Adding Value To A Property Through Renovation
As investors, getting the best return on our capital is paramount. When we talk property and renovations there needs to be careful consideration placed on much capital is available and how best it can be utilized. The first step is to establish a plan that identifies where the greatest value for your efforts can be achieved.
Where can you get the best bang for your buck?
We find the most common areas to renovate include the kitchen and bathrooms but through our experiences the biggest asset on all projects is paint: tile paint, paving paint, roof paint, wall paint, window paint, benchtop paint. It’s all similar type of paint. It’s the golden nugget in your toolkit, and it’s cheap in contrast to revitalizing larger areas.
Paint freshens the look and smell of a property and can be complemented with finer details such as fixtures and fittings that will create an uplift in price.
If you are unsure a professional consultant can conduct a detailed analysis based on your property and budget.
An excellent wealth creation strategy
There is no question that a renovation, whether it be a low-cost cosmetic or a high-end structural project, will help increase the value of a property. This extra value can be accessed in two forms: through equity release for potentially another purchase or cash from a sale.
Renovation alone is one of the biggest wealth creation strategies and takes less time and money than subdivision or developments. In contrast to these other strategies, a renovation is generally faster and lower in cost, making it more achievable for most of us.
Mitigating the risks
We often find that people with limited renovation experience often underestimate the cost and time required to achieve the desired outcome. If you are engaging a professional tradesman always ensure you have a full scope of works and that any variations are signed off. We suggest that any plumbing or electrical changes should be carried out by licensed trades – do not attempt this work yourself as these are higher risk and higher cost areas. Plus your security is paramount. Some potential risks with a renovation is that we underestimate the budget or scope of improvement. This can result in increased pressure to finish a job that may intern compromise quality standards. Reliability of trades and sticking to a timeline is another risk factor for consideration as this may impact when the property is ready for tenancy or sale.
A recent example
In one of our recent projects, we helped a vendor extract an extra $295,000 in equity with only $60,000 spend in five weeks. This result was life-changing for the vendor who was able to take a leap into their next phase of life. The vendor didn’t have the money, we stepped in to help, found the trades and agent to sell, co-ordinated the project, provided some funds to move the son out and shed some tears together on auction day.
The project was in a great location which we knew would command a strong price once renovated. The appraised price before commencing the project was $550,000. After opening up some internal non-structural walls we created a second bathroom to bring the price on auction day to $845,000. An amazing result in five weeks through renovation. We also nailed the budget spend of $60,000 which can often be rare for the enormity of these type of works.
If the jury is out into whether to renovate or not always consider: Do I have the capacity to do it myself? Do I have the money to make it happen? Do I know the uplift in value I will create? If the answer is NO to any question then re-assess to be certain before moving forward in the future.