To many buyers, finding a property below market value to renovate into your dream home is an exciting concept. For some, it’s a means of getting a larger house, or in a neighbourhood than they would not be able to afford otherwise. For others, it’s an opportunity to transform a living space to their own tastes and artistic visions. That being said, the process can also be nerve-wracking. Before buying a fixer-upper in Montreal or elsewhere, you should ask yourself a few questions to determine whether you’re up for the challenge.
Does a fixer-upper match your personality type?
Renovating a fixer-upper requires certain qualities and character traits. If you answer “yes” to less than three of these questions, you should probably wait until you can buy something turn-key.
- Are you a creative, hands-on person?
- Do you have the time and energy to dedicate to the project?
- Do you have the patience to slowly work on your dream home?
- Do you have experience or knowledge about architectural and decor principles?
- Do you like challenging projects, that are likely to stress you out at times?
Take the time to consider your decor preferences as well. Fixer-up homes are most suitable to those who appreciate the charm or older homes, but wish to incorporate a more modern look through the renovations.
What to expect:
Before you start shopping for your fixer upper, you’ll want to come up with a detailed plan for action. This will help prevent unpleasant and potentially expensive surprises.
Figure out your budget
When buying a fixer upper, chances are most of the money you save on purchase price will go into renovation costs. Based on your budget and savings, you’ll have to figure out where you want to splurge and where you’d rather postpone or be more economical. You also want to make sure that you have a cushion left over for a rainy day, always leave yourself a 10-15% margin in case things don’t go exactly according to plan.
- Start by calculating exactly how much the home will cost you in upfront closing costs, and in monthly mortgage payments.
- Next, get a quote for your envisioned renovations.
- Finally, compare those amounts to your savings and monthly income, to determine whether the project is within your financial reach.
Lastly, consider the future potential of the purchase. Is the home a good investment? Will improving the value of the property tip it over market value, making it harder to resell at a later date? Is the home in an appreciating area?
Make sure you calculate the property’s current market value in a CMA, as this will help you determine whether the purchase makes sense as a financial investment.
Figure out your timeline
Here are a few questions you can ask yourself when deciding how long you’d like to dedicate to the renovation project.
- Do you plan on “flipping” the property, or living in it yourself? If the home will be your primary residence, you’ll have the luxury of being able to take your time with the non-essential upgrades.
- Will you live on the premises during the renovations? Can you afford the carrying costs if you need to rent elsewhere?
- Will you do all of the work yourself, or will you hire experts?
- Are you renovations mainly structural, or cosmetic?
Don’t skip out on the inspection
Fixer-upper homes are often sold without legal warranty, which means that the home may have hidden defects and is bought at the buyer’s risk. For this reason, and to help you determine your budget, you should always opt for a professionally conducted inspection before putting in your final offer. A home inspector will let you know what work the home needs to bring it up to code. Although an inspector will rarely weigh in on how much the work would cost, you can take the inspection report to a contractor and request a quote.
Where do you find fixer-upper properties?
Here are some places you can find fixer-upper properties in Montreal:
- Set up a property alert for repossessions in your preferred neighbourhood. Repossessed homes tend to be listed below market value since they are being sold by the bank, rather than the seller. Note: indicate that you are looking for repossessed properties in the “Additional Criteria” section.
- Request a list of top properties listed below municipal evaluation in Montreal.
- If you think a property might be listed below market value, request a free professional evaluation of the property’s current worth.
- Ask your broker to send you his or her own selection of BMV properties. Many brokers have access to pre-market BMV properties, which are likely to sell even before they are listed online.
- Subscribe to a Deal of the Week mailing list, which will send you the single best BMV property on the market every week by email.
- For larger fixer-upper projects such as multiplexes and commercial properties, sign up to an investor’s off-market database.