Reviewing: Mike Holmes' article "8 Tips for planning a reno in 2014"

Hey everyone. I've been blogging a lot lately about renovations. I came across an article that might be of interest to folks. The Montreal Gazette published an article written by Mike Holme's entitled "8 tips for planning a reno in 2014."

In a nutshell, here are Mikes main renovation tips:

1. Right off the bat, Mike states, "Make decisions before you start. I've said it a million times. It takes longer to plan a renovation than to do it. The more time you spend making decisions before construction starts, the less time will be spent on actual labour, which helps control costs and work schedules."
2.  Find qualified pros: Mike suggest that you not rely on friends or family for recommendations and that you get 10-20 references for any contractor. He says, don't only look at recently completed projects and to check out work sites in progress.
3. Do a background check: Here Mike suggests that you do a background check. Bad contractors change incorporations to cover their tracks. Try speaking with the Better Business Bureau.
4.  Get a detailed contract: Mike states the more detail in the contract the better. It should review and specify every task. 
5.  Set up a payment schedule tied to project milestones: He also recommends that milestones be specified and that stages be completed and inspected before moving onto the next part of the reno.
6.  Discuss changes: Every time there is a change, Mike states, this causes delay and can increase costs. Speak openly with your contractor to ensure whether the change is worth this effort and delay.
7. Know the work schedule: This includes the daily work hours of the workers. Mike states if the workers visit the work site here and there at random hours then this will throw the timeline off track.
8. Should you stay or should you go? Mike suggest that during major renovations you should move out temporarily. Living through construction is never easy especially with young children and a busy work-life schedule. If you stay in your home Mike states that the workers will also spend more time cleaning daily at your expense rather than working faster towards project completion. 

Mike's tips are excellent. Like Mike, I am a huge fan of planning ahead before starting any project. The one part that Mike doesn't mention is financing. Here it's important to know what is your budget and how will you finance the renovation. Your dream project may need to be scaled down if it cannot be financed.

You may have the money in hand which helps tremendously or you may need a mortgage. Your two options here would be: 

(A) Auto-construction financing where the bank will give you a special mortgage that disperses funds (up to five dispersals) for the contractor at various milestones in the project. Here the bank will need to approve your contractor and project plan. 

(B) Refinance and use the net proceeds towards the construction. Here you will be in charge of the all the funds at once. Here the the bank may not need to see plans and budget. In both financing scenarios, it's important to stay on budget as the bank won't give you additional funds once the mortgage is notarized. 

Got construction financing?

Yes I know two blog entries this week. I was inspired this week to also speak a little about construction financing. 

Ever think of building your own property? Ever think of turning your duplex into fourplex or larger? Are you looking to build a new condo project? Lots of financing options exist. Your options and cost of borrowing depend on the overall project plan, risk and how much your willing to up down, i.e. cash into the mix.

Your lending options can vary from conventional banks, virtual lenders, pension or trust funds, and private lenders. The cost of borrowing or rate varies from approximately 3% to 15% depending on the overall project. 

Anyone that will finance your project will want to see project plan, architectural rendering, budget (land and construction costs), timeline, and market evaluation. Structuring and planning all this is critical and can be time or cost consuming if not planned out properly. I've seen a few projects that imploded because planning wasn't properly thought out in advance.

In one particular instance, a client met with me too late for me to help. The gentleman started building his home in a remote location without setting up mortgage financing in advance. When I met with him he reach past a point of no return with all banks and lenders. The house was 80% completed and he ran out of money. Furthermore, his credit was weak which didn't help matters.

On a larger scale, I worked with a client who wanted to build a condo project south of Montreal. He had bought the land, had a construction plan and budget, permits were on their way, he had 25% cash to work with and equity in other properties. Here I worked with a private lender to finance the construction and once the condos would be built and sold then the private loan would be repaid.

If you'd like to share your good and not so good mortgage or real estate moments let me know by phone or email. Have a good week everyone.

Habitat Montreal ReStore re-launched

Everyone has in some form or another heard of Habitat for Humanity but few in Quebec have heard of the ReStore. As their website states, "The Habitat for Humanity Montreal ReStore sells quality, new and gently used furniture, appliances, home décor items, building and renovation materials to the public at greatly reduced prices." All proceeds help cover the administrative costs including the construction of affordable homes for families in need in Quebec.

Check out this recent CTV News Montreal spotlight on Habitat for Humanity Montreal. Paul Karwatsky interviews Isabel Singh (President & CEO for Habitat for Humanity Montreal) and Kathy Raymond (Director of ReStores) about the organization and ReStores.
 
Last week, the Habitat Montreal ReStore re-launched their hardware trift store concept. Anyone looking to renovate their home or investment property should stop by the store. Under Kathy's leadership, I am really impressed with the changes, growth and new ideas.

Check out the Habitat Facebook page to learn more, see what new products are in-store this week or maybe even volunteer.

Habitat for Humanity Montreal needs our help

Hey Everyone, from time to time I help out at Habitat for Humanity Montreal. They do some amazing work here in Quebec by building home for those less fortunate. Habitat Quebec has a Montreal-based retail hardware store, called the ReStore where sales proceeds help fund their builds. The products that are sold in the store are donated by suppliers. I'm on the hunt to help find more suppliers that can donate overstock products or renovation materials. Also, on a weekly basis Habitat rents a truck to pick up donated products. The monthly rental costs are incredible. My second mission is to help find a 19 foot truck that can be donated or loaned on a "long-term" basis. If anyone can help me out that would be incredible and would make a huge impact for Habitat.

Thanks. Have a good rest of the week.

As a new homebuyer, can renovations costs be rolled into my mortgage?

Welcome to the new winter buying season. Yes, I know I said the “w-word” already, i.e. winter. If you are thinking of buying a new home for next spring or summer then it’s not a bad idea to plan a little ahead. My next couple articles in the coming weeks will focus on home buying. There are three types of construction and renovations mortgages. First, there is a self-built home where you require multiple cash disbursements, a “turnkey” construction where the home would be built by a certain date with one disbursement and finally a purchase with renovations. This week I’d like to focus on the third type, buying a home and rolling renovations costs into the mortgage. 

For example, I had a recent client that bought a home in Vaudreuil-Dorion.This client loved the house but it needed a little TLC in the kitchen and wood floors throughout the first floor. Most bank products of this nature permit you to buy the home and you can make renovations between 5-20% of the purchase amount for a maximum of $40,000. This renovations portion simply gets added on top of the mortgaged amount. If you exceed $40,000 it is still possible to get the funds needed but at that point it is typically seen as a construction loan as the renovations required would be considered major at that point. 

It’s also a good idea to be as clear with yourself with what type of renovations you really would like to do and make sure that the money spent actually adds bang and value to the home. This latter point is important.You probably have a pretty good idea of your personality and what your future plans will be. Some clients will make the purchase with renovations with the expectation to hang onto the home for the medium to long term which is fine. However if you are expecting to refinance in the future here is where the value-added will be important.

If you have any specific questions you’d like to discuss in next week’s article please feel free to email me.