The bigger the home renovation, the bigger the risk something goes wrong. Fortunately, that can be avoided.
Niran Kulathungam, a financial life professional, real estate advisor and master coach with Legacy Global Inc., and owner of The Ascension Principle, has about 57 doors to his name. Moreover, as recipient of the REIN Multifamily Investor of the Year Award and Renovator of the Year Award in 2017, and winner of the Michael Millenaar Leadership Award in 2018, he’s far from a neophyte. Kulathungam says that whether renovations are undertaken for a fix and flip or because the owner intends to live in the home, a checklist is required at the outset.
“When you walk into a property, the first thing you do that most people don’t is detail the scope of the work. You might realize you need a new kitchen, but you should ask yourself a more important question: ‘How can I make this the most amazing, top-notch house on the street?’ I create a detailed budget and I figure out where the electrical outlets and lighting fixtures are going, and then I budget the cost for each of them. I budget for tiles and countertops, and I budget what it would cost to move stuff around. I budget for every single thing I’m going to do in that house.”
Kulathungam adheres to the ‘80:20 rule,’ which stipulates that, upon detailing the renovation plan, 20% of the improvements will comprise 80% of the value enhancement. Those improvements include renovations to the home’s exterior because of how important curb appeal is.
“Decisions to buy or rent a property are often made when the person drives by,” he said. “Would you be happy bringing your mother-in-law over to this house? Is it something you’d be proud of showing her or anybody else?”
Having a beautiful kitchen is a bare minimum requirement for any home that has a chance of selling in today’s housing market, but that often isn’t enough.
Just as Kulathungam asks himself how his renovated house will be the most beautiful on the street, he asks how his kitchen can exist in a class of its own?
“What about your kitchen says, ‘Wow!’ That’s where I tend to spend a little extra money. People still use cheap countertops in their kitchens, but in this day and age I always put in stone and quartz, and hardly ever any granite.”
Don’t think kitchen renovations begin and end with a nice countertop, added Kulathungam. The backsplash is a relatively inexpensive way to beautify, and differentiate, a kitchen.
“The proof is in the pudding on this one; I get good results with it. Standard practice right now is to do white subway tile for the backsplash. My question is: if every renovation has that, what can I do to stand apart? I will spend extra money on really nice backsplash because it will give me a return.”
When it comes to lighting, don’t be miserly. Unlike most real estate investors, Kulathungam doesn’t mind spending more money on lighting if a high-end fixture or chandelier greets prospective buyers and renters upon their entry into the home, because it augurs yet more outstanding features to come.
“I want my kitchen and living room to rock,” said Kulathungam. “We renovated a bungalow in Stoney Creek and ended up vaulting the ceiling. By doing that, I dropped down three really nice lights, and to this day when anybody walks in, they go, ‘Wow!’ Lighting is crucial.”
To say the bathroom needs to look nice is an understatement — “you want to go for a spa-like feeling,” said Kulathungam.
That doesn’t just mean making good use of open space, especially if the home is a fix and flip; it means optimizing the things you cannot see. And what a wonderful surprise that could be for house hunters.
“Put in subfloor heating because it feels amazing and people absolutely love it. Lighting is, of course, important, and in some bathrooms I’ve done walk-in showers with glass walls and a sloped floor at the bottom leading into the drain. It’s more costly to do, but in a smaller bathroom it gives the appearance of space. If you renovate in an area where you attract families with young kids, you want bathtubs. If there aren’t young kids, then go with the walk-in.
“Put in nice taps, not cheap ones. If you renovate in Toronto, I would look at adding a towel warming rack. Although it isn’t that functional, it has that wow factor.”
According to Kulathungam, not much is needed to upgrade a master bedroom, however, because clutter is seldom spoken about in positive terms, and because bedrooms are proverbial sanctuaries, this room should feel commodious. Additionally, extensive closet space will make a believer out of even the most fastidious buyer.
“In downtown Toronto, closet space can be limiting. Put in barn sliding doors, with the slider outside the closet so that the entire door slides on the outside, instead of regular doors.”
Lighting inside closets, especially if you enlarge the space, is a great idea. Kulathungam recommends lighting that turns on when the door opens, and shuts when it closes. He also recommends figuring out where the television set will go and putting wiring in early on, as well as adding a modernizing feature.
“In the master bedroom and kitchen, put in some USB ports so that you can plug your cell phone directly into it,” said Kulathungam. “Little things like that go a long way towards doing a really nice renovation.”
Identifying potential water issues is crucial because the house’s foundation, not to mention the costly renovations, could be compromised. Kulathungam begins his inspection of the house on its roof and works his way down each storey to the basement.
“Make sure downspouts are directed away from the foundation of the house,” he said, “and figure out what the issues are before you put flooring in.”
These renovations are a little trickier than house renos, but many potential complications can be nipped in the bud early on in the process by simply being a good neighbour. For one, speak to the condo board right away and give them a heads up about what you’re planning to do in the unit, even though they can’t technically stop you, because certain things are allowed while others are prohibited. The structure falls under the purview of the condo board.
“I knock on the neighbours’ doors and give them my private cell phone number so that they can call me if they have any concerns,” Kulathungam. “I also offer to help them with their renovations by putting them in touch with my guys.”
Being a good neighbour doesn’t just stop there, though.
“In a condo, be respectful of your neighbours with respect to noise,” he added. “Make sure your guys renovate during normal work hours. I tell crews to keep music low and I tell them not to swear because noise carries in a condo.”
The cardinal rule of fix and flips
Plan ahead and always have a reserve budget, advises Kulathungam, because you may miss something lurking behind a wall. Most importantly, your name—your brand—is all over the property, so make sure you renovate it as if you’re its end user.
“Budget for things you did not initially budget for, and when you find a problem, don’t cover it up. Fix it. Your name is on the line. In this space, once you get a reputation as someone who can produce a great product—one where you don’t cut corners, one where you finish on budget and treat trades well, which helps you attract the best tradespeople on your subsequent projects—you also attract joint venture capital. If these lessons mean that you won’t make as much money on your first flip, rest assured that you will over the long haul, and you will create a name for yourself.”
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Written by Canadian Real Estate Wealth.
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Canadian Real Estate Wealth