Prairie Drive Home Renovation
Interior Renovations
In 2019, BVM Contracting was employed as a general contractor for the full interior renovation and legal basement apartment project located in Toronto (specifically Scarborough). Below is the story of our client’s renovation journey, which includes the purchase of their first property and tips and advice for others who are looking to buy a fixer-upper or renovate their current home.
Meet the clients (Ryan and Kerry)
Introduction to the Property
On April 15th, 2019 Ryan Meagher (Business Development at BVM Contracting) and Kerry Readwin took over ownership of Prairie Drive, a semi-detached bungalow located in the Oakridge Neighbourhood of Scarborough (Danforth Road & Danforth Avenue). Ryan and Kerry undertook the process of renovating both the main floor and unfinished basement, making the main floor more open-concept and adding a basement apartment to help subsidize the mortgage.
The plan to buy and renovate a home in Toronto wasn’t always their first choice when looking at the different real estate options available (condo v.s. move-in ready v.s. townhome). It took a little bit of research, a lot of help from knowledgeable professionals, and even more patience to wait for the right opportunity to arrive, which ended up happening with 93 Prairie Drive.
Working with a Real Estate Agent
The process of looking for a place of their own was inspired by wanting to move out of the basement apartment they had been renting for two years. At this point in time, Ryan and Kerry had saved up enough money to afford a down-payment with the first time home buyers program. Ryan and Kerry decided to reach out to a real estate agent that worked with one of Kerry’s work colleagues to get the house hunting process started.
It took about 3 months, 12 house tours, and 3 offers before Ryan and Kerry were able to lock in a successful offer at 93 Prairie Drive in January of 2019. The house next door (the one attached to the left of 93 Prairie Drive) was the house that brought them into the Oakridge neighbourhood. The home at 95 Prairie Drive was a two bedroom plus one bedroom basement apartment. Very eager to find a place with a basement apartment, Ryan and Kerry were ready to put an offer in right after seeing the house. To their dismay, there was already a conditional offer for the property which ended up going through.
Luckily, the same listing agent was also selling the property beside 95 Prairie Drive, 93 Prairie Drive. Since there was a mix-up about the status of 95 Prairie Drive from the listing agent, Ryan and Kerry’s agent was able to negotiate getting them an offer on 93 Prairie before it went on the market. After two walk-throughs, one with the real estate agent and one with Vince Meagher from BVM Contracting, Ryan and Kerry put an offer in under asking due to the damages and deficiencies cited in the home inspection report.
Getting a Mortgage
Once the offer was finalized, the real work started with getting the mortgage set-up for the property. Since Ryan and Kerry were using the first time home buyers incentive, which lowers the cost of the down-payment substantially for first time home buyers, their options were limited. Fortunately, their real estate agent put them in contact with an experienced mortgage broker that helped them get the best mortgage possible.
As an added benefit, the broker they worked with mentioned that some lenders offer “Purchase + Improvement” mortgages that add the cost of renovations to the mortgage amount. Ryan and Kerry were approved for $45 000 worth of renovations to the basement apartment they were hoping to create. Not to mention, since they were using the first time home buyers incentive Ryan and Kerry had to take out mortgage insurance through Canadian Mortgage & Housing Corporation (CMHC), which is required when you cannot come up with 20 percent (or more) down payment for your home purchase.
The following equation can be used to calculate what a final mortgage amount will come to:
Total Mortgage Amount = Property Cost - Down-payment + CMHC Insurance + Improvement Costs
The total mortgage amount ended up coming to around $580 000.
Quick Aside: Get pre-qualified with your bank or mortgage broker BEFORE or while you search for homes!
It is important to note that Ryan and Kerry reached out to their mortgage agent concurrently while looking for properties. The benefit of doing this is that you will know exactly what you can afford by completing a pre-qualification. How much you get pre-qualified for is based on your income and debt, and also differs depending on who you deal with (banks versus mortgage brokers).
Doing this is beneficial because it gives you a clear idea about the type of property you can afford (condo vs townhome vs freehold) so you don’t stretch too far and become house poor!
Remember the Closing Costs!
One thing that Ryan and Kerry underestimated during the process of closing on the property was the closing costs, which included the following:
Land Transfer Tax
Title Insurance Fees
Legal Fees
Home insurance
This list is not exhaustive, and can include home inspection fees, property valuation fees, moving costs and other smaller items.
Overall the total cost of closing on 93 Prairie Drive is summarized below, plus the ongoing cost of home insurance which is $170 per month. The main cost of closing on a home is the land transfer tax, which is a percentage based on the purchase price of the home. If you are a first time home buyer, you get a subsidy on the amount paid ($8450 in 2019). This subsidy is already included below.
Renovation Preparation for your Fixer-Upper
Once you solidify an agreement to purchase a property, obtain a mortgage for the cost of the property (plus any improvements), and pay all of the closing costs, your prep work is almost complete!
The last question you will want to ask yourself is, "is the house I just bought in good enough shape to rent out or live in?”. If your answer is yes then you can likely hold off on renovations for a bit, but if the answer is no then you might as well rip the renovation band-aid off and get the renovation’s done to maximize rental income or overall affinity to living in the house. That is what Ryan and Kerry did!
The goal for Ryan and Kerry was to create legal basement apartment that helped subsidize the cost of the mortgage. In order to start the renovation process, it is best to contact a reputable renovation company in your given geography. Contact BVM Contracting Here if you live in the Greater Toronto Area and we would be happy to help! BVM Contracting helped Ryan and Kerry during the purchase plus improvement process by providing the necessary quote needed for the cost of creating a legal basement apartment in their home.
It is important to note that, depending on the extent on the renovations, you will likely have to get a building permit in order to complete most renovations in a property. If you are unsure if you need a building permit, visit the City of Toronto website here that outlines when you need to get one. If you do need a permit you will have to work, at the very least, with who they call a BCIN designer. If you are doing a smaller renovation and want to keep costs low it is recommended to use a BCIN Designer since architects will almost always cost more to work with. A BCIN Designer is qualified to submit permits to the city and create plans for your proposed renovations.
Fortunately, BVM Contracting has strategic partnerships with BCIN designers and architects and can properly refer you to the company that best fits your needs. In the case of these smaller renovations we almost always recommend a BCIN designer, but if you are looking to complete a much more elaborate design with a home addition or new home we can make other recommendations. Contact us as soon as you know you are renovating so you can start working out timelines and budget costs for your home renovation project!
Access Credit before you lock into your mortgage!
Another smart decision that was made just before renovations started was Ryan and Kerry took out lines of credit (both personal and joint). Kerry and Ryan would not have been approved for this after they had a mortgage, but because they opened them before they got the mortgage they were able to use them during the renovations. The lines of credit totaled $42 000 and helped keep the project on track by allowing the clients to stay liquid.
the Renovation Process
Ryan and Kerry got possession of the home starting April 15th, 2019, and started renovations the next day. The permits were ready two weeks prior to closing because they were able to start the process over a month and a half before they took possession.
Once the renovations started, BVM Contracting took the reigns and guided them through the process. Not only did Ryan and Kerry complete the basement apartment but they also updated the main floor, which is where they ended up moving into. Knowing that they needed to finish the basement before getting the $45 000 for the improvement part of the mortgage, BVM Contracting focused on finishing the basement, which took about 2.5 months.
Since the floor had to be lowered in the basement and everything was being replaced/upgraded (new furnace/AC, upgrading to natural gas from oil, new windows, etc.) the timeline of the renovation was a little longer. It is recommended to upgrade everything the first time (even if you have to stretch) because it is a lot less costly to do everything at the same time, rather than upgrading in the future.
Once the funds were secured for the finished basement, the focus shifted to the top floor, where all of the walls/ceilings/floors were removed. In order to get the open concept feel that Ryan and Kerry desired the existing furnace exhaust (which went up into the roof) was removed. Additionally, the wall separating the dining room from the existing kitchen was removed as well. Since this wall was load-bearing, BVM Contracting had to install LVL’s and work with a Structural Engineer to approve the installation.
The kitchen was to be relocated to the side wall, which meant that the existing window would have to be replaced with a smaller window in order to allow the counter-tops to not encroach on the opening.
Since the home had not been renovated previously, and was constructed in the 1950’s, there was no insulation in the walls and minimal insulation in the attic. The insulation was upgraded with spray foam in the walls and extra blown-in for the attic to get the required R-value.
Additional to all of these upgrades, Ryan and Kerry elected to refinish their bathroom, add vinyl throughout the home, and add a natural gas fireplace. In order to save some money on appliances, Ryan and Kerry elected to buy scratch and dent appliances that saved them 15-20% and also installed an IKEA Kitchen (which save them around $7.5 K).
Once the interior was completed the focus shifted to finishing the exterior, which can be seen below. The ugly yellow brick was covered with a beautiful white exterior paint, the eavestroughs, soffit, fascia, and downspouts were redone, and the front and back gables were refinished with a vinyl siding.
The final product
Introducing the new and improved 93 Prairie Drive! After about 4 months of work on the home it was finally deemed move-in ready, which was great news for the newly engaged couple. All of the hard work put in and the guidance from BVM Contracting made for a smooth renovation experience. The success of any renovator isn’t based on how many hiccups are encountered, but how many of those hiccups are addressed and solved. In any renovation there will be challenges that will need to be addressed and solved, and it is the job of your renovation company (and the client) to work together to come up with the best path forward!
We are very proud of Ryan and Kerry for taking the leap of faith and trusting BVM Contracting to help guide them through the process and build the home of their dreams.
Accessed Rebates
Ryan and Kerry recovered the HST Rebate (GST191), which renovations are eligible for if it can be proved that 90% of the home was substantially renovated. They were able to obtain around $6 300 with this rebate with the help of BVM Contracting, which has helped pay off the debt from the renovations.
Additionally, since Ryan and Kerry installed a back water valve and sump pump, they also applied for the Basement Flooding Protection Subsidy Program. This will give them back around $1 800 in subsidies from the City of Toronto.
Basement Apartment Rental Amount
Kerry and Ryan successfully found a tenant by using a tenent screening service to lock down the right tenant for their apartment. They were able to find a tenant with good credit paying market rent at $1 500 per month, which is more than half of the couple’s monthly mortgage!
property Appraisal
Ryan and Kerry were able to appraise their home in order to refinance their mortgage to utilize the equity gained from the renovations. Find out more about the new value of their home, what they bought the home for, and how much the renovations costed by clicking here.
ABOUT BVM CONTRACTING
BVM Contracting is a full-service General Contractor or Home Builder located in Toronto. We provide home renovation and building services for major home renovations (kitchen renovations, bathroom renovations, basement renovations, full interior renovations, home additions, and new home construction). Our goal is to help guide our clients through the process of renovating their home, from concept to completion.
Further than providing General Contracting and Project Management for major home renovations, we also offer value-added services such as renovation financing, renovation rebate consultations and services, building permit and design services, smart home installation services, and real estate investor services.
To learn more about our offering by visiting our services page.