Is it better to buy a move-in-ready home, or to buy a place with “potential” and renovate it? This is a question I’m often asked by clients – and it’s one one my husband and I asked ourselves when we were shopping for our own house.
While hunting in our favourite East Van neighbourhood, we found our “dream” home and fell in love at first sight. The catch? It needed a complete renovation, from a new roof to updating all the electrical and plumbing to a new kitchen to completing the unfinished basement.
Faced with the question of whether we were up for the challenge of such a huge project, we started by coming up with the following list of pros and cons to help us make the decision.
Buying a Place That Needs Renovations: Pros
- Lower initial cost. You are paying less for the property initially, although of course you’ll have to weigh the initial savings against a realistic estimate of what you’re going to spend on renovations.
- You add value. You aren’t paying for the work someone else did to improve their home. If you are getting the property at a lower price (which you should be), then you are adding the value to the property and making it worth more. Hopefully more than you spent on the renovations!
- Control over renovation budget. You generally end up paying less for your own renovations than if you’re buying an already home, when you’re paying for someone else’s renovations (people want to make a profit off their own).
- Quality control. You choose the contractors (or do it yourself!) and you get to approve materials. So when the project is finished, you’ll know the quality of the workmanship.
- Finished product is exactly what you want. You get to pick finishes, fixtures, colours, and everything else. Your home will be to your tastes and not someone else’s.
Buying a Place That Needs Renovations: Cons
- Renovating costs money. It can cost a lot of money. Many renovations come with costs that people who haven’t done this before might not know about, including land surveys, architectural drawings, engineering reports, building permits, disposal fees and more. If you don’t have the cash, you may be able to use a Purchase Plus improvement program to get a mortgage that includes money to put toward the renovations you want.
- Can you live in a reno zone? They don’t call drywall dust “divorce dust” for nothing. Okay, that may be a little extreme – but living without a working kitchen or bathroom can be very stressful. Depending on the scope of the renovation, you may even need to live somewhere else until they are finished. I know a couple who lived without their only shower and toilet for weeks. Weeks! They would visit a coffee shop every night before bed and go to a gym or community centre every morning. What happened if they had to go during the night? Well, they had a bucket...
- You might have to pay a mortgage and rent. If you need to move out and don’t have somewhere to stay for free, you’ll be paying rent as well as your mortgage while the reno is happening.
- You might not be allowed to do the renos you want. Some stratas do not allow specific materials, such as hardwood or laminate floors. If you are purchasing a strata property, you need to read through the bylaws and rules before you purchase. When it comes to houses, the city can be a fickle beast. City permits often require negotiation, which comes with uncertainty. If you want to make structural changes, you may need to consult a structural engineer to find out the feasibility and costs.
- Finding a trusted team is challenging. Finding and hiring an honest and knowledgeable builder and designer takes time. Reputable builders are often booked many months or even years out. Are you prepared to live in your place as-is until they’re ready to start?
- You’ll probably spend more than you expect. What starts out as a modest reno can quickly snowball into something much bigger. This can happen when you decide to add more features to your original plan, but it can also happen for reasons beyond your control. For example, the City may require that something like your current stairs will also need to be redone if they don’t meet requirements in the current building code. This can easily bump your renovation cost up by $10,000, depending on the scope of the work.
Are You Ready?
Another question you will want to ask yourself is “How handy am I?” If you can pitch in with things like demolition, painting, or installing floors, you will save yourself some money. If you aren’t handy at all, that’s okay – just know that you’ll pay for everything you don’t do yourself.
TV renovation shows make the process look romantic and fun, but remember that weeks (and sometimes months) of work are edited down to a half-hour show.
In the end, my husband and I ended up not buying the “dream home” that needed a major reno, and instead chose a house in the same ’hood that only needed a few things done. We did renovate the functional but dated kitchen, but haven’t had to do much else. We paid a little more initially for this house than we would have for the other one, but we only had to put up with a few weeks of cooking on the back porch and washing dishes in the bathtub while the kitchen was out of commission.
So when you’re deciding what’s right for you, listen to your heart – but also to your head.