Know your market before spending on renovations
The home renovation craze is inspiring more and more West Australians to renovate for lifestyle and profit. The Master Builder’s Associations’ Gavan Forster said while ABS figures reveal around $500 million is spent on renovations in the State each year, the actual figure is closer to $2 billion. Kitchen and bathrooms top the list, followed by adding a second storey or another bedroom.
The team at Property Wizards believe you can’t beat buying to add value, whether through renovation, development or subdivision, as long as it’s the right property in the right location.
If done wisely, increasing the value of your investment through home renovation can boost your cash flow and improve your chances of attracting and keeping good tenants.
However, not all renovations are equal and there are some common pitfalls to avoid when deciding how to best add value.
Renovation traps to avoid
Overcapitalising is a key risk to consider. We believe it’s important to know the market when looking to add value to an investment property. Seek advice and find out what has sold in your area.
Understanding the market will also ensure you don’t limit your resale potential by spending money on features that buyers don’t want. For example, a below-ground pool or a fancy garden may improve the look of the house, but you may not get your money back.
A recent survey by the Commonwealth Bank revealed West Australians are the keenest renovators in the nation, although they are also the most likely to go over budget and over deadline. As a result, 56% of respondents were forced to make compromises, such as simplifying their designs or skimping on the quality of materials.
Hidden versus visible improvements
It is often good to add value in a visible way, particularly where the repairs are cosmetic and low cost, for example replacing grotty kitchen bench tops or a rusty letterbox. Hidden improvements however, like rewiring or plumbing, are often expensive and don’t add much value.
A good way to get ‘the most bang for your buck’ is to look for ugly or shabby features that can be easily fixed. These may include replacing or updating old floor coverings, window furnishings, light fittings, cupboard handles and tap ware. Painting in light, neutral colours is another way to add cost-effective value.
Consider providing more storage options, improving the street appeal and front entrance or installing a shade sail or a deck in the backyard.
If you decide on a major renovation, we recommend you ensure your property is structurally sound and engage professionals to do the job so it doesn’t end up costing you in unforeseen expenses. A professional design concept is also essential and you may be required to get Council approval.
With good advice, research and careful planning, the right home renovation can increase your equity and put more money in your pocket.
If you have an interest in building your wealth through property, then call us on (08) 9381-7450, or request a FREE Starter Pack.