A couple of things, you have to know that the market will bear the price of a larger, nicer or renovated home.

Second, you typically should plan to be in the house a while to allow for that renovated house to appreciate enough to make the pain and aggravation of the work be worth it.

It helps if you bought the house with some significant equity.

We bought our house in the late 90s for the low $200s. Did a $400K addition/renovation in 2006, house was immediately valued over $700K. It's now worth over $800K.

We live in an Arlington neighborhood where additions were common and so we had a good idea of the post-reno value going in. And, we had enough pre-renovation equity that the backend mortgage was still do-able.

We funded our reno through a cash-out refinance so the cost of the reno is rolled into our new mortgage - almost as if the house cost that much in the first place.

I would buy the house with a mortgage and then use saved up money for the reno work. I wouldn't do a big renovation if I had to take out a loan to do it.

We do one big project at our house each year. We save up and just pay our contractor for each job. He knows we'll be starting the next one about a year later.

How do you finance a reno?

We are currently undertaking a $100K+ reno, and we are funding it through an inheritance. That being said, the house that we purchased was underpriced (an estate sale that needed a lot of work) by about $100K relative to other homes in the immediate neighborhood. So, we feel that it is not a bad investment. We also plan on staying in the house a long time. You can get construction loans from the bank, based upon the equity you have in the home as well as the potential future value of the home. But, you need to prove these things to the lender.

OTOH, if we had purchased a home what was average price for the neighborhood, we would not sink that kind of money into a reno--whether a loan or using personal funds.

I wouldn't finance that kind of work, I'd save up for it.

I don't think they were ever in Houston. They were in Austin for a good portion of their shows. There was a neighborhood we were targeting when we were thinking of moving there that they have done several houses in.

I appreciate the replies but I think maybe mentioning the name of the show distracted people from my question. I'll re-post as just a general reno question. Thanks, OP

http://www.imdb.com/title/tt1827882/board/nest/215072266?ref_=tt_bd_1

Anonymous wrote:they are in canada
the show is house porn and not meant to educate you on how to do it financially.
Likely they are not paying for some services in exchange for being on the show -- drawings, etc.
Look at it for ideas for layout and design, not how to finance

Are all of the HGTV renovation shows filmed in Canada? I hate it that they never disclose the location.

OP here - no idea about taxes on the furniture bonus in Canada but I would guess so.

I don't mind the commentary on the show, but does anyone know the answer to my question? How do you finance a 100-200+k renovation if it's not going to proportionately increase the value of the home? What collateral would the bank have/what would the incentive be for them to finance such a huge reno on the home? Do the buyers take out two separate loans - one for purchase & one for renovation?

Thanks!

"they have to personally participate in the labor for the beginning and end of the reno."

Meaningless photo ops. Most of the buyers have no skills/obnoxious personalities and would get in the way of the pros.

Anonymous wrote:OP here. Yes, they are in Canada but they also did a season in Houston. The participants/buyers get 20k worth of free furniture as their bonus for being in the show but otherwise they fully pay for the house and reno and they have to personally participate in the labor for the beginning and end of the reno.

Are the Canadians required to pay taxes on the "bonus"?

OP here. Yes, they are in Canada but they also did a season in Houston. The participants/buyers get 20k worth of free furniture as their bonus for being in the show but otherwise they fully pay for the house and reno and they have to personally participate in the labor for the beginning and end of the reno.

they are in canada
the show is house porn and not meant to educate you on how to do it financially.
Likely they are not paying for some services in exchange for being on the show -- drawings, etc.
Look at it for ideas for layout and design, not how to finance

For all your property brothers fans - I've been watching & enjoying since I discovered the show last month but I have a fundamental question. With the larger renovations, like 100k+, does the value of the renovation proportionally increase the value of the home? I just watched an episode in which they proposed a 250k renovation on a 400k home, which was in a good neighborhood and it would have fundamentally transformed the home, but I have to wonder - what if the family unexpectedly needs to sell in a few years for whatever reason? Will they be able to recoup 650k to cover their loan? Or even just break even with whatever amount remains on their loan? I'm guessing that's a pretty big gamble.

Also, how do you pay for a 100+k reno? Is it part of the regular mortgage or are there separate loans for that? The families always just state their final number budget but that kind of assumes the bank is willing to fund any amount of renovation and I'm always wondering would the bank be willing to lend out that much if it won't proportionately increase the value of the home? Why would they lend out more than what the collateral is worth?

I wish the show was a little more educational about the risks and how they finance the renos! Although I am learning a lot about DIY options.