Is there such a thing as a “quick” renovation?  Don’t renovations always take a few weeks (months) longer than you’d expect?

Last week, I looked at this small property on Ashby Place and considered buying it to renovate.

But then I came to my senses when I realized that I don’t even know how to plug in a cordless drill…

Welcome home to Ashby Place!

Doesn’t it look “quaint?”

Quaint is one of those over-used buzz-words that’s thrown around in real estate far too much.  Quaint could mean anything, really; I guess it depends on what it means to YOU.

To me, quaint means, “small, modest, quiet, and unassuming” to me, and that’s exactly what Ashby Place is….to me, at least.

Ashby Place is one of those small side-streets in the Corktown district that is lined with hundred-year-old houses; similar to Percy Street, which I have written about in the past.

The Corktown neighborhood is a strange area of the city, because it seems like every year it’s referred to as “up and coming,” but nothing has ever really become of it!  We’re all still waiting!  The Distillery District and the St. Lawrence Market areas have both taken off in the past decade, yet the adjacent Corktown neighborhood is still in transition.

It seems as if the “West Don Lands” development is finally about to get started.  This government initiative is only about four years behind in my estimation…

And in between it all, we have quaint Ashby Place.

10 Ashby Place came onto the market two weeks ago for a modest $179,000.

I had to do a double-take when I first saw the price; how do you get a house in downtown Toronto for $179,000?

Situated on a tiny 12. 67 x 60 foot lot, this 1-bedroom, 2-bathroom rowhouse can’t be more than 1000 square feet on two levels, with perhaps an opportunity for another 400 square feet in the unfinished basement.

BUT….it’s still a house, and last time I checked, they’re not making any more land…

Sight unseen, I already knew the story behind this listing – it’s an artificially low price because the owners and the listing agent have no idea what it’s really “worth.”

And considering that the two adjacent houses sold for $340,000 in 2007, there is obviously a lot of room between the $179,000 asking price and what this house could be worth to the right owner…

Excerpts from the listing tell the whole story:

“This Corktown Victorian needs a lot of love.”“Bring your contractor and designer and create your own condo alternative.”

“Being sold in ‘as is’ condition.”

Okay, so the house is a heaping pile of crap, right?  Is that what the listing is basically telling us?

So naturally I got to thinking, and since my latest attempts to put my money into a pre-construction condo were thwarted by the evil-doers at Streetcar Developments, I figured maybe I should branch out into renovations!

That won’t backfire, right?

Renovations are easy….right?

Nothing could ever go wrong!

What is the “out” with this house -that’s the first question.  If #8 and #12 Ashby Place sold for $340,000 and $340,300 respectively in 2007, and they weren’t renovated from head-to-toe, I’d say that there is potential for $400,000 at 10 Ashby Place, but it’s not likely.  To err on the conservative side, I’m going to call it $370,000, since the comparable prices are two years old (the market has gone up and down and back again since then, but it’s very hot right now!), and since I would gut this house down to the studs, I’d be putting together a superior product.

If the out is $370,000, clearly you need to know what this house is going to sell for in order to crunch your numbers!

Let’s assume this house sells for $225,000 and work from there.

First, you have Land Transfer Tax of $3,950 if you are NOT a first time buyer, which I am not.

Secondly, you’re looking at about $1,000 in legal fees.

Third, you’re on the hook for about eight months of property taxes, which are very low at $1,671 per year; so call it $1,120.  Also add in about $1,000 for utilities (heat, hydro, water) considering you’ll be renovating and using a ton of power!

Before you’ve even set foot in the house, you’re looking at just over $7,000.

Now let’s start the renovation!

You’re essentially gutting this house right down to the studs, and even then you’re going to be re-framing since you’ll want to create your own layout.

Your major expense is going to be the insulation, drywall, poly, mud, tape, and paint since you’ve ripped out every single wall, floor and ceiling in the house.  Call that $20,000.

Removing all the knob and tube wiring is about $7,000.

The house is currently electric heating, and that needs to be changed.  To install forced air gas heating, and air-conditioning, call it $12,000.

The cost of re-framing three levels (don’t forget – we’re doing a finished basement and putting in a second bedroom) is going to be about $4,000.  Consider this $4,000 to include all “carpentry” costs.

How about all the baseboards, trim, and crown mouldings?  I did say this was going to be a nice house, right?  Throw your doors into this group, and you’re looking at about $5,000.

Carpet for the basement, tile for the kitchen and the two bathrooms, and hardwood for the main floor and second level, and you’re looking at $8,000.

Oh, and those aforementioned bathrooms and kitchens – call it $6,000 for the main bathroom, $4,000 for the second bathroom, and $8,000 for the kitchen.

We’re building a “nice” house, but we’re doing it on the cheap!  Have you ever heard the word “IKEA” before?

If you want to put in new windows, it’s another $4,000.  But my my count, we’re already up to $74,000, so forget the windows.

A “nice” oak front door might be about $2,000, but I also don’t want to pay for that.

And how about tuckpointing the brick on the front of the house?

How about landscaping the backyard?

How about a new staircase on the main floor since the old staircase is practically a ladder?

What if you wanted to redo some of the plumbing while you’re moving rooms around?

How much is your new stackable washer/dryer?  (mine was $699 at Future Shop, of all places!)

And finally, how is the roof looking right about now?  That could easily cost you another $5,000 to replace or $2,000 to repair.

Since I was conservative with my estimate on the final sale price, I’m going to make up for it here and call the renovation an even $80,000.  I think that’s fair, considering I was up to $74,000 before I rattled off a list of things that I could do, if I were so inclined.

Bottom line: if you paid $225,000 for this house, paid $7,000 in up-front costs, and spent $80,000 on a renovation, you’d be all-in for $312,000.

If your final sale price is really $370,000, factor in the last $18,500 for real estate fees, and you’ve got a tidy $39,500 profit.

Really?

Only $39,500?

Is it really worth all the time, effort, and energy?  And how about the risk?

Could you do this renovation for less than $80,000?  Perhaps.  I’m not a contractor, although I did have a contractor help price this out for me.

Could you get more than the $370,000 sale price?  Perhaps.  But I like to be conservative.

So how are matters complicated when I tell you that this house didn’t sell for the $225,000 price that I’m using in my calculations?  Because in fact, it sold last week for $250,000!

So take another $25K off the profit, and you’re left with less than $15,000.

There is no mone in this project assuming a $250,000 purchase price and a $370,000 sale price.

And we didn’t even talk about interest on your loan!

In the best case scenario, where you get the house for $225,000 and sell it for $400,000, you’ve got up to $70,000 in profit.

In the worst case scenario, however, you don’t have nearly enough money to ever consider taking on this project!

And in a conservative scenario, there still isn’t enough money in this project for me, personally.

But if I had it to do over, I’d still look at this project just as aggressively as I did.

There’s money to be made out there.

It’s just not as easy to find as people think…