The following article is from Canadian Real Estate Wealth Magazine .
Ask any landlord, contractor, builder or small real estate investor the one tool they have in their DIY renovation arsenal, and the answer is invariably the spreadsheet. Most property owners with some years of experience behind them have crafted a list of must-do projects as they inspect their latest investments. The spreadsheet, making up years of gained knowledge on a variety of projects, is the key to that successful renovation.
Peel back the spreadsheet onion and investors reveal the projects that are essential in making the most amount of profit for, what they hope is, the least amount of cost. Especially in a volatile economic climate with the fear of a double-dip recession, property investors and landlords are taking it upon themselves and "DIYing" their projects to ensure they are attracting the best tenants and/or buyers for their properties.
DIYing and the economy Owners and landlords are enhancing the value of their properties on their own more than ever before. Cost is always the number one factor and certainly the economy has heightened the need to cut expenses as much as possible.
Even though uncertainty in the economy can create buying opportunities for investors, would-be investors need to be aware of the pitfalls those investments might bring. “Economic times have increased the availability of some projects,” says Andrew Brennan, a professional real estate investor with Brennan Property Investments. “A lot of people who are behind on mortgage payments may not have the money to maintain their more distressed issues,” he adds.
There is a flipside to the economic story other than the availability of potential projects. Landlords, because of uncertainty, are looking to save money.
Stuart Henderson is a property owner and a senior member of the Ontario Landlords Association. The association has more than 3,000 members, most of whom own properties of 10 units or less. He says members are looking for assistance on DIY renovations more than they have in the recent past.
“The economy has not been strong since 2008, so more and more landlords who would have normally paid a contractor are now forced to do their own repairs and renovations,” he says. “Doing your own repairs and renovations is really a key point of landlords these days; the days of slumlords are over if you want to get good, qualified tenants.”
Plan and budget Getting the appropriate high-quality tenants is really what is behind the renovations in the first place. Essentially, it should be the first part of any DIY renovation plan. “The first thing you need to do is know the expectations of the tenants you are marketing to. You can’t go into a low-income area in parts of Toronto and renovate that to the same standards that would be required for a $1,500 one-bedroom apartment downtown. You need to know what your tenants want,” says Andrew Gulaty, a full-time firefighter and owner of properties in Toronto and Mississauga. He notes that new landlords must realize the goal of a renovation on a rental is not the same goal one might have on their personal residence.
“When you are renovating a rental, your goal is to maximize return on investment and to attract quality tenants. Your personal tastes are not as important; the goals are different,” he stresses. He adds that most new landlords’ biggest mistake is overrenovating. “Granite and stainless steel in a poor-quality neighbourhood is not going to attract top-quality tenants.”
Most investors agree that fixing problem areas first and then getting into the cosmetics is the way to go on DIY projects and makes good planning sense. Scott McGillivray, a property investor and the host of Income Property on HGTV Canada, prepares a relatively systematic way of looking at projects.
“When I see a property that has opportunity, the checklist would be to fix everything that’s a deficiency on the home, i.e. roof, wiring, plumbing,” Mr. McGillivray says.
And with most renovations, either for personal or income purposes, the kitchens and bathrooms appear to be first on everyone’s list.
“The kitchen is of No. 1 importance,” adds Mr. McGillivray. “I have a sublist of how much work needs to be done in the kitchen.