it make more sense to gut the existing house and renovate it or tear it down and build new?
Below we will discuss some of the considerations related to each scenario:
Money is always one of the most important concerns when evaluating real estate projects. Don’t forget, the main reason you chose a fixer-upper was due the high cost of already-renovated homes, so don’t lose sight of why you took on this project in the first place. The best first move is to hire a certified home inspector to conduct a proper inspection of the home. I have had great experiences working with Mike Heeley at Heeley Home Inspections, as well as Jeff Gleva from A Buyer’s Choice Home Inspections (approx. $500/inspection). Once you know what you’re working with structurally, mechanically, electrically, etc., cost comparisons will become more relevant. Building a house from scratch will surely be a more expensive project overall, however, everything will be brand new (i.e. no upcoming repairs, energy efficient, etc.) and the property value will increase by more than simply renovating an existing house. If you find yourself leaning towards a tear down, be aware that there will be an additional demolition fee on top of the cost of building a new house. Your realtor can advise you on the cost of vacant land in the area and discount demolition costs to arrive at an opinion of value for the property as a tear down. Demolition costs will vary depending on the size of the house and it’s location. You will incur a cost for having the house physically demolished, as well as tipping fees for removal of the rubble to a landfill. Tipping fees are different from city to city and will also depend on distance to the nearest landfill. On average, expect around $20,000 to demolish and remove an existing house from it’s lot.
Be aware of the timelines attached to each scenario, especially if you need to be moved in by a specific date. Again, timelines will greatly rely upon property specific details such as City approvals, engineer’s drawings, materials ordering, and the size of your contractor’s crew. Generally speaking, expect 2-4 months for a full renovation and 4-12 months for a tear down and rebuild. Houses in Heritage Conservation Districts will be required to follow stricter guidelines, so expect additional delays. In Guelph, homes with the Heritage designation can be found in abundance within the downtown core between College Avenue and Wellington Road. Gordon Street, which runs perpendicularly between College and Wellington is well known for it’s red brick, heritage homes that are an investors haven for both flipping and student rentals due to it’s close proximity to the University of Guelph and downtown.
Next, an important consideration will be what you really want from this future dream home. Is the existing house large enough to suit your needs? Does the existing layout compliment your style of living? Are the bones of the house good and worth salvaging? Answering all of these questions yourself will help guide you in the right direction. If the house is an appropriate size and has good bones, it is likely worth renovating. Load bearing walls can easily be removed to accomplish an open concept design when replaced with a proper steel beam, as per an engineer’s recommendation. Likewise, rooms can be gutted to the studs and remodelled to fit your tastes.
On the other hand, if the house is a bit small to begin with and has significant structural concerns, you will be looking at an extension, full gut-job, and renovations inside and out. At this point, the renovation cost may equal or exceed that of a tear down and rebuild, in which case it would no longer make financial sense to renovate.
Hire Them and Build it
Once you’ve worked out which approach makes the most sense based on the costs, timelines, and overall condition of the property at stake, it’s time to hire a professional contractor and get started! Always make sure to meet with several contractors for a variety of quotes. Costs are often reflected by the quality of work, but don’t be fooled, the most expensive quote doesn’t always translate into the best quality of work. Certain contractor’s quotes can be inflated above average just because they are currently very busy. Similar to the real estate industry, I would suggest that referrals are the best way to select an appropriate contractor. Talk to your friends, hear about their experiences, both good and bad, and see their finished worked for yourself. With a contractor lined up, you are ready to go! Always remember to set aside a “contingency fund,” as unforeseen costs will arise over and above your renovation budget. Ultimately, through careful planning and a lot of patience, you should end up with the house of your dreams for less than if it was already existing. You always pay a premium over and above the cost of the renovation for having someone else take the risk and endure the renovation process. So as I like to say, “Why let someone else benefit from adding the value for you, when you can add it yourself?”