With much of downtown Toronto's housing stock sagging into the dilapidation of old age at the same time as market values are soaring, builders and handymen would seem to have it made in the buy, fix-up and flip game.
But just how easy is it to make money? And what are the key fixes that ratchet up value and make 12-hour days of sweating, aching and inhaling sawdust worth it in the end?
Two buddies -- one from the new-home building business in London, Ont., the other an itinerant jack-of-all trades -- decided to throw their money and labours into the big-city renovation market for one year to find out.
Builder Randy MacKay, 39, and his university pal John Stassen, 34, a handy guy who had never found a permanent niche for himself, came up with the idea last summer. In the dozen years that Mr. MacKay spent building his company, Waverly Homes, Mr. Stassen travelled the world. Along the way, he worked as a freelance computer programmer, personal trainer, bouncer and salesman before returning to Canada, where he did a stint as a registered massage therapist and then started a computer business.
The duo's vague notion of buying a house to renovate and sell quickly became more sharply focused when Mr. Stassen's girlfriend, who works in media, caught wind of plans for a new renovation series on HGTV.
"We did a proposal, and Alliance Atlantis signed us up for one season with an option for two more," Mr. Stassen says.
The project became to find, buy, fix up and sell at least four Toronto houses in one year and try to make a profit at it. The year is up at the end of September.
The show, The Big Flip, goes to air in October, and the jury's still out on the profit question.
"We could lose our shirts on this one," Mr. MacKay says of project No. 3, a century-old bay-n-gable row house in Cabbagetown.
They have gutted it and are dressing it up to the max with limestone, hardwoods, porcelains, quartz, stainless steel and dozens of pot lights.
The second of the four homes, which is in Riverdale, is finished but hadn't sold by press time.
The first house, on another street in Cabbagetown, stunned both men by producing a modest profit -- even though it had harboured virtually every nightmarish surprise that can lurk in a renovation project, including termite damage, rot and a colony of carpenter ants.
The fourth isn't done yet, and the renovators are feeling the strain.
"When I got up this morning it hurt to put my feet on the ground," Mr. Stassen groaned during a recent interview with the two men.
Mr. MacKay sighs, saying: "This is a completely different game than building new. It's not for the faint of heart."
Their experience provides some valuable lessons for anyone with misty memories of the eighties who might think house-flipping is easy money.
When the pair bought house No. 1, a stylish detached Victorian that had become terribly rundown during years as a boarding house, they learned the hard way how important a thorough inspection is. It turned out that extensive termite damage had caused the floor to slant, and someone had tried to cover up the problem by nailing planks on top.
Also, the main support beam of the house was badly rotted and in danger of collapsing. But the coup de grâce was the discovery of an entire colony of live carpenter ants in wooden posts behind drywall.
"Some warning signs were missed," Mr. MacKay admits, "but the owners covered and hid the damage. Even an inspector might not have seen that."
They'd paid $368,000 for the house, and discovered they'd have to go way over budget and well beyond the time allocated to fix it.
Three months, $160,000 and a badly tattered relationship later, they put it on the market. Incredibly they made a profit when it sold for $600,000, though a big chunk went to the real estate agent.
"It cleaned up really well," Mr. Stassen says, "and it helped that the house next door was beautiful, very well-kept."
House No. 2 was a Riverdale semi-detached. The renovation went fairly smoothly: New wiring, flooring and drywall were installed; the kitchen was expanded; a bathroom was added; and the basement was finished.
"But we didn't have much luck in the neighbour department, and the location is perhaps not in demand," Mr. MacKay says while pondering why it's still on the market.
The owner of the other half of the semi was hostile to the construction crews and also refused to clean up his front yard or improve the façade of his half of the semi, which hurt the curb appeal of their house, Mr. MacKay says.
"We may break even or we may lose a few bucks."
For the third house, the bay-n-gable row house in Cabbagetown, they decided to go all out with high-quality finishes and extensive structural work.
They bought it for $380,000, and it was "basically a write-off," Mr. MacKay says.
"It's not a really nice Victorian. . . . There was little of architectural value. It was the base model of a design."
The house had had no renovations since the 1950s (newspapers laid under the kitchen linoleum revealed the date). Still, with Cabbagetown being such a sought-after area, and prices in the $800,000s based on the neighbourhood's character, the duo decided to sink $250,000 into renovations.
They opened up boxy little rooms, rebuilt walls, rewired and invested in top-of-the-line stone and wood finishes as well as 50 pot lights in the downstairs alone.
Having observed prospective buyers at open houses, they had learned the importance of the "wow" factor, Mr. MacKay says. "They're not thinking about the light bulbs they'll have to change. . . . They look at all the lights and say 'wow.' "
House No. 4 is in the staid Bayview and Lawrence area, and the renovators have just begun. For this one, they're incorporating more lessons learned along the way. For starters, they bought it privately and got a better price because of the absence of agent fees.
They now know to keep a cushion of $10,000 to $15,000 for the unforeseen work that inevitably arises. "You can be the most experienced person in construction but you always eat up $10,000 on unexpected stuff," Mr. MacKay says.
They now know the wiring in old homes will inevitably need to be replaced. "We've had to completely rewire every house," Mr. Stassen says. "In one, it looked like the wiring was new, but it turned out the new wires just went to a box hidden in the wall that connected to the old wiring."
And they've developed a strong grasp of what the market wants. "Can I add any bathrooms, can I make the kitchen bigger?" are the questions Mr. MacKay asks when he views a house. "Women look primarily at those two things, and 85 per cent of the time, it's the woman who makes the decision when a couple is buying."
Adding storage is another must, they've learned.
And if working with real estate agents, make sure they are talking up the changes you have made and stressing the quality of the work, they advise.
"We haven't found the house yet that we can just repaint and sell at a profit," Mr. MacKay says.