Dear urbaneer: How Do I Set My Home Up For Financial Success?

Dear Urbaneer

Welcome to this month’s installment of Dear urbaneer, where we assist our clients by answering their most challenging housing questions. This time around, our Buyers, keenly aware of the asset value of their new house, are proactively thinking how to strategically boost its resale value.

Dear urbaneer:

Under your calm prudent guidance, we are thrilled and relieved that after several months of searching – and losing in those frustrating bidding wars – that we are about to take possession of our new Home! We'll admit the search was emotionally exhausting, and while you always said we'd ultimately find the one (which we did!) we're only just enjoying the joy and jubilation that comes with the end of a long journey. However, now that we’re reconciling we've tied up the bulk of our finances in this home (both cash and debt) we want to take the appropriate steps to make ensure we not only preserve but increase the value of our house. We know you've got the formula locked down, so what improvements do you recommend?


Setting Our House Up For Future Financial Success



Here's our response:


Dear Success:

First of all, Woo Hoo! on finally getting your Home! There's no question yours was an exhausting housing search, like so many other weary Buyers. It really is becoming commonplace in the City of Toronto as the supply of freehold housing shrinks, while demand – and prices – balloon. This inverse relationship has left scads of would-be-buyers re-examining their needs, wants and wishes, with many reluctantly having to exit the downtown market for suburban options as they get priced out of the market.

On a more positive note, now that you've secured a house – now will be the time time to get down the business of living your life in your new home. But, as you’ve very astutely observed your house isn’t just your home – it’s a major asset – and realistically your biggest liability (i.e. mortgage debt). This is particularly true in the City of Toronto, where homebuyers have been leveraging themselves to the top of their budgets, because the dynamic of market demand currently requires it. As we learned embroiled in this scorching hot market, every property sale price set the precedent for the next house, so while you had to push yourselves from your ideal price point to your financial maximum, you've ticked all the boxes on your house-hunting requirements!

Real estate is a great investment, but generally speaking, you need to let it grow over time in order to really reap the rewards of equity. You’ve probably heard water cooler chatter, or dinner party conversation, where friends, family, colleagues or neighbours seemingly are buying and selling their homes in short order, apparently amassing a small fortune along the way. Rest assured, chances are their calculations are off. There's a laundry list of costs associated with buying and selling a home that significantly erode the bottom line, which essentially takes years to accumulate to the positive. We’ve talked about this in a past Dear urbaneer post called “Dear urbaneer: How Much Profit Should I Expect Climbing The Property Ladder.”



Location, Location, Location

With your eyes forward to your housing future and back to those basic rules we discussed during your search around preserving and growing your property's value over time. That mantra we espoused as the cardinal real estate rule “location, location, location” is so commonly repeated because of its simple wisdom. We appreciated your commitment to our point of view that “You can change the house, but you can't change the location!”. You strategically purchased a property which sits nearby that ideal real estate trifecta: access to amenities, public transport and green space, which means you’ve already crossed a major element off of your asset-boosting to-do list. We know the reason for this is that people will always pay a premium for proximity. It’s all about being near amenities that will enhance quality of life and provide convenience – like shopping, schools, parks, community centres, cafes, restaurants, etc.  Here is a past Dear urbaneer called, “On Choosing A Winning Location.”



Return On Investment

Regarding the physical steps you can apply to your own property to increase and boost its value. It ultimately depends on your short and long term budgets, the state of your home and on your tolerance and desire for renovations. The greatest ways to elevate your property's value are to focus on the kitchen, washrooms and the master bedroom sanctuary. As you cross the threshold into the world of renovations, did you know Canadians are actually spending more on home renovations then they are on purchasing new homes? You can read about the stats and surge in home renovations in our recent post “Behold The HGTV Effect On Toronto Real Estate”.

The numbers will vary, but in general, you can expect to recoup upwards of about 75 percent of your cost for a kitchen or bathroom overhaul. Other smaller improvements (like doors and windows) will also pad your bottom line. Click here for the U.S. based National Association of Realtors’ 2015 report on remodeling cost vs. value.  While the costs and overall market will differ in Canada, the message is similar. In many cases, less is more. That is to say, if you're financially limited, don't fret as smaller projects ultimately combine to add overall value.

Looking for some cheap & easy fixes? Here's a great article from MoneySense, called “Top 10 Cheapest Ways To Increase The Value Of Your House which lists various projects and their potential value increases. In addition to the kitchen and baths, they suggest homeowners concentrate on other investments too. We're fans of investing in landscaping and curb appeal, the value of upgrading lighting and flooring, because they renew a space and are perceived to be costly and more difficult to install that they really are. Buyers always value an updated roof because it speaks to the fundamental for comfort in shelter, and repainting both your interior and exterior in today's colour palette subtly communicates how on trend a property is.

Another worthwhile point; if you're upgrading with an eye to resale value versus your own particular taste, make sure your finishes and fittings stay heavily in neutral territory; by employing a neutral palette and an intelligent space plan, you’ll appeal to the greatest number of Buyers. After all, even we experienced during our search how frustrating it was to see houses where the owner had sunk large sums of money into taste-specific renovations that completely turned you off.  Here’s an article that talks about that and the relationship between cost and value for home renovations from Style at Home called “Return On Renovations: How Much Will You Get Back?” Want a giggle while learning a lesson? Here's one of our rants and ridicules called We Flip Quesadillas, Not Houses! which shares some of the common faults of flippers that we see everyday in the Toronto real estate market.


The Condominium Conundrum

While there are common steps that will apply to increasing a freehold property's value, there are certain specific aspects condominium owners should be mindful of when trying to boost value. Urbaneer has written frequently about the role the condominium market plays in Toronto real estate, which has a greater vulnerability in value given the potential oversupply of smaller units in the ubiquitous point towers. Because of this, it's more crucial than ever that condo owners be proactive in styling their spaces. As a rule of thumb, presenting the unique is your ally. Thoughtful space plans with quality finishes in premier locations are always clear winners in the condominium market. Upgrades don't need to be expensive, but they need to be executed regularly to ensure your asset value keeps growing, as condos tend to become aesthetically dated more quickly given the constant arrival of new fresh on-trend product.

In addition to some the general suggestions that we extend to all housing types, we recommend that condominium owners pay attention to the details. Emphasize or create storage space. Replace hardware in kitchens and bathrooms with what’s current. Flooring carries even more weight in a smaller space; avoid carpet if you can in favour of durable, rich hardwood planks. Countertops are a focal point, so make sure you make this a clean, crisp design element that stays within your budget. Click here to read a past Dear urbaneer post on this subject in “Dear urbaneer: How Do I Boost The Value Of My Condominium?

We hope this helps!


Are you wondering how to actively engage in your housing future through making a smart buy – and then setting it up for growth? We at urbaneer have decades of experience navigating the sometimes turbulent waters of the Toronto housing market with great success. We’d be delighted to help you, or someone your love, on the journey to home sweet home!

~ Steven and the urbaneer team
  earn you trust, then your business

Steven Fudge, Sales Representative
& The Innovative Urbaneer Team
Bosley Real Estate Ltd., Brokerage – (416) 322-8000

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