Real Estate and Mortgage

Would You Buy A Home Needing Renovations?

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First of all, every house needs renovations, whether it’s a new build, flipped house or around for years.

While the real estate market in Canada is Super Hot are you willing to pay for an overpriced home that needs renovations?

Financing a fixer-upper home seems ideal, but know the money facts before you jump into renovations.

When I moved to Canada in 2007, I have to be honest and say that home prices were low compared to the UK.

We even joked that we could buy two or three homes in the city she was brought up in.

You get a basement that I had never seen before, so I thought it was pretty cool when I visited Mrs. CBB’s house.

Unfortunately, she sold the house because it was too big to maintain and work full-time.

It was a new home with an unfinished basement, so it needed some renovations.

You could buy a house for $75,000 and get someone else to pay the mortgage.

Im 2005, Mrs. CBB bought the house for $265,000 with an $80,000 downpayment leaving a $185,000 mortgage.

That same house in 2022 is selling for nearly two million dollars which is crazy even thinking about it.

We said that she should have kept the house and paid off her ex-fiance several times.

Although looking back is nice, there’s not much you can do but learn from missed opportunities.

Today, I want to discuss whether buying a house that needs renovations is a smart financial move.

However, does a flipped house or new build sound financially savvy even though there might be bones in the closet?

Renovations being completed in a house by an older man.
Renovations being completed in a house

Room Rental vs. House Renovations

She decided to rent a partially finished basement room in a 1970s back split.

Although she considered purchasing an older home, they all needed house renovations.

Alternatively, buying a condo made her feel like she was living in an apartment again.

Her idea was to be debt-free, including her mortgage, as fast as possible, so she didn’t have the worries, so many people had.

That was a pretty big goal to set, but you have no idea how frugal Mrs. CBB can be.

The problem is that homes all come with problems that cost money, and it never ends.

One day, it’s the toilet backed up, the roof is leaking, the stove quits working, etc.

Having a home maintenance budget and a plan is essential to saving money to pay for emergencies or a yearly renovation project.

Being house poor was scary for her, so she decided to rent instead to figure out her life.

Living The Room Rental Life

It wasn’t a bedroom but what one might consider a second living room in the basement.

I don’t think the basement room was legal, but the owner was a single mom of two and needed the money.

We took a big risk, especially if there was a fire and we couldn’t get out. Don’t be like us.

Sadly we did not have tenants’ insurance which could have ended badly if there was a fire, break-in or damage.

Need House Renovations? Call Mr.CBB

When I was visiting Canada from the UK, I did a few house renovations for free because I didn’t have to pay extra rent,

If I stayed for four months, I would shovel and complete simple repairs, resulting in house renovations.

First on the agenda was to put a door on our bedroom for privacy and protect our belongings.

We picked up a used door at Habitat For Humanity to replace the sliding accordion-type privacy door.

Yes, we paid for the door, but it wasn’t much, and I had no intentions of asking her for $50.

I added a lock, and the owner had a key if she needed it as the electrical box was on the wall.

Mrs. CBB chose to rent a room because she wasn’t ready to buy another home, plus she was working non-stop.

Over the years, there were no less than 400 hours of overtime which meant work, sleep, eat, repeat.

Her fun was running on the treadmill, grocery shopping, sleeping and playing sports in the summer.

It was the perfect life for her, plus she was increasing her savings for a downpayment on her next home.

And then, I came along to ruin it all, ha, ha.

Not really, but living in that basement room was a bit stuffy for both of us.

It was either sweltering heat in the summer or freezing in the winter.

Before I moved in, the agreed rent was $400 a month, then $500 when I moved in permanently,

The owner then asked me to start doing more renovations around the house as if I was her husband.

Finally, she increased the room rental to $600, and then we began our house hunting search.

I feel as if she wasn’t happy that I wasn’t going to renovate her entire house for free.

We were already married and ready to get the heck out of hell by that time.

Cheap House Renovations

I’m not the type of guy that argues with people, so I shut my mouth and agreed to help her.

This bought us time to look for a new house with our realtor, which took months.

For example, I ripped out the basement bathroom and built a new one with the budget she gave me.

There’s not much you can do with a few hundred dollars, but I made it work. Scary but true.

I’ll be honest and say whoever buys that house will probably have to rip it out and start over.

It’s not because I didn’t know how to do home renovations but because it was all cheap material.

The quality was as basic as it comes, and I’m not a plumber or tile guy, but I did it for her.

We also needed time, so I could find a job which ultimately sent me back to school to learn something new.

While house hunting, it occurred to us that we’d rather have house renovations over someone’s shady work.

Paying for a house that looks fancy but is just hiding problems didn’t interest us.

New Kitchen Renovations modern looking.
New Kitchen Renovations

Home Buying Is Stressful

Due to a career change, our friends are currently looking for a home close to Windsor, Ontario.

Although he hasn’t been offered the job yet, they wanted to see what was in the real estate market.

Sadly, like anyone looking to purchase a home, the prices are astronomical and unattainable for many people.

I’ve heard of a few people I know looking to buy, but without the large downpayment, they anticipated.

Almost everyone who owns a detached home is a millionaire on paper or close to it.

We can’t believe what’s happening in the Ontario real estate market and are glad we weren’t looking to buy.

It doesn’t matter if you live in a shed, as it would still cost you a million dollars just for the property.

Would You Buy A House In 2022?

One of my readers sent me an email wanting to know if I would purchase a house that needs renovations?

I was honest and told him there was no way I’d even consider buying a house right now.

However, if he chose to purchase an overpriced home, the choice was his.

I wouldn’t suggest taking out loans for renovations or rolling it into the mortgage, but that’s my opinion.

Confidently I couldn’t offer him the insight to even win a house bid. You’d have to be lucky or pay near double over asking price.

Waiting To Renovate

Even if you find a home that needs renovations, can they wait, or are they needed before you move in?

I see homebuyers who renovate the house from top to bottom to make it livable.

That approach never bothered us, as it was more important to pay off our mortgage fast.

Nothing in our house was a major problem that we couldn’t fix, so we’ve semi-waited to renovate.

We’ve been in our house since 2009, and I’ve completed a few easy house renovations.

Replacing all the outlets and floor vents in our home and the bathroom exhaust fans.

Alongside the renovations, I completed a house makeover in some areas, such as the sunroom.

The entire sunroom will be coming down one day, but for the time being, I made it functional.

I wanted to tackle what was needed first and then tackle house renovations that would increase the home’s value.

Renovations I’ve Tackled Since 2009

Full Gut Renovations After A House Purchase
Full Gut Renovations After A House Purchase

Renovation costs vary from contractor to contractor, city to city, so it’s always good to get a few estimates.

  • Full Bathroom Gut Renovations Average cost bathroom estimates (upstairs $15,000, ensuite $30,000)
  • Basement Renovations but only removing the old mice-infested insulation and replacing it.
  • Although I’m planning a home addition, I repaired our Three Seasons Sunroom’s new tile and screen door. The sunroom remodel was quoted for $25,000, but I’ll be doing it independently.
  • Staircase renovation from oak to dark hardwood sanded the railings and spindles. The spindles are white, and the railing was stained dark wood and sealed.
  • New Wood Fence quoted $12,000, paid $1000, as did all the neighbours, and we did the work.
  • I built a new deck a year after moving in, but I’ll do a full gut and rebuild soon as it’s needed.
  • Remodelled the entire front gardens, new sod, paved walkway, rock steps and retaining wall. (The neighbours called me Fred Flintstone because I didn’t rent any machinery to move the rocks.)
  • Painted the garage door
  • Installed a new front door with a pretty iron insert
  • Replaced all new door and closet hardware in the house
  • We purchased a $10,000 stove for $1000 Dacor brand
  • I found a store model stainless Thermador Stove Extractor for $750 regular $2500
  • Installed a camera doorbell and cameras around the home
  • Replaced all new vents outside the home and took all the fuzz and nests out. (ugh)
  • Put new sod in the back garden and create flower beds, shrubs, and solar hanging lights along the fence.
  • Installed custom-made blinds for the entire house and our sunroom.

I’m certain there are lots more, but I’m getting there slowly but surely as we plan to stay here for good.

With prices the way they are, the financial burn is real, and if interest rates go up, there will be big problems.

We’re already plagued with increased utility bills, petrol and groceries, not to mention renovation materials.

House Renovations Done Right Cost Big Bucks

New Bathroom renovations with glass doors. Modern looking bathroom renovation.
New Bathroom renovations with glass doors.

A couple we know bought a small bungalow for $900,000 last year at the beginning of the war of the houses.

They own a business, have three small children and are struggling financially.

The home came with no back fence, and of course, they bought a dog but didn’t consider that carefully.

When looking to buy real estate, it’s a smart idea to create a house list of wants vs. needs.

See if you can get possible estimates for the costs, such as a wood fence.

Although it’s a rough estimate, unless you know the property size, at least you’ll have an idea of costs.

Needless to say, with the photo he sent me of his make-shift fence, I wasn’t sure to laugh or cry.

He made the fence out of wood skids which their dog could easily jump over if given the opportunity.

When I see him next, I’ll ask him to get the holes dug and offer to help him build the fence for free.

House That Needs Renovations Needs Considerations

New Deck Renovations At The Back Of A Home
New Deck Renovations At The Back Of A Home

Decide to buy a house that either needs renovations or not based on real numbers.

Don’t just look at how much the mortgage and property taxes or you’re just asking for disaster.

  • Create A Mock Budget that includes a mortgage payment.
  • List basic house renovations you need and see if you can get a rough estimate.
  • Don’t be afraid to rent an apartment if you’re not ready to buy a house
  • Be very careful with flipped houses
  • Try not to skip the home inspection if you don’t know what you’re looking for. This condition may mean you don’t win a bid. Most buyers today are doing without the inspection to buy a home.
  • Consider a condo, townhome or semi-detached as a first home instead of marching into a detached.
  • Don’t let others sway your decision because they won’t be paying the bills.
  • Ask lots of questions, whether it be to local tradesmen and women, about home renovation costs and scenarios, house insurance, property taxes, renovation paperwork, city permits for renovations and the type of materials used.
  • If you are skipping the inspection, see if you can bring someone to look at the house with you, especially if they have a keen eye for spotting problems.
  • Your first home may need renovations, but that’s ok; you can work on them as you go along.
  • Don’t try to impress anyone by buying a home out of your financial league, even if the bank says you can afford it.

This is the reality for many home buyers today who take the maximum amount the bank offers for a mortgage with as little as 5% down.

On top of that, it’s a struggle even to save 20% down to avoid CMHC fees for a million-dollar home.

No stress at all, right? If buying a house is stressful, perhaps you’re not ready so take your time.

The mindset about wasting money on rent may be the better option instead of losing a home you can barely afford.

Are You Prepared To Take On Home Renovations?

Considering these ten ideals, are you prepared to be a homeowner?

  1. Needs vs. Wants
  2. Renovation and house maintenance Skills
  3. Urgency
  4. Current Affordability and Future Possibility of Interest Increase
  5. Money for house renovations you can’t do yourself
  6. Realistic Monthly Budget
  7. Having Children or Have Children
  8. Living on One Income or One Income and Maternity Leave Pay
  9. Possibility of a Second Income
  10. Proximity to your Business or Employer

Personally, if we were to buy a house in this overpriced market, I’d opt for a house that has not been renovated.

Discussion: Would you buy a home in 2022 that needs renovations, is fully renovated by house flippers, partially finished by the owners or buy brand new?

Please leave your comments below as this is a hot topic, and I want to know what you think about real estate today vs. a few years back.

Mr.CBB

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