When does it make sense to renovate instead of buy?
Open this photo in gallery Roy Roedger, pictured with his son Gil and family dog, has owned his Toronto house for 27 years and chose to renovate after considering buying a condo instead. NICK IWANYSHYN/THE GLOBE AND MAIL  Like many Canadians living in an older home, Roy Roedger wanted to make changes. After 27 years, his 100-year-old Toronto house needed a complete upgrade to bring it up to modern standards. Nearing retirement, he and his wife considered buying a condo, but they balked at spending more than $1,000 a month on maintenance fees. They also loved the Davisville area where they had raised their three boys and their neighbours had become their good friends. Theres a real sense of community that would be hard to replicate elsewhere, says Mr. Roedger, president and CEO at SDI Marketing. When I did the math about land-transfer taxes and real-estate fees, I thought why not put that money into renovating the building instead, because the location was good.  Story continues below advertisement  The couple hired Men at Work Design Build Ltd., a company specializing in major renovations and additions for older homes in the Toronto area, to do a complete rebuild right down to the studs. Initially budgeted at $850,000, the total cost came to $1.1-million, including permits and an unexpected $180,000 expense to replace water-damaged basement walls. Other overages were due to the couples choices to upgrade flooring and rebuild the fireplace. Despite initial delays because of COVID-19 restrictions, the project finished on time. Generally, the budget was bang on, says Mr. Roedger, who says the renovation was well worth it. The Toronto market has seen steady gains year over year, so putting money into a growing asset wasnt a bad idea, plus borrowing costs were very low so it didnt feel like a risky investment. Basically, the same house across the street, completely renovated, listed for $3.1-million, although part of that is this crazy market.  Paul Gallop, founder and president of Men at Work, says when all costs are factored in, economics usually favour a renovation over moving, but people are often unrealistic in expecting that a professionally completed project will be drastically cheaper than buying. Theres often pretty severe sticker shock when people are confronted with the true costs. Feature for feature, a renovation usually costs less than a move up, Mr. Gallop says. But especially when adding space, the steps and different professionals that need to be involved for a small project are the same as a big project. In terms of design, drawings, zoning compliance, building code, structure, heating and cooling, permits  all have to be managed, whether its an 80-square-foot or a 2,000-square-foot addition.  COVID-19 has impacted the renovation industry, disrupting the municipal approvals and committee of adjustment processes when city operations were temporarily shut down, which created bottlenecks and complications. Mr. Gallop does say it didnt make as big a difference as expected. Most people plan major renovations well in advance, so his business was not heavily influenced by the pandemic. The current market craziness with lumber costs skyrocketing over the past year, and supply chain issues impacting availability of products are inconveniences to be sure, Mr. Gallop says. Customers havent been able to visit showrooms due to lockdowns, making it difficult to pick finishes. Following COVID safety protocols has slowed us down, but in the big picture, the industry is growing and improving rapidly.  While he says construction costs have been rising year over year and the constant demand for  and shortage of  skilled trades has continued to push prices up, the costs of construction are still not rising at the rate that property values are escalating. Story continues below advertisement  Even if your renovation project costs a bit more or takes a little longer than a year ago, as a homeowner, youve probably seen a value increase in your property far greater than that increase in construction costs. Obviously, renovating cant fix some problems. Proximity to a busy street, train tracks or problematic neighbours are never going to be resolved with a renovation. But most of the time, home renovation is the cheaper and better way to go for people considering the options of moving or improving.  With 11,951 residential transactions in the Greater Toronto Area (GTA) for May, 2021  more than double the result from May, 2020  sales are strong despite record-high prices. Trevor King, a founding partner at ARKA Real Estate Group in Toronto, says the reason people usually move is they outgrow their house. Maybe they bought a starter home when they got married, but now theyve got two kids, Mr. King says. Or they want a different school catchment or need more space for a home office. But sometimes people who bought intending to move up are being priced out of the market, so it makes more sense to add a third floor.  As a realtor who does renovations for clients to help them sell their house, hes also had people choose to stay in their home after the work is complete. People think, now I can get $2-million for my house, but where do I go? With recent low interest rates, they can get the money for a major alteration.  In Vancouver, Meme Brooks, owner of Meme Brooks Design, offers one-stop headache-free renovations  managing every detail from city permits to contractors to the final fluffing of pillows. The biggest change shes seen during the pandemic is the increased scope of the work clients want done. Story continues below advertisement  People have been saving up over the past year since they havent been able to travel or have big celebrations, so theyre spending on creating a really beautiful home to live in, Ms. Brooks says. Also, quite a few had office spaces and suddenly they dont have to pay that large lease any more, so they want an amazing home office. Im seeing our clients weighing the options, but most are never going to get the same amount of square footage in a newer place. So, theyre thinking, we already love where we live. Lets just renovate and make it the dream home we always wanted. "