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Our reasons for renovating vary: adding more space, updating or restoring an older home, maximising the property’s value for sale. But whether you are upgrading the kitchen or adding a room to accommodate a growing family, there are many benefits of renovating, including increasing your home’s value and improving living conditions.
The Housing Industry Association (HIA) estimates the Australian renovation market to be worth more than $31 billion. The report also found there had been a 4.7 per cent increase in the number of renovations in 2015 – the strongest growth since 2010 – and HIA anticipates further rises to come.
Good renovations start with good planning
Renovating can be rewarding financially – adding value to both your property and lifestyle. However, no matter whether you have major improvements, or a simple do-it-yourself project in mind, it’s worth doing the job well. And it all starts with knowing what you are aiming to achieve with your renovation.
Consider your reasons for renovating
Each year thousands of Australian property owners undertake successful renovation projects. Some of us are motivated by the need to add space, or save on moving costs. Others just want to restore an older home to its former glory. And in some cases, home owners choose to renovate in order to maximise their property’s value ahead of a sale. For investors, renovating may be an opportunity to improve the value of their asset and make a profit on sale, or it may mean being able to command a higher rent.
Taking some time to think about what you want from your renovation, will ensure the end result meets your goals. With this in mind let’s take a look at some of the key reasons for undertaking a home renovation:
1. Avoid the costs of moving
If you like the area or home you live in, renovating rather than selling up and buying elsewhere may be a cost effective option. It helps you avoid legal fees, agent’s commission, stamp duty, and a raft of other expenses associated with buying and selling, that can add up to thousands of dollars. It’s money that can go straight towards your home improvements.
However, be sure your renovations will have lasting benefit for your lifestyle and family needs. Otherwise you may still need to consider moving further down the track.
2. Enhance the returns on an investment property
Renovations may mean enjoying a greater profit on sale or being able to charge a higher rent on a rental property. If the property is to be sold immediately after renovating, any improvements should be designed with broad market appeal in mind. Improvements focused on increasing rental returns should take into account the factors that are most likely to appeal to tenants otherwise the capital spending may not achieve this goal.
3. Increase your property’s value
A well-designed, well-executed renovation may add significant value to your property. It’s an opportunity to grow your property’s value regardless of how the overall market is faring, and in this sense a renovation can also be a great investment of your time and money.
Be sure to speak with local real estate agents to check that your planned renovations will increase your property’s value by at least the cost of the project. This is especially important if you don’t plan to remain living in the home for at least the next few years. See ‘The dangers of over capitalising’ for more on this.
4. Achieve a higher sale price for your property
As mentioned above, renovations could make your property easier to sell – and you could potentially secure a higher sale price with a renovated property. But make sure to consider other people’s tastes as well as your own. Aiming for a design that has broad appeal and selecting neutral colour schemes can make your property appealing to a wide cross-section of buyers. If in doubt, talk to local real estate agents about whether your proposed renovations will enhance your property’s likely sale value.
If you are planning to sell your property in the near future, it’s worth thinking carefully about undertaking major renovations. Unless you renovate sensibly you may not recoup the costs of your renovation particularly if the property market takes a dip while the works are being completed.
5. Restore a character home
Many older or unrenovated homes are hidden gems just waiting to be polished. Renovating these homes can be extremely rewarding but be sure to thoroughly research the history of the property and the sort of features that apply to different historic styles. This will help you achieve a renovation that is sympathetic to the style while still providing modern conveniences.
Older homes can present major challenges to renovators. Hidden ‘surprises’ like uneven floors or poor structural support can leave your renovation budget thinly stretched so it’s wise to leave room in your budget for any unexpected expenses.
6. Make your home more eco-friendly
There is a whole range of improvements that can reduce your home’s eco-footprint. Many ‘green’ modifications can be affordable, like installing low-flow showerheads and taps, yet the long term savings may be substantial. Ask your council about the availability of grants or subsidies for home owners making environmentally friendly modifications.
However, some ‘green’ renovations can cost more initially. For instance, energy efficient appliances may cost more to purchase than inefficient models but the savings over time could compensate for the initial expense.
There are plenty of other reasons to renovate. The key point is to think about what you are aiming to achieve and ensuring your project will deliver the desired outcome.