Renos Without Regrets
Overcapitalising. It’s every renovator’s worst nightmare. You’re tipping in as much of your hard-earned cash as possible to create wealth from your biggest investment, so you want to reap the rewards of your hard work, not regret it.
Before you get out the wrecking ball and paint swatches, make a rock-solid plan and factor a realistic time frame into your thinking. If you plan on selling sooner rather than later, you may not get your money back on big structural changes unless there’s been a real estate boom.
Start with a valuation
First of all, you should consult a professional to know the real current value of your home. Spending tens of thousands of dollars on a low value home isn’t the wisest decision. If you’re renovating to make it more appealing to buyers and you’ve overcapitalised, you might just do the opposite – it may sit on the market for a long time before selling. As a buyers agent I see this happen more often than not!
Consider your neighbourhood
This goes hand-in-hand with your valuation. You’ll need to consider the value of surrounding homes in your neighbourhood. Most areas have ceiling values – the certain value buyers or renters are willing to pay to move in. Think about it. If you’ve created a million-dollar home in a duplex estate, you may find it quite difficult to find a buyer.
Create a budget
As a simple rule of thumb, you’ll want to increase your property value by $2 for every dollar your spend. So that $15,000 bathroom reno needs to add $30,000 to your home. Will it? After you’ve worked out the top dollar you could ask for your property in your neighbourhood, you can work backwards to create your budget. If you genuinely think you can increase your property value by 50k, consider how and where you’ll spend that $25,000 on your home – kitchens and bathrooms are always popular reno rooms, but don’t forget about first impressions. As a bare minimum, look at increasing your property value by $1.50 for every dollar you spend.
Getting down to business
Now that you’ve worked out how much you can gain and how much you should spend, look at the place as a whole and make a list of everything you want to change. Before you get started, make a plan for both your structural and cosmetic renovations.
Renovators can get a little excited with kitchen fixtures and fittings but it’s important to not go overboard. You shouldn’t spend more than 2 per cent of your property’s value on a brand-new kitchen. If your home is valued at 400k, that’s still $8000 for you to spend – so you can still achieve a great looking kitchen.
Same goes for the bathroom – don’t spend more than 2% of your property value. You can always save costs by reducing plumbing costs – use existing plumbing and just replace a bath and shower. Or consider whether you can combine the two if you’d like a different layout.
Giving your backyard a little love will add a little value, but don’t forget about first impressions. You’re better off investing in your front yard and keeping the landscaping outback very simple.
Low traffic areas
Don’t waste your time and money on guest bedrooms and the laundry. Despite some people appreciating a good laundry, it really won’t add much value.
Consider strategic renovations. While kitchen and bathroom renovations are favourites, increasing your homes energy efficiency is becoming VERY popular. Adding solar panelling kills a household bill and helps the environment to boot.
- Don’t make it (too) personal. It obviously needs to be something you like, but make it something other buyers will like too.
- Don’t spend more than 10% of your property’s value on cosmetic renovations like carpets, painting etc.
- If your home value is under $750k, don’t invest in high-end kitchen appliances.
- Add shine factor in visible areas – high gloss paint, flooring or tapware.
- Remember to plan, plan, plan! Make sure you create a consistent theme from the get-go, you don’t want to end up with a reno hodge-podge.
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