Planning to fix-and-flip? Here are five home-renovation mistakes – Montreal Gazette

With prices climbing in Montreal and fewer homes on the market to choose from, buying a fix-and-flip or a handyman special may seem like a good strategy to get into the market. Although HGTV makes it all look so easy, the reality can be complicated, expensive and risky.

Here are five money-losing mistakes homeowners make when they renovate:

Even professional appraisers recognize that home renovations arent just about return on investment (ROI). According to the Appraisal Institute of Canada, renovations pay off in three ways:

Increasing the selling price of your home

Increasing your enjoyment of your home

Maintaining the worth of your property

If your goal is to increase the value of the home enough to make a profit on a quick flip, gutting the kitchen, building an addition or replacing all the floors may actually end up losing you money in the end.

Likewise, if youre renovating a house you intend to stay in, you may regret cheaping out or cutting corners on the finishing if it sours your enjoyment of your home.

How much should you spend? According to home stager Gabrielle Grawey, it depends on the overall value of the home and what is typical within your neighbourhood.

The budget of someones house dictates the value of the renovation, Grawey said. If youre gutting your kitchen or bath and replacing with luxury when the current value of house doesnt match that, you can expect you will lose a good part of that investment.

Its not an investment unless you can have a reasonable expectation of making a profit. Some upgrades are more likely than others to boost your selling price.

According to a homeowners guide produced by the appraisal institute, the renos with the best payoff for sellers are kitchen and bath upgrades, repainting, cosmetic updates to dated or worn finishings, and decluttering.

The association notes that the renos that bring more joy than ROI are things like finishing a basement, adding a garage, sunroom or deck, along with fencing and landscaping. Better not to sink your money into these upgrades unless youre planning to stay a while and enjoy them.

A rule of thumb: the longer you intend to stay in a home, the more reasonable it is to spend money renovating it. Even if the renos dont increase the value of the home by enough to cover what you spent, if you experience greater happiness while living in the home, that may be enough payoff to justify the cost.

According to Remodeling Magazines annual survey measuring return on investment on home renovations, pretty much every major reno will probably be a money-losing one. The U.S. magazine compares the average cost for 22 common remodelling projects with the typical return upon the sale of the home in 136 American markets. In the 2019 survey, the highest ROI was for a garage door replacement, which recouped 97.5 per cent of the investment on average in other words, losing only 2.5 per cent.

That doesnt mean theres no way to make money on a flip. If you do some of the work yourself, theres more room to profit. Local market conditions will also have an impact. In a hot housing market, a renovated house may sell more quickly or be more likely to get multiple offers, which could also boost ROI.

If your goal in renovating is to spruce up a home for sale, your best bet is to start with the essentials: take care of basic home maintenance, repair whats broken, get the house professionally cleaned, and give the house a fresh coat of paint in neutral colours. Leave major renovations to the next owner.

Weve all seen those older homes with vintage mid-century tiles in the bathroom (that now seem kind of awesome), different shades of cheap laminate in each bedroom, real hardwood in the hallway, carpet in one room and a brand-new IKEA kitchen. It makes you wonder, what is this houses identity, anyway?

When it comes time to sell, patchwork renovations can be worse than no upgrades at all, said Tanya Nouwens, a RE/MAX Royal Jordan realtor and home stager.

According to Nouwens, its crucial to keep renovations in context with the home and neighbourhood. If the whole home is in a 1980s time warp, upgrading only the kitchen or bathroom can make everything else seem shabbier.

If the whole house is dated, renovating the kitchen draws attention to other parts that are shabby, Nouwens said. If a home is in a time period, I leave it in that time period.

Its fun to go shopping for tile, upgrade kitchen countertops or pretty up your yard with new landscaping. Yet if you blow your budget on cosmetic upgrades and neglect essential repairs or maintenance, youll not only end up scaring away potential buyers, but you could potentially face frighteningly high repair bills later on.

When it comes to maintaining the worth of the property, replacing the roof, updating climate-control systems, replacing windows and doors, updating electrical systems and repairing structural defects are the most important priorities, according to the appraisers institute.

Make sure these unsexy but essential aspects of your home are in good order. Buyers will often be willing, even keen, to update an old kitchen or repaint rooms to suit their taste, but no homeowner looks forward to replacing shingles or shoring up a buckling foundation.

Upscale master suite addition

Job cost: $271,470

Resale value: $136,820

Cost recouped: 50.4%

Mid-range backyard patio

Job cost: $56,906

Resale value: $31,430

Cost recouped: 55.2%

Upscale bathroom addition

Job cost: $87,704

Resale value: $51,000

Cost recouped: 58.1%

Mid-range master suite addition

Job cost: $130,986

Resale value: $77,785

Cost recouped: 59.4%

Upscale major kitchen remodel

Job cost: $131,510

Resale value: $78,524

Cost recouped: 59.7%

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Planning to fix-and-flip? Here are five home-renovation mistakes - Montreal Gazette