Buying and Selling an upgraded condo
Who gains from home renovations? The user or the flipper?
Last November, I listed a condo at the Mississauga Valley neighbourhood. My enthusiastic seller and his lawyer were keen to sell off the property as soon as they could. But selling any property is easier said than done. It requires a lot of effort, planning and hard work. There are numerous expenses involved and buyers hesitate to spend on upgrading their property.
However, when a property is well updated and upgraded, selling takes little time. Buyers don’t mind paying a bit more for well-renovated properties as it saves them the hassle of doing it up. The average price of a decently upgraded condo in the building I mentioned sells for around $250,000 or more. But the property in question needed a lot of work. My background in interior contracting made my mind tick. I quickly added up the approximate numbers.
Do you math before thinking of selling an upgraded condo
A well laminated floor with baseboard etc. would amount to nothing less than $3,500. Upgrading the one and a half bathrooms would take at least $8,500. Painting and finishes would cost about $1,500. Kitchen costs could easily amount to $7,000. Five appliances could further add up to $3,500 more. Light fixtures and switches would take about $1,500 and other miscellaneous items could add up to another $1,500 which totaled to about $27,000.
I admit that putting dollar value on any property depends on the buyer’s taste and choice. When it comes to spending money, the sky is the limit. I can think of just one refrigerator costing as much as $20,000 easily, if one had to plan it on a higher budget.
But the trick is smart investors do not over-renovate.
That’s the first investment rule. For a user (those living in the unit) improvements such as those mentioned above can be carried out slowly and gradually over a period of time period. Even if about $27,000 is spent on reasonable upgrades eventually, buyers can end up with a condo worth $242,000, if he had to buy this unit for around $215,000. That is $8,000 below the market price. And why not, this buyer is taking the risk and investing his own cash.
What about the flipper?
The flipper is one who wants to make profit from selling an upgraded condo. In order to flip this unit, the flipper would want to recoup the buying and selling cost in addition to the carrying cost (while the work is being completed). If you add up the above approximate costs: buying cost (2%) $4,000, selling cost (5%) $13,000, carrying cost (1 month to fix the unit, 2 months to sell and close) $5,000, the total amounts to $22,000. Now the break even price comes to $242,000+$22,000=$264,000.
That might not make much sense for a flipper to risk buying this property at anything more than $210,000. When this property was put up for bidding, I was overwhelmed with the offers from both investors and the user. As you probably guessed, the user won the bid!
Upgraded condo listings at older condo buildings are popular in Mississauga
Spacious two and three bedroom condos in older buildings are in high demand. Currently, there is a huge demand for both investors and users to buy these condos and renovate them with modern interiors. Many first time buyers opt for these renovated properties since they do not want to invest their own money on improvements. Older condos are also popular with people who downsize from bigger homes in the Mississauga. These users are cash rich and often renovate condos with modern upgrades for their own comforts.