10 Tips for Turning a First Home Into an Income Property

For the past ten years, Scott McGillivray, a 30-year-old real estate entrepreneur, has made a living by transforming houses into income properties. The 30-year-old currently manages 18 properties with over 100 tenants, and now he's coming to HGTV to help a "house poor" generation create legal income suites and help offset their rising mortgage payments.

Whether it's a 100-year-old Victorian home, a multi-apartment property or a fully renovated unit in a hip urban area, this entrepreneur can do it all. Check out 10 tips we learned from McGillivray by watching the first episode of HGTV's Income Property:

1. Make sure it's worth it
   As McGillivray says, the cost of renovations has to be able to pay itself back within two years rent. Scout out local markets, get a professional opinion, and be sure to watch Income Property. Because, hey, who doesn't want to make a couple of bucks on something they need anyway?
   
2. Tag team, if you can
   To use a cliché, two heads are better than one, and home-owning is no exception. Getting to your desired final product is a journey, and having a teammate to share frustrations, anxieties and most importantly, costs with is invaluable.
   
3. The best way to learn is to go through the experience
   As one homeowner in the show puts it, "you can read as many books as you want, but you have to experience it." Every home is unique, and every home will reveal its own problems and potential solutions.
   
4. Whatever you budget, add 25 per cent
   When renovating your space, despite what a professionally quoted budget says, add 25 per cent, just in case. If you don't go over, nothing lost. But if you do, at least you were expecting it.
   
5. Houses are like onions
   The more layers you peel back, especially while demolishing, the more problems you're going to find. Count on hidden gems like mould, live wires and any other hidden costs, just in case.
   
6. Consider all the options
   If you have a three-story plus basement house, why just rent out only the basement? As we learn in the first episode, doubling the space not only allows you to live mortgage-free by increasing the rent, it also increases the value of the home. But it also may not be the option for you, especially if you plan on expanding a family or you want access to your backyard.
   
7. Make sure the space is livable
   If the kitchen has zero counter space and the bedroom can only fit a bed, not only is it going to be hard to find someone to rent out your unit, but think of the types of people who might be wanting to rent out your unit.
   
8. Don't skimp on the drywall, especially on the ceiling
   Not only do you want a fire barrier between you and your new housemates, you might be thankful for a little bit of sound-proofing in the long run.
   
9. Start on the outside
   A separate entrance is key when renting out a basement, especially if you don't want to mingle too much with your new lessees. And you might want to make sure there are no potential lawsuits hanging around — such as slippery stairs or rotting wood.
   
10. Don't turn your house into a home... right away
    If a long-term investment is what you seek, turning your space into a home right off the bat isn't going to help pay those accumulating bills. Your No. 1 priority should be making your home into an income source, or at least a manageable entity

Staging Tips

Inexpensive staging tips guaranteed to help you sell your home.

1. De-clutter & De-Personalize:
Buyers generally want two main things out of a potential property: they want it to be roomy, and they want to be able to see themselves living in it. Neither of these things can happen if the house is full of your stuff. Clear out a minimum of 50% of your personal belonging when you stage your home – more if possible. Take down all family photos and mementos. Clear out closets as much as possible. Take the kid’s drawings off the fridge. The cost? A few hours and some boxes for storage.

2. Clean, Clean and Clean Some More:
I’ve toured hundreds of properties and there have been times when I wouldn’t touch anything. And while I can see past the pink slime in the shower, dirty doorknobs, and carpet full of pet hair, a lot of prospective buyers can’t. Your home may have tons of potential, but if it’s dirty, the percentage of buyers who can see that potential drops significantly. Clean like you’ve never cleaned before. And when you think it’s as clean as it can get, clean it one more time.

3. Paint:
A fresh coat of paint helps your cause in two ways: First of all, it can neutralize rooms (such as a very pink little girl’s room) so that buyers can picture it as what they’ll need it to be. Secondly, new paint always makes a home look cleaner. Painting isn’t a big financial commitment if you do it yourself. And, the time it takes to paint will pay dividends when buyers walk through your neatly staged home.

4. Minor Repairs (change light bulbs, fill holes, repair screens, clean up exterior):
You might not care that one of your vanity lights is burned out or that your attempt to hang a painting resulted in six holes in your living room wall, but those little things can be a huge red flag for potential buyers. The biggest advice I have is just don’t be lazy. Take the time to replace a window screen or a cracked outlet cover. The cost is minimal and it shows that you take pride in your home. And, maintaining the small things can help reassure buyers that you’ve maintained big tickets items, like your roof or HVAC system as well.

5. Every Room Has a Purpose:
A lot of people have spare space in their homes that are turn into “dead zones” – rooms, closets, corners where “stuff” ends up getting thrown. But when you’re prepping to sell your home, not only should every nook and cranny be clean and clutter-free, they should also have a purpose. That spare room with your old treadmill and drum kit could be staged as an office space. If your basement is unfinished, put up some inexpensive shelving units to showcase how much storage is available. Buyers shouldn’t have to work to picture a rooms as functional for their needs.

Scott McGillivray on Vacation Properties as Income Properties

So You Want to Buy a Vacation Property…
Just because summer is over doesn’t mean you should stop thinking about sun and sand. Fall is actually a great time to start thinking about next year’s vacation and where you’re going to stay. Cottages are a big part of the Canadian vacation experience, and buying one might be a great investment if you go about it the right way.

Smart investment or luxury item?
The answer? It’s a bit of both. An inherited cottage or one you bought decades ago during the golden age of affordable lakefront properties could make you a pretty penny today. If you’re in the market to buy though, you have some factors to take into consideration that will drastically affect the price. Buying a property that is accessible, usable and desirable year-round is a much better investment than a property that you can only get to in the summer, isn’t insulated and doesn’t have any merit in the winter. Take advantage of winter sports enthusiasts, as their options for winter rentals are usually pretty limited.
Being less than a 2-hour drive from a city is also going to command a higher price tag, but don’t be afraid to go a little off the beaten track or settle on a smaller lake. There are still deals to be had if you look a little further out and are willing to put in some work. There’s always going to be more work involved with maintaining a cottage, so keep that in mind when setting a budget. Don’t put yourself into a “cottage-poor” situation where you can afford the cottage, but not all the other fun accessories that go along with it, like building a dock for a boat.
Fractional ownership
Want all the perks of a cottage without all the costs? Fractional ownership might be the answer. Of course, the catch is that you only “own” the cottage for half the year. Fractional ownership may not be for everyone – but it is certainly something to consider if it suits your needs and wallet. Buying a property with friends or family may be a way to put cottage ownership within reach. While it sounds like a great way to pool resources and leverage your buying power, have a lawyer draw up an agreement that clearly states who is allowed to use the cottage when and other expectations such as upkeep, mortgage payments and property taxes and how to manage other unforeseen expenses. Also make sure you come to an agreement about the rules on renting out the property during the weeks you “own” the property, but aren’t using it. The best way to maximize a cottage purchase is to maximize the income potential.

Owning a cottage is an amazing idea but before you sign on the dotted line, do your homework. Cottages, unfortunately, are not exempt from taxes, and just like at home, require regular maintenance, cleaning and grass cutting. And while it’s hard to put a price on those summertime memories by the lake, making a smart investment should be your number one goal.

Shopping for a Home in Winter

If you've been thinking about buying a new home, winter is the time to start getting serious. Here are a few reasons to brave the cold and go on a house hunt:

The winter season has fewer units on the market, and sellers tend to need to move from their property. You can use that to your advantage to get a favorable deal.

Winter has fewer buyers in the market. Looking for a home in the winter can be inconvenient, and people are less likely to move. Families also tend to be on a September to June cycle because they are unwilling to move their children to a new town in the middle of the school year. Fewer buyers means less competition.

 

Lenders also usually have fewer loans to process and less paperwork to deal with (though this can change quickly if rates fluctuate). With lenders less hassled, you can expect a smoother process to get approved for a mortgage. But, as reported in Bankrate.com, there are exceptions to this rule, most notably in warmer parts of the country (especially Florida), ski towns, and in parts of the country where demand is so strong that it will not slacken during the winter months.

Finally, as all savvy shoppers know, after the holiday season comes the season of bargain opportunities. This includes houses, as well.

Foreign buyers fuelling sales in luxury real estate market: report

Sales of luxury homes will likely gain momentum in the fall, fuelled by demand from international investors, according a new report from real estate sales and marketing company Sotheby’s International Realty Canada.
The report released Tuesday suggests the largest proportion of foreign buyers will be from China, Russia, the Middle East, India and the U.S.

Elli Davis, a sales representative with Royal LePage in Toronto, says many foreigners buy condos for their children to live in while they attend school in Canada.
“I’m seeing a lot of foreign names on showings of all of my listings,” said Davis.
“More foreign names than not.”
The Sotheby’s report says the high-end condo market in the Greater Toronto Area has rebounded after a slower start to the year, a trend that is expected to continue into the fall.
“There were a lot of numbers that were starting to look worrisome in Toronto,” said Sotheby’s president and chief executive Ross McCredie.
However, while some economists are cautioning about an oversupply of condos about to hit the Toronto market, McCredie notes that there are far fewer high-end units available.
“It’s not like the $600,000 shoebox condos where you’d have investors buying them and looking to renting them out,” he said.

“If it’s a well-built building in a good location, people want to live there, so it’s more about lifestyle than pure investment.”
McCredie also notes that those in the market for a luxury home are less likely to be deterred by short-term fluctuations.
“They’re not first-time homebuyers,” he said.
“They’ve seen cycles before. Most of our clients remember what it was like in the early 80s and the early 90s, when you had major corrections, so they’re not going into these markets blindly.”
Sales of luxury homes are also expected to gain traction in Calgary and Vancouver and remain balanced in Montreal, according to Sotheby’s.
Sotheby’s said sales of high-end homes worth at least $1 million were up in major Canadian urban markets in the first half of the year compared with the second half of 2012.