November Market Stats

Today we’re going to take a pause on the blue smurf house flip to discuss the current market trends in Kitchener, Waterloo, Cambridge and Guelph. 

Looking back, we saw a building surplus of properties for sale in the region, meaning there was more inventory than there were buyers. However, that surplus was bought up in November bringing the supply down again. With that surplus we saw a dip in prices of detached homes in the KW region with a median price of $901-905K. Waterloo is in the lead with the higher median price of detached homes at $950k. With the surplus gone the low inventory is back and causing prices to slowly start creeping back up. 

Kitchener and Cambridge houses are still getting 120% of asking price. For example, if a house is listed at $750K it is selling for $900K. Guelph does not show this same trend of going over asking at such an extreme but does have the highest home prices among the 4 cities, even higher than Waterloo. Historically, there has always been a large gap between Guelph and Cambridge house prices. Guelph house prices are 10% higher than Cambridge which has the lowest housing prices in the region. These prices are not only seen in detached homes in Guelph but also in townhomes. This past month there was a 6% increase in townhome prices in Guelph. 

If you’ve always dreamt of living in the country, now may be a good time to check out the inventory as we are seeing a dip in country home prices. 

Now let’s jump into the stats on condos across KW, Cambridge, and Guelph because we are seeing a big shift here. Condos in KW and Cambridge are up 10% with a median price of $520K! Let’s break it down and look at the condo price per sq ft for a 1 bedroom condo. For Kitchener the price is $598K and for Guelph it’s $709K. That’s almost a $100K difference for the same condo! If you’ve been considering diving into the market but haven’t been sure where the best opportunity lies, the Kitchener condo market may be your answer!

Finally, let's look at the stats on who is buying and selling in our region. We are seeing a high number of buyers, 45% to be exact, from outside KW, Cambridge, and Guelph. Many of these buyers are not surprisingly, from the GTA. On the selling side we are seeing 19% of listed homes from brokerages outside KW, Cambridge, and Guelph. 

So tell us, what do you think about these current market trends?

Catch you on the flip side,

The Blue Smurf Flip Part 1

My first career was as a Naturopathic Doctor and all through post graduate school I dreamt of owning and running my own multidisciplinary clinic. So naturally, we decided to take on this project after having a triplex and 5 single family home flips under our belts. This was an entirely different beast though. Commercial properties were out of our budget at the time and so we had to find a residential property that could be converted into a commercial space. 

When we came across the blue smurf house in downtown Kitchener we knew it was perfect. The proximity to downtown and public transit was ideal. It was located on Victoria street, which is one of the busier streets in Kitchener and so it’d be great for drive by marketing. It also had the perfect layout to have a mortgage helper with an upper residential unit. When we bought the building there were several challenges to overcome immediately. Most importantly, this legal nonconforming duplex had the zoning we needed to make the conversion from duplex to commercial and residential, mixed use building (MU) zoning.

The driveway debacle 

While working on the site plan approval for permits, we had to do a property survey and discovered that the driveway was not actually on our property! Well, a very small portion of it was, but most of it sat on the neighbouring property. Yikes! Our lawyer tried to get title insurance to cover the cost of moving the driveway or buying the land from our neighbour. Unfortunately, insurance would not cover this expense so it had to come out of our corporation's pocket. We ended up moving the driveway onto the other side of the property and redoing the entire parking lot with curbing, room for snow storage, accessibility parking and lighting for safety. 

Permitting

This process was slow and   l      o     n      g. In total, it took about 1.5 years to get our stamp of approval to open our doors to the public. We required a variance for the parking lot as regulations stated we needed 7 parking spots plus an accessibility space. We were able to fit 4 parking spots plus one accessibility spot. The variance process alone was tedious. We had to attend meetings and panels where we had to present the project and explain how the building could function with fewer parking spaces.  During the process of working with the city we also learned that the city was going to TAKE 10 ft off the front of the property for future city planning development. They just took it. We didn’t get paid for that land or receive anything in exchange, just gone. To add insult to injury, we had to cover the legal costs of giving the land to the city. This project was starting to feel a bit cursed. Oh, we were also required to make what was basically a donation to Victoria Park if we wanted our permit. In the end, the permitting of the blue smurf house cost us $60K. Yes, you read that right 6 followed by 4 zeroes.  

Layout and Additions

We did some minor layout changes in the upper residential unit. The goal was to create a nicer flow in the kitchen and bathroom and to add a utility room so that it would run separate from the commercial unit. Additionally, we made it beautiful as that is not the word I would use to describe it when we found it. The main floor, which would be the clinic/commercial space, is where the bulk of changes happened. Originally it had a full kitchen, one bathroom and two bedrooms. By the time we were done it had 2 bathrooms, a kitchenette, 3 offices, a reception area, and an addition on the front of the building to make a studio space for yoga, classes/workshops, etc. To do this we had to reinforce the basement foundational walls to support the main floor and add a beam in the main floor unit to support the upper unit allowing for such a drastic layout change.

I think that’s enough of a journey down memory lane for the blue smurf project. today Check back in next week to learn more about the construction process of it! 

When you found out about the driveway would you have left it or moved it? Or would you have just moved on from the project all together (There was a brief moment we considered this!)?

Catch you on the flip side,

The Yellow Bungalow Flip

Today let’s dive into our most recent flip of the yellow bungalow. This house was on a lovely tree lined crescent in Waterloo in the Lincoln Heights neighbourhood. We had to be careful not to overbuild this house - not an easy feat due to the extreme cute factor. While this is a very nice neighbourhood in Waterloo it cannot support largely high end finishes while turning a good profit. This flip was about finding the sweet spot of upgrading enough to get top dollar for the neighbourhood without overdoing it. 

The first thing we were itching to change was the exterior. This house had a red brick front, white plastic shutters, white trim around the windows, and urine yellow siding around the rest of the exterior of the house. We decided to paint the siding and the brick in night blooming jasmine by Behr. We wanted to create a light contrast between the window trim and brick/siding so decided to do a light grey, Silver City by Behr, and finally did the exterior doors in black, Limousine Leather by Behr. We removed the shutters and the bushes from the front and replaced the mulch with fresh brown mulch to match the shingles on the roof. 

On entering the house we decided to take out walls that stood between the kitchen, living room, and dining room to create an open concept. Since it’s a small space we went with white cabinets but wanted to draw attention to the counters and opted for a dark granite counter and a black sink/faucet combo. We went with tile in the main entry and kitchen area and a high end dark wood laminate for the floors throughout. The dark wood floors brought some warmth into the house while using white on the walls to create a larger feel. In the dining room, we featured a vertical shiplap wall to trick the eye into thinking that the ceilings were taller. In this home, the ceilings are slightly lower than the standard 8ft and were 7.5 ft. 

We replaced all of the old 6 panel doors with 2 panel doors and black hardware to stick with the theme throughout the house. 

In the upstairs bath we continued the white and black theme and used decorative pieces for some pops of colour. We chose the light fixture to suit the rustic feel of the white vanity we used. The downstairs bathroom featured a beautiful wood vanity with black hardware as well as an all glass shower. Originally the toilet, vanity, and a much smaller shower were all on the wall that the vanity is now on. We broke up the concrete and moved the plumbing so that the toilet would be situated under the slope of the stairs allowing for a larger vanity and shower. This was a big job and when we first got started we weren’t sure we had made the right decision but in the end  we were so happy with how it turned out! 

We added some floating cabinets and a dry bar complete with a mini fridge to the family room in the basement to make a super cozy movie room.  

On the other side of the basement we created a final bedroom with a walk in closet and a den area outside of it. To make the bedroom compliant with safety and fire regulations we enlarged the window in the bedroom to make an egress window. We staged the den in the basement as a playroom and workout space. 

Finally, in the basement we used wood grain luxury vinyl over top of dricore boards to keep the floors from getting cold in the living areas and a tile luxury vinyl in the bathroom. 

In the backyard we kept the original deck but replaced the stairs, pressure washed the wood, removed an old dilapidated pool not in working condition, replaced the grass, and built a shed.

What is your favourite part of this flip!? Ours was definitely the downstairs bathroom and exterior transformation!

The Deal Breaker

There are not a lot of things that scare us off when it comes to searching for our next flip. We’re cool with knob and tube wiring, asbestos, critter infestation, student rentals, and anything alike. However, one thing we are very weary of is mold! It is almost always worse than it appears and unless you’re willing to tear down and start over, it is not worth the hassle. Like the tip of an iceberg, if you can see it on the drywall, it is likely there is a whole lot more you can’t see. Worse than that, mold is alive and continues growing like cancer. If you don’t rip apart large portions of the house to get it all, the mold will just continue to grow. Not only is it a pain in the ass but it poses serious health risks for yourself and future owners of the property if it is not dealt with properly. We have never opted to go through a mold remediation process because it is quite pricey and usually throws our numbers off too much to make it worth the investment. 

How to know if there is a mold issue:

• Look for it. Most commonly it is found in basements or on ceilings. It will usually discolour drywall, trim, flooring, etc.

• Smell for it. When you can smell it, it is likely pretty bad.

• Test for it. You can purchase a digital moisture meter and test drywall, wood, etc. as well as have a professional conduct an air test.

• Avoid properties that have an indoor hot tub. We have never seen one of these that doesn’t have mold, it is the perfect breeding ground. 

Why are none of the other things listed above a deal breaker? Well, student rentals are actually a favourite of ours. They are disgusting and have not been well kept so they scare away the average buyer looking for a personal property. Knob and tube wiring doesn’t scare us as we often end up installing entirely new electrical throughout the house anyhow due to floor plan changes. Getting asbestos abatement done is also “relatively” affordable but most importantly it is not something that spreads unknowingly throughout the house, you know how much of it you’re dealing with. Once asbestos is removed it no longer causes harm and when dealt with by a professional there is no harm to the person removing it either. 

In case our take home message hasn’t been clear yet - be extremely cautious with mold as it can ruin a flip before you even get started.  

Catch you on the flip side,

Quick calculations when considering the flip

When looking at investment properties you can dive pretty deep into spreadsheets and calculations leaving your head spinning. Of course, these calculations are important but before you get ahead of yourself, there is a much quicker and simpler calculation you should do. To get started you need the following numbers:

• Property price

• Renovation budget

• Carrying costs

• Closing costs

________________________

= All-in cost

Property Price

This number is as it sounds, the price that you will pay for the property. Ask your realtor to do some comparables to help decipher what price you will need to pay to acquire the property and to be sure you are not overpaying. These comparables will also be very important for later on in this discussion. 

Renovation Budget

This number is easy to mess up as there are many costs that are often forgotten. Below I’ve included an exhaustive list of things to include in your budget.

• Material (flooring, kitchen, appliances, paint, etc., etc.)

• Labour

• Dumpsters (This can add up! Talk to your contractors about more affordable options than the local Bin There Dump That)

• Permits and planning

• Construction insurance - protects you from liability of anyone harming themselves while on your property. Note: all of your contractors should also have their own insurance. 

• 10-20% extra for “Oh Shit!” occurrences 

Let’s talk about the last point for a moment. This is a safety net for any issues that you may find once you get into the project. Also, we have found projects end up taking 2x times longer and costing 3x as much as you had originally planned. For experienced flippers, 10% extra is probably enough but if this is your first go at it we’d set aside an extra 20%. 

Carrying Costs

These costs will depend on your schedule and your ability to stick to it, so again a buffer may be a good idea. Carrying costs include:

• Property tax

• Interest on the financing you have utilized (this is assuming you have not bought the property fully in cash)

• Utilities - lighting, heat (hello, Canada!), water, etc.

• Insurance - fire and theft

Closing Costs

This one is pretty basic and includes your lawyer and realtor fees. It’s easy to cheap out on a lawyer but if you plan to make investment properties a regular part of your portfolio we suggest spending the money on great legal representation. Don’t be penny wise, pound foolish. 

Okay, so you’ve got these numbers figured out, now it’s time to come back to those comparables your realtor looked up for you. Look at homes in the neighborhood that had the highest selling price and comparable finishes to what you’ll be doing - is the price greater than your all in cost? How much profit will you make? Is that profit worth the effort, time and resources? If your projected profit is only $10K it’s probably not worth it and time to keep looking at other properties.

Catch you on the flip side,