Financial dos and don’ts of renovating
With more than 1.5 million viewers watching The Block each night, it’s safe to say Australia is hooked on renovations. But those shows don’t usually show us how to budget responsibly.
While a good reno can add serious value to a property, it can also be draining on the hip pocket. Whether you’re renovating to sell now or later down the track, consider the following steps before taking a sledgehammer to your walls, to get the biggest bang for your buck.
It’s not always the obvious things that bite you when renovating on a budget
Make sure you:
1. Seek expert advice
Local real estate agents have a great idea of what buyers are looking for and can tell you where to inject your cash. Consider getting a professional property valuation before making any changes to assess the actual value of your property so you don’t over capitalise.
2. Know your limit
It’s best to work out your budget before approaching the bank to finance your renovation. Give yourself a buffer by adding 20 per cent to your budget so you can handle any unexpected costs when they arise, and believe me, they will. Consider living in your property during the renovation so you don’t have to fork out extra for rent and storage.
3. Constantly communicate
Be sure to have constant communication with your builder or project manager throughout your build. The sooner you are made aware of any required changes or added expenses, the sooner your builder can address them. It’s also a good way for you to keep track of your budget.
4. Add street appeal
If you’re renovating to sell, give the exterior of your house some serious ‘wow factor’ by adding a colourful garden, water feature and manicured lawn. Buyers are often sold on a home before they take a step inside, so it pays to make your property appealing from the outset.
Make sure you avoid:
1. Rely on plastic
Financing a renovation with a credit card is an absolute no-no. Unless you have sufficient available funds to pay off your debt, don’t commit to the project. Instead, consider taking a line of credit, which is an approved loan that you can use all at once or over a period of time.
Financing a renovation with a credit card is an absolute no-no
Unless you’re a seasoned pro, it’s best not to take on the “dirty work” of a renovation yourself. While hiring people to do the tiling, concreting and plumbing can be expensive; a lack of tradie-know-how can end in disaster and be very costly in the long run.
3. Cut corners
While it’s smart to be as cost effective as possible when renovating to sell, make sure you don’t scrimp and save on everything – quality work sells homes. Estate agents and buyers can spot dodgy builds from a mile away, so ensure all the work in your house meets or exceeds people’s expectations.
4. Splash cash
Think a pool will add value to your home? Think again. While they are a nice feature, pools generally only add value to luxury homes. So rather than spending cash on a pool, why not put it into the rooms that will get you the highest return: the kitchen and bathroom.