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.
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.
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?
5. ARE YOU RENOVATING WITH YOUR HEART OR WITH YOUR HEAD?
Be reno-smart and use these tips to help avoid overcapitalising on your home renovations.