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RENO VS. INFILL

RENO VS. INFILL

Building and renovating a home is very much like writing a Hollywood movie. A great home begins
as a draft plan – similar to a movie script – and within months it is converted into a structure, which can induce some powerful emotions. However, unlike many Hollywood productions, a properly planned real estate project can assure you of at least some profit.

What steps can you take with renovation or infill construction projects to achieve both profit and a Hollywood ending?
Acquisition strategies, financing options and potential sale price upon completion, along with your management skills, will dictate your level of success.

THE PREMISE Compared to a renovation and flip, a tear- down is a longer project that involves several transactions, a complex permit process, a longer timeline to completion, and generally requires more experience. Though a new build could seem like a saga, a poorly planned, modest reno can also turn into a nightmare. You can learn a lot from a renovation (risking less) and still profit.

THE STAR PROPERTY Your Realtor can search on MLS for: “as is”, “vacant” or properties with more than 120 days on the
market. These could be indications of owners in trouble. I also recommend properties with expired, terminated or suspended listings. Check that each time they return to market, there
is a large price reduction. Find these properties by searching for listings that include: “reduced price”, “power of sale” or “motivated seller”.

BUDGET Before you call “Action”, know your financial snapshot. Cash and lines of credit are a preferred, cheaper
way to finance projects. Mortgage brokers specializing in construction financing should be part of your team, even if you think you can finance the project on your own.

“STAY ON TARGET” I always work from a very detailed budget spreadsheet that I make available to my clients online. Budgets are never arbitrary. If you don’t know what something costs, get on the horn. A budget goes hand in hand with your draft plans.

“CAST AND CREW”  Start with an architect and a project manager/contractor. They will help make your project viable, get approvals from the city, and stick to your budget. Some architects can help with the permit process; others mostly work with experienced builders and only focus on plans.

NO “CLIFF HANGER” The sale price of your completed project should not come to you as a surprise. Start with the “best educated valuation” first, and then get into acquisition, drafting and planning.

CAUTION Do not rely on currently listed prices of properties that seem similar to what you are planning. A professional constantly reviews the most recent sales and adjusts the target sale price, if necessary. Place little value on the highest sales.

NEW BUILDS As in a renovation, working backwards
from a well-estimated sale price is the right approach to new construction. Lenders use that value to prevent over-leveraging in your project. For a proper valuation, choose a highly competent appraiser. Take the appraised value, subtract the cost of architecture, permits, city levies, construction, financing and mortgage broker fees, real estate fees, and 10 per cent of budget for contingency, then see if you would be left with a sufficient profit to go ahead with the project.

HOLLYWOOD ENDINGS A fairly priced property can sell quickly and let you move on to the next project.
For more information, please complete your inquiry below or call the author at 647 209–4004 (Yan)

Office: P. 416.441.2888; F. 416.441.9926; 2145 Avenue Road, Toronto, Ontario M5M 4B2
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