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5 Ways to Avoid Spending too Much on Your Renovation
Just like cricket and football, home renovating is now something of a national pastime. Home renovations across the nation topped a whopping $31 billion in 2016. There are countless DIY blogs, YouTube videos and home-beautifying magazines driving the trend. Popular reality TV shows where a bathroom makeover happens almost overnight, have many Aussie homeowners convinced that now is the time to renovate. Unfortunately, too many wannabe home-improvers assume renovations that make their property more attractive and comfortable will invariably make it more valuable. This is not always the case. Overcapitalise at your peril. According to many real estate experts there are numerous ways to help avoid overcapitalising on home renovations, here are the top five:
1. GET A VALUATION – DON’T GUESSTIMATE
Get an independent professional assessment to determine how much your home has gained in value since you bought it. A good rule of thumb to keep in mind is that your block of land appreciates in value while the building depreciates in value. A major renovation can add up to 10 per cent of the value of your home, particularly if you hold on to the property for at least 5 years. But it doesn’t make sense to spend tens of thousands of dollars renovating a property with a low value.
“Sometimes it’s cheaper and quicker to demolish the existing building rather than undertake a renovation that isn’t functional,” says Katherine Kruger, Investor Service Manager at Perth’s Abel McGrath Property Group. “The most detrimental mistake owners make is not obtaining advice from their local real estate agent.”
2. KNOW YOUR NEIGHBOURHOOD
It’s important to take surrounding homes into account. The appearance and upkeep of neighbouring houses, the general streetscape, the suburb you live in – all influence the upper sale threshold; a ceiling limit on what renters and buyers are willing to pay. Outlaying a small fortune on extensive, flashy renovations will cost you dearly if your home is in an area where buyers and renters are unwilling to pay a higher price. You may end up wasting a wad of cash if your sole reason for renovating is to have the best house in the street. Check the sale prices of houses recently sold in your street.
3. THE BUDGET
Launching a renovation project without a budget is a recipe for overspending. Be sure to factor in costs that might increase during your project’s timeframe and beware of hidden costs. For instance, a kitchen rebuild may mean you and your family will be dining out for three weeks, or perhaps construction noise and the presence of strangers will upset your toddlers, requiring you to spend on day-care. Contact your local council and state government department regarding building plans and permit requirements and also find out what you need to do to comply with energy efficiency and water saving regulations. Will you need to install low-wattage energy efficient light bulbs and water-saving showerheads or use certain types of building materials? On the plus side, going green may save you money in the long run. If your renovation involves major structural work you may need to get foundation data and conduct soil tests.
4. WHO’S ON THE JOB?
“With the right expert advice you won’t risk choosing a poor quality builder who provides substandard workmanship resulting in you having to employ a new builder to re-do the work,” Katherine says. “Get everything in writing and signed off on a professionally prepared agreement – not just a handshake!” Cutting corners by trying to do the work yourself may prove disastrous. A poor quality job that fails to meet building code requirements will likely depreciate the value of your property. “Personally undertaking work you’re not certified to do may breach building, electrical and safety codes thus potentially rendering your work not only illegal but also unsafe. You’ll end up spending more money for a qualified tradesman to fix the job.”
5. ARE YOU RENOVATING WITH YOUR HEART OR WITH YOUR HEAD?
Is your planned $50,000 bathroom renovation with luxury imported fittings really a wise investment considering your home is valued at $200,000? You may be renovating your home to provide extra space and comfort for your changing lifestyle but even so, you need to consider if your planned extensions and adornments are consistent with the current character of your home. Be wary of renovations that have limited appeal to future buyers. An outdoor Grecian spa, lap pool and library with huge bookcases won’t appeal to everyone. Katherine advises avoiding extravagant embellishments that won’t add value when it comes time to rent. “Why not consider a marble-look instead of a pure marble product? Instead of jarrah floorboards, consider wood-look vinyl or laminate. Instead of installing new carpet, why not rip up the old carpet to reveal the beautiful timber floors?”
Be reno-smart and use these tips to help avoid overcapitalising on your home renovations.