When Mrs. And Mr. Brar went looking for a home, they knew exactly what they wanted “a run-down house with a depressing exterior and a drab, dingy interior”.
They found it. The front lawn of one property they visited was a blank rectangle, with sparse grass but not a single shrub or tree to break up its unappetizing appearance. From there, things rapidly got worse. The backyard was littered with dog poop and looked onto a seedy back alley. The interior of the two-storey 1800 sft house was full of worn carpets, dark paint and faded wallpaper.
But it was a solid house in a leafy neighborhood of Brampton with good schools. The Brars knew they could fix many of its problems with a bit of sweat, a few new doors and a lot of paint. So they ignored the $300,000 asking price and made a low-ball offer of $230,000 for what they figured was a perfect diamond in the rough. Their bid was accepted the next day. “The house had been on the market for six months, says Mrs. Puaar” The kitchen and bathroom were old and dreary. In fact, the whole house was in a sad state. But we put about $50,000 worth of improvements into it “doing almost all the work ourselves, a little at a time” and we figure we’ve made hundreds of thousands of dollars in just three-and-a-half years.”
Interested in finding a similar diamond in the rough? Then it’s important to know what you’re getting yourself into. Simply buying any old property can easily cost you a fortune in renovations. But if you learn how to spot an undiscovered bargain, you can turn up surprising deals even in a hot real estate market.
In my experience, “More than 90% of buyers judge a book by its cover,” They drive by and if they don’t like what they see at first glance, they don’t even go inside. But that’s not the way to find a great fixer-upper. You have to be able to walk into an awful-looking house and visualize what it could be like with new paint and wallpaper and a few key renovations.
Here’s how to do just that:
Remember that close counts
The classic tip for real estate buyers is to buy the worst house on a good street, and that’s still the best strategy. Doing so almost guarantees you won’t overpay for a home. You can boost your property’s value simply by doing small renovations that bring your house up to the level of its neighbors. In my opinion look for proximity to good neighborhoods and leafy areas that have a bit of natural beauty since those advantages can’t be easily bought or duplicated.
Think like the next buyer
We’ve all been told to put other people first. That advice is especially true when it comes to finding a diamond in the rough. To be truly blessed, forget about your own needs. Think instead of others, specifically those future home buyers that you hope will one day hand you a big fat cheque for your house.
Think of parents, for example. Few things are more effective at selling a house than great schools. So even if you don’t have school-age kids yourself, make a point of inquiring into the quality of local education. Similarly, you should think of potential landlords. A basement apartment can make an expensive home affordable to a wide range of buyers, so even if you don’t want to take in tenants yourself, you may want to buy a house with such an apartment already in place.
When searching for a bargain, your best friends are dirt and clutter. Mess turns off buyers and can reduce the price you have to pay. “There were dust, garbage and debris everywhere when I first looked in my current house,” says Mrs. Brar. “But I could see a beautiful floor layout. The rooms were large and spacious. And even though there was no landscaping, it had a fairly large front and backyard with a driveway and small garage. There was great value there.”
Like Mrs. Brar, you have to look beyond the obvious to find a deal. First rule: get out of the car and take a look no matter how bad a place may appear from the curb. Second rule: be systematic in evaluating a home. Because clutter can deceive you into thinking rooms are smaller than they really are, carry a tape measure to check room sizes. Pack a digital camera so you can snap photos to remind yourself of key points.
If a house is broken into a warren of small rooms or seems awkwardly laid out, tap the walls to figure out which ones is weight bearing. A solid sound indicates a structural wall, one that bears weight. Changing a structural wall can cost thousands of dollars and sabotage your renovation budget.
On the other hand, a hollow sound usually indicates a non-weight-bearing wall that can be removed with relative ease for a couple of hundred dollars and a few hours of your own labor. If all that stands between you and a beautiful new floor plan are a few non-weight-bearing walls, you may have found a diamond in the rough.
Know your own limitations
Some homes that look like diamonds in the rough aren’t, because the cost of updating them would be enormous. A leaky basement or a big crack in a structural wall should send you running unless you’re prepared to spend $20,000 or more on repairs. Floors that are severely uneven should also sound alarms. In general, anything you have to hire a pro to do is likely to blow up your budget. Completely redoing an old kitchen, for example, is a quick way to blast through $15,000 or more. An old bathroom will cost $10,000 or more to bring up to date if you’re putting in new plumbing and fixtures.
Beware of renovations
Be cautious of homes that have already gone through major renovations. You have no assurance that the jobs were done properly. And even if they were, you’ll probably wind up paying top dollar for the property.
Instead, focus on homes that don’t need major work but can be dramatically improved with cosmetic touches. A true diamond in the rough needs only fresh paint, new doors and tasteful landscaping to make its exterior look substantially better. When it comes to kitchens or bathrooms, the ideal diamond in the rough needs only new tiling, a new countertop, new cupboard handles and a tasteful paint job, not structural work.
Look for freebies
Always lift up carpets to see what the flooring is like underneath. Hardwood floors beneath old, stained carpeting are the equivalent of a $15,000 gift if you calculate what they would cost to install new. Oak bannisters, too, can often be found hiding underneath chipping paint. “If you have an oak bannister and railing on a painted stairwell, simply stripping the paint off and staining the oak underneath can change the entire look of an entryway.
Become a tree hugger
You should keep an eye out for homes that have attractive trees. I believe that mature trees can add $10,000 or more to the value of your house. In fact, it was the four 100-year-old pine and maple trees in the backyard that sold Mrs. Kamath on her home. “They needed a bit of cleaning up so we trimmed them back a bit,” says Mrs. Kamath “Now they give the backyard a great cottage feel.” The moral? Look for homes with trees and if your house doesn’t have one, plant a sapling tomorrow.
Practice flower power
The ideal diamond in the rough is a house that packs no curb appeal, often because it lacks an inviting front lawn. You can instantly add value by planting a few hundred dollars worth of flowers and shrubs or adding rocks, paving stones and other decorative elements. “When we bought our house, the front lawn was a disaster, “ no flower beds, no winding path,” says Mrs. Kamath “My husband and I took our trailer, loaded up $40 worth of river rock, brought them home and laid them ourselves. We then power-sprayed the whole front patio, got some new white numbers and front entrance door, and painted the garage door and front shutters. When you look at it now, it looks like a completely different house.”
Love among the listings
Here’s where to start looking for the fixer-upper of your dreams.
The best way to get a real estate bargain is to look where others aren’t. Vacant properties, for instance, are often empty because the seller has bought another house and moved. Given the cost of paying two mortgages, the seller is often eager to make a deal. And because empty homes can appear sterile and cold, they scare off many other potential buyers.
Homes being sold by retirees are another fruitful area for bargain hunters. “The homes are often dated on the inside,” says Hodge. “And retirees may not be as motivated to get top dollar because they’re not moving up.”
Homes that have been used as long-term rentals can also be great finds. They’re often older homes in established neighborhoods, but often have surface damage like holes in the walls. But that’s good news for you because it means the house can easily be cleaned up and fixed.
Finally, ask your agent if he or she knows of any properties that are difficult to show, whether because a tenant won’t co-operate or because the showing hours are limited. Many real estate agents and home buyers won’t bother with these places. As a result, you’re not going to be bidding against a lot of other potential buyers. That presents an opportunity to negotiate a great deal.