November 18, 2016
Building on your home’s value
Real Estate Watch
By Michael Bernard
With Metro Vancouver’s real estate prices still in the stratosphere, one would think buying a fixer-upper and investing some sweat equity might be a dead and buried concept.
Not so, say several real estate experts.
While the detached fixer-upper has been replaced by the more modestly priced affordable condo, first-time buyers are still turning into weekend reno warriors to make home buying a little more affordable while improving their new home’s livability and future sales price.
“Vancouver is not as heated anymore, but earning sweat equity is always plausible,” says Scott McGillivray, who hosts the fixer-upper program Income Properties on HGTV.
“In fact, in an overheated market it’s even easier because you’ve got passive appreciation (the real estate market) and active appreciation (improvements and renovations) happening at the same time,” he says. “Sweat equity will never go out of style because everyone wants to maximize the value of their home.”
It’s worked for Natasha and D’Shawn Kemry-Higgins, who, with help from Natasha’s mom, Vancouver west side Realtor Colette Gerber, mapped out a long-term master plan that started with their entry into the real estate market in September 2014.
Gerber, who worked in property development before becoming a Realtor, used her knowledge of Metro Vancouver’s hot spots to steer the young couple to neighbourhoods that were both affordable and likely “to get a lift” from future development. They found one just a few blocks from the bustling Brentwood town centre in Burnaby, where developers were already busy building highrises along the Skytrain route.
Gerber tempered their high expectations and urged them to compromise by purchasing a condo unit with renovation potential. They listened and purchased a solidly built, two-bedroom apartment in a 30-year-old low-rise complex for $289,500. “When they realized they couldn’t afford exactly what they wanted, they used their vision and knowledge of how to go about upgrading and took something a little less expensive and made it theirs,” she said.
D’Shawn, a carpenter and general contractor by day, would come home at night to begin his second job using his skills and Natasha’s reno ideas to make carefully thought-out improvements.
“We did an entire bathroom and kitchen renovation,” says Natasha. “We also did new drywall, new pot lights, all new wiring including a new electrical panel. We did custom closets and tiled the bathroom and the kitchen.”
Natasha estimates they spent $30,000 to $40,000 upgrading the suite. The strategy paid off. On Sept. 29, 2016, almost exactly two years to the day they purchased it, they sold their condo for $450,000 “to the first person who walked in.” Gerber said they checked the prices of unimproved suites nearby and found that the couple’s 55-per-cent gain far exceeded what other suites fetched. Now they are looking around to buy another condo to do exactly the same thing.
Another Vancouver Realtor, Rick Stonehouse, agrees the concept of “sweat equity” is absolutely alive and well, though he admits the high price of real estate makes it harder for the first-time buyers who account for 75 per cent of his business. Instead of fixing up older houses, they are scouting out older condominiums in popular areas such as Commercial Drive and Strathcona. But he warns that successfully buying and renovating is both an art and a science.
“People can make mistakes doing this and do the wrong thing. Those who are buying a $400,000 apartment don’t want granite countertops. They just want certain other things. Like an in-suite laundry is a huge thing now. Some people would rather have that than a new kitchen.”
Stonehouse summed up what works today: “clean, white, modern and no carpets.”
Financial institutions are also recognizing that sweat equity can make homes more affordable for first-time buyers. Ryan McKinley, Vancity’s senior mortgage development manager, says the credit union offers a mortgage package where buyers can borrow an additional 10 per cent based on the “anticipated value” of the property after the improvements are made.