‘Buy the worst house in the best street’ is a well known piece of advice. However, that ‘worst house’ will need some hard work and careful budgeting if you want a decent return on your investment.
If you have the time, the enthusiasm and the budget, renovating a home to improve its value can be a satisfying project for owner-occupiers or investors. Some people even find it pleasurable and slightly addictive, renovating and selling once a year or more!
A good renovation can add substantial value to your property – sometimes doubling your renovation outlay, before transaction costs are factored in. “You might spend $50,000 on renovation and sell the property for $100,000 more,” says Property Planning Australia’s General Manager Mark Armstrong, before adding “but the stamp duty you paid when you bought, the interest you pay while renovating and the cost you incur when you sell will eat into your profit margin considerably.”
However, Archicentre’s NSW manager, Angus Kell says that often prospective buyers “will be seduced by a fully renovated property in lieu of a property which they will have to spend money to improve, and you will recoup more than you spent.”
Like all money making schemes, it pays to do your homework first and investigate thoroughly before you open that can of paint or rip up that old carpet. Even before you buy, or immediately after, you should get a building inspection. Archicentre (www.archicentre.com.au) has offices in every capital city and can arrange inspections or advise how to get them. The inspection will show you any major problems such as sagging roof, rising damp, worn stumps, or illegal additions such as decks or patios that might be unsafe.
“A lot of people buying properties as investments, decide to live in them for 12 months first and then do the renovations before selling. It’s vitally important they get a building inspection before they do this, even if they then decide to live in the house for more than a year,” says Armstrong. “There is no point painting or renovating the bathroom, only to find the house needs restumping — major work which may crack the plaster.”
He says the factors that make you “fall in love” with a property are much the same for other buyers – the location, the aspect, the style of the house, as well as more mundane ones such as closeness to public transport, freeways, shopping centres and local businesses. Renovation can’t change any of those factors – but it can assist people to fall in love with your place rather than another down the street.
“Look for a property where cosmetic changes can refresh the look. Focus on the things you can do to update the dÃ©cor – and that means focusing on the things people can see and notice.” These are simple things like fresh paint, new carpet, polished floorboards, new benchtops, cupboard handles, mixer taps, light fittings, curtains, blinds.
Do your homework
The first thing to do is to decide which room or rooms you are going to renovate. The two rooms that have the most “falling in love” effect on prospective buyers are the kitchen and bathroom. However, if these have been recently remodelled, you may prefer to focus your energies and your budget on the living areas.
Experienced renovator Lillian Vasilj says look at your short, medium and long-term goals for the property. An interior decorator who has turned her renovating skills into almost a business line, she has redone 11 houses in six years. “The first thing you need to decide is are you going to live in this, or is it purely for resale? Are you going to live in it for 12 months before selling? Then, what do I need to do now, and what can be done later?”
Once you know what renovations you’ll do, the next step is to decide how much you can do yourself and how much you’ll need expert trades help. Be realistic -about your physical abilities, your time constraints and your finances. Research the costs involved. Armstrong suggests a good resource is your local hardware store or DIY shop. Not only will they have a lot of the basic products you will need, but they can advise on tradespeople and their likely hourly rates.
“A lot of people don’t appreciate how much renovations can cost. Part of the problem is understanding how much you can do and how much you need tradesmen, and how much tradesmen’s labour costs,” he says. “If you need electrical or plumbing work you will need a qualified electrician or plumber. A tradesman would rather do a large job than a small one, so they will charge more per hour for the small one. Do your research — find out about costs from DIY shops, get quotes from more than one tradesman.”
“Get all your trades work done in one hit,” Vasilj advises. “Work out how many new powerpoints you will need, and get them all done at once, instead of calling the electrician back to do some more another day.” She also suggests you get any tradesmen together at a briefing meeting so they can work in with each other and so save them time, and you money.
Research also the costs of items you will be installing; whether a new stove or a new tap, there can be huge variations in prices, which will all add to your costs. For example, taps can vary from $40-$400; benchtops from $1,000- $10,000.
Make a budget
and stick to it! “The biggest mistake people make is not to budget appropriately – this means when they are getting to the final stages they are running out of money,” Armstrong says. “They do the initial things well but the finishing touches are not up to scratch. In a lot of houses we see where people have been running out of money. They didn’t compromise on materials in the early part, and in the places where people don’t see them, but coming down to the end, they’re running out of money, and so they compromise and get cheaper taps or cheaper cupboard handles, the things that people notice.”
Vasilj suggests making two lists: a ‘must’ list and a ‘want’ list. That way you can drop things from the want list if the budget is getting stressed without compromising on the important things.
Archicentre’s Kell also emphasises the importance of budgeting realistically. “If you have planned the works and prepared a budget for the stages, then stick to the plan and budget from start to completion,” he says.
Set a realistic deadline
Once you have don all your homework, including getting quotes from any relevant tradespeople, set yourself a realistic deadline, and stick to it. Be realistic – don’t over-extend yourself. Remember, everything takes longer than you expect!
Make sure any tradespeople know what your deadlines are for their contributions, and that they are happy with the time allowed. Do any prep work required before they arrive so they can start immediately.
Kitchens and bathrooms
These two rooms have the most powerful effect on prospective buyers, Armstrong says. Get these right, and buyers will fall in love with place and you’ll make money. It’s relatively simple to make highly effective changes.
“But don’t make changes that affect the plumbing – eg- moving the bath or sink or toilet, or structural changes that people won’t see,” he warns. “They add considerably to your costs, but prospective buyers won’t see the value. Why pay $10,00 to move the bath?”
In the kitchen, it might mean changing the benchtops (get rid of that old laminate), new doors to the cupboards, new mixer tap to the sink, new appliances. It could be done for as little as $3-4,000 for a whole new look and feel.
In the bathroom, instead of replacing the bath, have it re-enamelled. Replace the vanity unit with one with a flick mixer tap, replace the showerhead with an efficient water saving one. Install a shower screen if necessary. Refresh the tiling – this might just mean redoing the grout.
Living areas are the easiest to do. A coat of fresh paint, new carpets or polished floorboards, new curtains or blinds and maybe new light fittings, and the whole room is changed. Do any painting first, so drips and possible spills land on the old carpet and are thrown away. If you plan to have polished floorboards, you can remove the carpet, and clean the floor underneath, but the bulk of the work will have to be done by a tradesperson.
Whatever part of the house you choose to renovate, remember to enjoy the experience, even through all the hard work, dust & dirt. You are creating something new that someone else will value and building new skills for yourself. As Vasilj says, “experience is knowledge.”
What to avoid
– Major structural alterations – reroofing, restumping, moving walls
– Major plumbing or electrical alterations – moving the bath, toilet, sink; installing new air conditioning system
– Unlicensed tradesmen, especially ones using second hand materials to ‘save you money’
– Skimping on the things that people see – paintwork, taps, doorknobs, benchtops
What to do
– Simple cosmetic touches that change the look of a room – fresh paint, polished floorboards, new benchtops, modern mixer taps, new light fittings
First things first
– Choose a property that needs the least work to update
– Get a building inspection (www.archicentre.com.au for more information)
– Decide which room/s to renovate
– Do your home work
– Develop a budget
– Set a time frame
What you can do & what you need a tradesperson for
– All cleaning, pre-painting filling & sanding prior to painting
– All painting – even ceilings
– Pulling up old carpets & cleaning floorboards prior to sanding and polishing
– Sanding floorboards (if you have time and are strong enough)
– Fitting new benchtops and new doors to cabinets
– Replacing door and drawer knobs if just repainting cabinets
– Replacing tap fittings if no plumbing involved
– All electrical work
– All plumbing
– Any structural alterations
– Sanding & polishing floorboards
Melbourne interior decorator Lillian Vasilj is almost a professional, having done 11 renovations in the past six years. But like all renovators, at the start she didn’t really know what she was getting herself into, especially with a husband and small children and a business to run!
What did you buy?: A one bedroom flat in St. Kilda, Melbourne
How much did it cost? $205,000
What did you do?
– put in new kitchen
– new flooring in lounge
– replastered lounge room (got rid of ugly timber panelling)
– painted, lounge, put in new light fittings
– new tap fittings in bathroom and kitchen
How much did that cost? $19,000
How much did you make? $19,000
How much did you do yourself? All of it, except electrical and plumbing
How long did it take? Seven weeks. I almost got divorced on this one, because I was doing everything myself and was never home. I decided after that to get tradesmen in to help me. Made less money, but stayed married!
What you wish you’d known before you started: It’s very time consuming and everything takes three times longer than you think. Especially cleaning up and the details. Don’t underestimate the work or presume that everyone has the same vision you do.
Three top tips for amateur renovators:
– start on a little project
– believe in your vision and be organised
– don’t worry about how much you make (as long as it’s a profit) — experience is invaluable and you will be an expert in no time