As a real estate agent working in Port Alberni I have helped many people buy homes with the intent of fixing them up and selling them for a profit. The types of people who take on this challenge vary from professional contractors to weekend warriors. We have clients who have been very successful making a profit and others who have not. Interestingly, the persons skill set is not usually the determining factor for success. A solid game plan, and an openness to seek and heed professional advice, is far more important in my experience.
Finding the Right Project
Finding the right project house is the foundation of success. The old adage, “buy the worst house, on the best street”, is a good place to begin. In my experience, the importance of location is often overlooked. The neighbourhood in which a house is located sets the price ceiling for the house once it is renovated. Make sure that ceiling is relatively high.
Next, find a house with good bones. Things like roofs, wiring, plumbing, heating, perimeter drains, windows, and even concrete work are not good investments. You want to spend your money on upgrades in which $1 invested will yield more than $1 in return. These types of functional upgrades generally do not yield positive returns. I’m not recommending you pass on a house because it needs work in one of these areas, but be careful buying a home that needs work in multiple functional areas.
Make sure there are no functional oddities that might limit the homes eventual price ceiling. For example, a house with 3 bedrooms on the main floor generally has a higher ceiling than a home with 2 bedrooms on the main floor. Very small rooms, particularly living rooms, kitchens, and master bedrooms can affect a home’s price ceiling.
What to Update
This will depend on what the particular house needs. I strongly recommend that you consult with your Realtor before deciding what to update. In general, reuse what you can and replace what you must. For example, if you can avoid replacing an entire kitchen, by simply updating the countertops, backsplash and hardware, that may be the wisest choice. Flooring, paint and baseboards are good things to consider replacing, as are light fixtures and bathroom/kitchen fixtures.
I have witnessed truly amazing transformations to older homes, by removing a wall, or cutting a pass-through. Open floors plans are very popular today, and opening up a traditional floor plan can yield good financial returns. Be mindful that you are not tampering with load bearing walls. Another amazing update is the refinishing of original wood floors. In Port Alberni oak and fir floors can be brought to like-new conditions for the same cost as mid-grade laminate flooring.
What Materials to Use
The quality of materials you should use will depend somewhat on the house. In general, the mistake people make is using to high of a quality (and therefore expensive) material. In the Alberni Valley, you will have your best success renovating lower costs homes. You should buy a house that is below the average sale price in the market, and well below the average sale price of the neighbourhood.
Midgrade flooring, fixtures, and paint are a good place to start. Kitchens and bathrooms can drain your budget quickly, so be smart about these areas. I have seen the most success by people who get creative about reusing materials in kitchens/bathrooms, and shopping for materials second hand.
I hope this article will give you a place to start thinking about how to go about profiting from improving a home. I can’t stress enough that getting advice from your real estate agent in every phase of the planning is crucial. Our team are more than happy to do this type of consulting for our clients free of charge. In the big picture, if our clients are successful it is good for them, the neighbourhood, and our team too.