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Does Renovating a Condo Make Financial Sense?

10/20/2014 06:07 EDT | Updated 12/20/2014 05:59 EST

With condos taking longer to sell in Toronto, and a seemingly endless supply of competition from both new build and resale, many condo sellers are looking for ways to differentiate themselves from their competition. One question I am most frequently asked is what renovations in a condo make sense, and which ones to avoid. Here are some things to consider before starting any renovations:

A condo is a commodity, and there is a limit on how much they can sell for

It is very common in neighbourhoods with detached homes for sales to be hundreds of thousands of dollars apart. A brand new build on a large lot with an addition and high end finishes can sell for double the price of a neighbour who has a small house with no updates. This is not true in condo buildings. Your sale price is tied very strongly to other sales in your building, and there is only so much room for buyers to go up. Keep this in mind when creating a budget - if you spend too much, you can guarantee a loss before you even list the property!

Building age matters

Most of the condos in Toronto have been built in the last 10 years, meaning they all have relatively new finishes. In these cases, even if you do a great renovation, there won't be much difference from your property and something that was brand new less than 10 years ago. Your newly installed stainless steel appliances don't look much different than the ones that came with the building several years ago, but the $5000 you spent on them certainly hurts your bottom line. In older buildings, there is definitely more potential for a higher selling price. In these situations, look at the sales history and figure out if other sellers have renovated and made a profit. Buyers don't want to set a record price in a building, so if there are no other sales at a higher price, you may want to hold off on doing an extensive renovation.

Know your buyers

Most condos in Toronto are one or two bedroom units, under 1000 square feet. The buyers for these properties are young professionals, likely without children, and they have very different tastes and needs than a buyer looking for a detached house. Focus on things you know they will like, such as new modern hardwood floors, granite countertops, an accent wall, a glass shower, or other renovations that centre around making the property feel modern and urban. I've seen buyers fall in love with a custom kitchen island, a built-in natural stone TV wall, or a loft style concrete ceiling, and then ignore other properties that were overall in better condition but didn't have these features. These extra touches are not too expensive and can make a difference.

When renovating a condo it is always important to try to curb your spending, figure out if other people have done similar renovations and made a profit, and to remember that it is much more difficult to renovate and flip a condo for a profit than it is to do the same in a detached house. However, with some creativity and the right plan and design, there are some renovations that can help to facilitate a faster sale with more money in your pocket.

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