Every condo needs a bit of fluffing before it goes to market, unless you’re simply willing to accept fair market value, or less.
Most condos need some sort of de-cluttering and/or staging as well.
But when should you consider renovating your condo? We’re talking $10,000, several weeks of work, and the headaches that come with it? Let’s discuss…
If you could write a cheque for $10,000, and turn that into $15,000 – $20,000, with zero risk, and zero work, would you do so?
Excuse what could sound like a cheap sales pitch, but this is what I’ve told a few condo-sellers lately when discussing the prospect of renovating and selling their condos.
“Zero risk” sounds like an oxymoron, but we’re not talking about investing $10,000 in the stock market (hopefully not last week, anyways…), and we’re not putting that $10,000 on the roulette wheel. We’re talking about investing it in an existing asset, and adding value to a piece of real estate.
“Zero work” sounds too good to be true, but this is part of my service. While I always explain that I have the best mortgage broker, real estate lawyer, and home inspector to work on behalf of my buyers and sellers, I also have a stable of tradespeople that I have worked with in the past, and trust.
Case in point, I have two clients currently renovating their condos in preparation for the busy fall market, and I’ve talked to two other potential sellers in the same situation.
I’ll give you an example of the “work” that is required.
One of my clients owns an investment property in the downtown core, which she’s had for almost a decade. Like many people do – she bought it to live in, outgrew it, but kept it as an investment.
Over the last few years, the unit has really started to wear down.
Remember a few weeks ago when I made a gross generalization to the effect of, “……all tenants live in their own filth”?
Well her tenant was a classic example.
He called her one day to tell her that the fridge was no longer working, and she said she would get a repair man in there asap. She asked him to call her back the next day with a convenient time, but he never called her back. She simply assumed the fridge was back to working, but alas, that was not the case…
When we did an inspection a couple weeks ago, we found the fridge unplugged, and the stench that passed through the front door was like a punch in the face. So how did the tenant live without a fridge, you ask? Well, it seems like he got take-out or ordered in every single night. There were about seventeen “Domino’s Pizza” boxes piled on the living room floor.
The unit was a disaster, although to be fair, only some of the problem arose from the tenant.
Most of the issue was simply that this was a 10-year-old unit, that had been lived in for ten years.
I told my client that she had no choice but to renovate, or she’d actually lose money.
How does that work?
Here’s the logic: if you spend $10,000 to fix the unit up, you might get $15,000 – $20,000 more for it. But if you don’t spend that $10,000, then you might get $10,000 – $15,000 less for the unit.
If that unit is “worth” $300,000, by putting in $10,000, you might get $320,000 for it. But if you don’t put in the $10,000, it might sell for $285,000.
We’re all so desensitized to this real estate market that we’ve come to expect any property will sell itself. But a beat-up, 10-year-old unit will not, unless the seller wants to sell to a buyer “looking for a deal.”
I told my client that to figure out what we needed to renovate, she should, “Look down, then around, then up.”
It sounds like something you’d tell kids, but it works.
Look down. Look at the floor – that cheap, brittle, 10-year-old laminate flooring. That needs to go, and we’ll replace it with some “cost-efficient” engineered hardwood.
Look around. Look at the dirty walls, which we’ll need to paint. Look at the brutal kitchen appliances, which we’ll need to replace. Look at the door handles and hinges, which are all gold, when every newer condo has chrome or brushed-nickel.
Look up. Look at the burnt light fixtures, that were probably five dollars each when the developer put them in when Paul Martin was still our Prime Minister.
A simple, cursory view of the condo can give you a very good idea of what needs to be replaced.
So here was our renovation list:
-entire unit painted (570 square feet: walls, trim, baseboards & quarter-round, doors)
-new engineered hardwood in kitchen, living, dining, bedroom (bedroom had disgusting carpet)
-new bathroom vanity
-new bathroom shower tile
-remove sliding door on tub (really old style…), and re-glaze tub
-new stainless steel kitchen appliances
-new doors, door handles and hinges (replace gold with brushed nickel)
-re-grout and polish tile in foyer
And that, folks, cost $12,000.
The condo looks like a completely different unit, believe me.
And the seller freely admits – she didn’t put a penny into that unit for a decade, so it’s basically like having paid $1,200 per year of ownership, except everything is 2015-new.
The $12,000 investment won’t just get her a $20,000 return, but rather it will get the condo sold in the first place.
The ROI? Yeah, that’s important.
But you can get a return until you sell. And you can’t sell the unit when it’s in such awful shape that the only people who will buy it are “looking for a deal.”
I was delighted to hear my client say that it was “easy” on her. She wrote the cheques, and I handled the trades. I think we did a great job, and my goal is always to make it as easy on the client as possible.
Now sometimes, the “renovation” before the sale isn’t really what you’d consider adding value, but rather removing negative value.
A few weeks ago, I met with a nice couple who had a 2,000 square foot condo in a slightly older building, but everything in the unit was from around 1995.
Do you know what was really big in 1995? Wallpaper.
Every room had wallpaper. Every wall, in a massive 2,000 square foot condo.
Now while their condo is a prime renovation candidate (new kitchen, new baths, remove a wall between the living room and family room, etc), I explained to them that a large part of the buyer pool will be so distracted by the wallpaper in every room (of every variety), that they might, subconsciously or otherwise, decide the project doesn’t have merit.
So rather than spending $100,000 renovating the condo over four months, I urged them to spend whatever it cost (maybe $8,000?) to remove ALL the wallpaper, and paint the entire unit cloud white.
Then we can stage the unit, and while the kitchen and baths are old, and the 2,000 square feet would work better if there were fewer walls, the buyers will feel, in a word, “calmer” when they walk through the unit.
No wallpaper. White walls. Staged furniture.
Let the buyer then decide whether to take on the renovation project.
So here’s a case where we’re not ripping out shower tile and installing new kitchen appliances, but simply removing some of that negative value from the unit.
I met with another couple last week who had a unit, and a situation, very similar to my client with the $300,000 condo, who did the $12,000 reno.
These folks had lived there a while back, but now own a home, and they want to get out of the landlord-biz, and put their money elsewhere.
The unit they own is also about a decade-old, although they seemed a bit more averse to anything “major” either in terms of work or in terms of expenditure.
Some people come to me and ask, “What work should I do, and what will it cost?”
Other people come to me and ask, “For $5,000, what can I get done?”
It’s either the work, or the budget, that’s at the forefront of people’s minds, and sometimes if you say, “I want to spend xxx,” I can advise you accordingly.
For these folks, I told them that cleaning was the first task at hand. The 1-bedroom condo was being lived in by what looked like a family of four, and it didn’t have the best look, feel, or smell to it.
Painting was the second task at hand, since all the walls were a baby-blue, but they just had this really dirty, greasy feel to them.
Flooring would be next on the list, since the carpet in the bedroom and the den was way, way beyond its life expectancy, and the engineered hardwood through the living/dining/kitchen was a decade old, and well-worn.
Right there, you’ve got around $5,000 worth of work to do, unless you want to paint the unit yourself, but I don’t recommend it. Most people who start painting quit after two hours, or if they do finish, it looks like two people who have no experience painting, painted the unit.
If there was a couple hundred bucks more in the budget, I’d say replace every light fixture in the condo – maybe 4-5 in total, at a cost of $30-$50 each, plus $200 for an electrician.
And for a week’s worth, and $5,000, you’ve got a clean, bright, fresh, updated spin on an old, out-of-date condo.
Remember what I said at the onset: if you don’t renovate your out-of-date condo, you’ll end up with less than fair market value in the end. A modest investment brings you a return on that investment, after getting you pack to par to begin with.