# Makes sense do a renovation from a homeline?



## canadian gab (Aug 6, 2011)

Hi I have typical case that seems easy but several realtors have contradictory opinions. 

House: Old Bungalow, 1.5 bathroom, 3 bedrooms, current price is $570K 
Condition: 
Kitchen from the 80's, white appliances, medium 
Main Bathroom: from the 80's, medium 
Basement full finished, high-end from the 70's 

Same houses full renovated sells for $640K to $700k max 

The question that realtors contradicts is: 
Mortage remaining: $285K 
Equity: (570K-285K=$285K) 

I have $50K from a homeline attached to the mortgage if I invest these $50K distributed: 
1) $7k in appliances, $3k in granite, same cabinets 
2) $10k in the bathroom 
3) $3K in shutters 
4) $5K in the second bathroom to covert to full. 
5) $20K in the basement to upgrade to 2015 
6) Full paint and extras. 

The new price + investment is $620K, Gain conservative only $20K ($40K if lucky) 
The morgage would be now $335K 
New equity: ($640K-$335K=$305K) 
Want to move to a $800K house, also I want to buy first and sell later (banks makes this difficult) 

The question that they contradicts: is worth the reno spending $50k from a homeline? 
If is spent from the own pocket then is not brainer... but is this case??? 

I would appreciate your valuable expert opinions. 

Thanks a million.


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## Just a Guy (Mar 27, 2012)

You never know the true value of your home until someone pays you for it. They can say the rents will get you more, but that's only a guess. If the buyers don't like your choices, they'll want to redo them so they won't see the value you do.

Then you need to look at the market in general...right now it's pretty stagnant...not a lot selling, whatever the price.

I'd suggest you renovate if you want to stay in your place and it will bring you enjoyment anything else is probably a bit of a gamble.


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## nathan79 (Feb 21, 2011)

Nothing wrong with white appliances. People are getting over the stainless steel fad after realizing it's an oxymoron -- stainless is nearly impossible to keep stain-free.


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## Just a Guy (Mar 27, 2012)

Once had a tenant who bought and installed stainless appliances in one of my rentals...they didn't cook better, or keep the food colder, or wash the dishes any better...just cost them several thousand dollars more than the free ones provided. Also, considering it's just a thin panel, I don't understand why it boosts the price up by $100 at least when they have the option between white and stainless in the exact same appliance.

Sort of like the "invisible spray" option on cars hat the dealers try to sell you on...


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## rikk (May 28, 2012)

OT: If I were selling I'd put a few $$s into curb appeal, fresh coat of paint and extras (#6 which you've not priced but could be $5K-$10K) ... presentation, and leave any renovation or not up to the new owner ... or ... I'd focus on the new place.


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## sags (May 15, 2010)

Renovations rarely recover the cost.

I agree on the curb appeal aspect. That is the first thing people see and brings them in the door............or sends them looking elsewhere.

Having said that...........a fresh coat of paint, hardwood floors and new carpet where needed, and replacing old doors and mouldings is a relatively inexpensive upgrade.


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## RBull (Jan 20, 2013)

^+1

Deal with good first impression/curb appeal but don't bother with expensive upgrades. Even if you did it's very possible the new owner won't like them and the value is wasted. 

Realtor may like to see them because it makes their job easier- less potential objections, but frequently renos don't get fully paid for by next owner.


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## Just a Guy (Mar 27, 2012)

First thing most new owners do is paint. Make sure the place is clean, looks nice and move on. I once had a realtor convince me to renovate the kitchen and bathroom...the new owners ripped them out and replaced both first thing.

Paint is cheap and cleans a place up nice (but don't be surprised if they repaint), curb appeal is important.


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## tygrus (Mar 13, 2012)

Look this is nuts, you are dropping $50k into a house you no longer want to live in just to raise the value by a meager $20k all so you cna sell and move into an $800k house? Are you serious? Do you know the state of the economy?

Anyway, don't waste another dollar on your house then. Hire a top notch stager who will easily blunt all the negatives on your house with a little creative decorating. Probably get you your $20k that way without all the renovation mess, an dif not, probably get you a quick sale.


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## canadian gab (Aug 6, 2011)

Thanks Tygrus, just a guy, Rbull, rikk, I will consider spend much less in the reno, what I still don't know if makes sense to take the money from the homeline? , this is more a finantial advise, thanks a lot


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## rikk (May 28, 2012)

^ Well, I'd guess the balance becomes due on the sale of the home which may or may not be an issue for you ...


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## RBull (Jan 20, 2013)

In any case if you sell and purchase another home $500k mortgage is a lot, especially with toppy real estate now. Good luck


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## Homerhomer (Oct 18, 2010)

canadian gab said:


> Thanks Tygrus, just a guy, Rbull, rikk, I will consider spend much less in the reno, what I still don't know if makes sense to take the money from the homeline? , this is more a finantial advise, thanks a lot


spent the money you have, not the money you don't have.


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## Rusty O'Toole (Feb 1, 2012)

If you are going to do any reno's you should get back at least $2 for every $1 you spend. If you spend $50K the value of the house should increase $100K. If it won't, don't do it.

My experience is, even GOOD renos don't pay. Everyone wants the cheapest price. Spend the money making the place beautiful, now they want a beautiful house at the cheapest price.

Make sure the place is clean and shows well. If it is shabby looking do paint and carpet and let it go at that. Maybe a couple of new inexpensive light fixtures.

Throw out all the junk in the basement. The stuff you want to keep can go in the garage or into storage.

Fix up the lawn and flower beds. This does not cost much and makes an impression, it is one of the few things you can do that actually pays.

As long as it looks clean and is priced right it will sell. When the new buyer starts talking about how they are going to redo the kitchen and bathroom, and estimate time and money you know is way too low, bite your lip and say what a wonderful idea.


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## Cal (Jun 17, 2009)

tygrus said:


> Look this is nuts, you are dropping $50k into a house you no longer want to live in just to raise the value by a meager $20k all so you cna sell and move into an $800k house? Are you serious? Do you know the state of the economy?
> 
> Anyway, don't waste another dollar on your house then. Hire a top notch stager who will easily blunt all the negatives on your house with a little creative decorating. Probably get you your $20k that way without all the renovation mess, an dif not, probably get you a quick sale.


Exactly what I was thinking......Spend 5oK to maybe get it back, why?


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## carverman (Nov 8, 2010)

Rusty O'Toole said:


> If you are going to do any reno's you should get back at least $2 for every $1 you spend. If you spend $50K the value of the house should increase $100K. If it won't, don't do it.
> 
> Fix up the lawn and flower beds. This does not cost much and makes an impression, it is one of the few things you can do that actually pays.
> 
> *As long as it looks clean and is priced right it will sell.* When the new buyer starts talking about how they are going to redo the kitchen and bathroom, and estimate time and money you know is way too low, bite your lip and say what a wonderful idea.


That's pretty much my philosophy on up keeping the house. Buyers today don't want to spend thousands on fixing things up around the house after they buy it.

Renos, (unless the carpets are so dirty they have to be replaced, or the walls are dirty and grease behind the kitchen stove), only make the house attractive to the prospective buyer(s), you can't expect to get the money (labour, materials and taxes) spent on the renos will be recovered..it's all in the overall price of the house in your market area. 

IF it is priced right compared to the other houses that are listed , or have sold around your area/street, it will sell.

What is important is the age and condition of the roof...that is important for resale. 

The driveway, cracked or broken does not leave a good impression. Perhaps the age of the furnace and AC as well.

Most, if not all prospective buyers these days will order up a home inspection if they are serious in putting in an offer, ( depending on what is disclosed in the initial listing), that
could have some bearing on the negotiations, if the buyer is still interested..that is.

These items generally have to be replaced every 15-20 years or so, if not replaced then repairs have to be done at some point. 
This may concern prospective buyers more than the kind of countertops that the reno has installed. 

The bathroom fixtures, depending on colour may also have an effect on resale. Today, not too many buyers want to see gold, green, mauve or pink '70s colours in the bathroom, so that could be a issue with a potential buyer, and that will usuallly result in a lower price from the listed price, as most bathroom renos can run around $10k or more.

Definitely some nice landscaping, flowerbeds or foundation plants help to make the home more attractive to potential buyers in the spring to fall months.


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## canadian gab (Aug 6, 2011)

Rusty and caveman
Thanks this is good perspective to have 2:1 ratio for $$reno and sale price increase, In my case I and considering only in the traditional thinking: reno Kitcken and bathroom makes a RIO over 30% because are from the 80's and low quality, but with the lowest amount of investment, granite, used SS appliances, handles, moulding and painting. Same for the bathroom.

My only question is the financial side of the equation...taking from the homeline..

thanks a million


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## Spudd (Oct 11, 2011)

You seem pretty well decided to do the renovations. I don't think it makes any difference if you take it from the homeline or not (except obviously you would have to pay some interest on the amount you take - hopefully you could get the renos & sale done quickly so this would be minimal). Do you have actual cash you can use to do the renovations? 

The other thing to keep in mind is if you plan to buy your new house first, the bank may be less willing to give you a bridge loan (that's what you call it when you own 2 houses and you have temporarily a huge mortgage that covers both) if you have a larger balance on your first home. You should go talk to the bank about your plans and see what they say.


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## canadian gab (Aug 6, 2011)

Spudd Thanks for the advise I never considered the potential issue about the bridge loan, I'll look into, Thanks very much for that!


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## Rusty O'Toole (Feb 1, 2012)

If I had to boil it down to 2 thoughts they will be:

Don't put more money into an investment than you can get out.

Everyone is a hanging judge of price. No matter how nice, no one wants to pay up. There may be exceptions in a hot market but right now, be careful.


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