Reviewing Mike Holmes on renovations and creating value

Mike Holmes is back at with another article that I enjoyed reading entitled, "Fix-ups to push up your property value." In the article, Mike shares how to create value or increase value in your home, which I would add is also applicable to investment properties.

Mike poses the most fundamental question: What does valuable mean? Not every renovation adds value to your property. Sometimes renovations solely make the property more durable or energy efficient (new windows, doors, insulation). I agree with Mike, that these make for a happy homeowner because energy costs can decrease. I think that when it comes to renovations it all depends what your goals are. Perhaps your goal is an income goal or you want to flip the property or perhaps you'd like to renovate, rent and refinance the property to buy more.

Mike's tips are awesome:
1. Don't curb curb appeal
2. Fix roof problems
3. Clean the property before listing

I have some clients that realized that the the cost of renovations don't always translate into 100% market value. This is especially applicable with a purchase plus renovations or refinance plus renovation project financing. Depending on the size of the renovations you're looking at it's worth to have a proper home evaluation to determine present and future value post-renos.

At the moment the vibe I am feeling in the Montreal market is: renovate, maintain and hold your properties. It's a good time the weather a bit of the market storm.Your thoughts?

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.