How To Create Instant Equity From Simple Renovations
Whether you’re thinking about listing your home on the market in the next six months, or simply looking to add value to an existing property, renovating can be an effective way to create instant equity.
Property owners eager to lift the value of their homes often ask the question: how can I ensure maximum value from a simple renovation?
Before jumping straight into a renovation, however, it’s essential to carefully plan and budget for any upgrades you are considering. The key is to make sure you know what adds value, without over-capitalising.
Here are my recommendations:
- Consider your renovation with rental yields in mind. As with investment property selection and purchase, a renovation is all about attracting the best rental yields. Therefore, it’s important to keep prospective tenants at the forefront of any renovation. For example, consider what upgrades would appeal to them. A simple re-carpeting job can cost as little as $5000 while adding as much as $10,000-$20,000 to a property’s value, and doing a complete refurbishment for $50,000 may add $100,000 to its value.
- Know how to add value with little outlay. If you’re looking to sell your home or investment property, but don’t have the budget for large-scale renovations, there are several small-scale improvements you can do yourself to instantly lift its value. A fresh coat of paint can make a world of difference to worn-out interiors, and it’s impressive how much a decent clean can increase the appeal of a home. For gardens and backyards, a new table setting can help buyers visualise how outdoor spaces can be used for entertaining. If you own a swimming pool, make sure it is clean and has been maintained, as this can be a strong selling point for families. Even the simplest of details, such as dressing pool-side furniture with towels and cushions for inspections, can create an inviting atmosphere.
- Light it up. One of the things I always look for in a property is light. Despite whatever amazing features the property might have if it is not naturally well-lit, it turns me off straight away. If your property is dimly lit, consider replacing old light fittings, switches and sockets with more efficient ones. If you are in a house, semi or townhouse, a skylight could also uplift living areas, kitchens or bathrooms with poor natural light. Removing clutter and opening blinds and curtains are other easy ways to enhance your property’s appeal and demonstrate an abundance of natural light.
- Hire an independent property valuer. Many inexperienced buyers risk over-capitalising or making upgrades that don’t impact the value of the property. Even before beginning the most simple of renovations, it’s worth hiring an independent property valuer, as they can advise you on how much value a renovation has the potential to add – particularly in your area. A valuer can tell you if spending $30,000 on a kitchen renovation will actually add more than $30,000 to your home’s overall value, for instance. They will also be aware of circumstantial factors, such as the average value threshold of properties in your street.
- It doesn’t have to be perfect. Don’t worry if not everything about the property is pristine – a place that’s liveable enough to rent out straight away is often the most realistic and affordable option for investors. If you have an eye for improvements, investing in a place that needs a simple renovation presents a real opportunity for equity. However, if you’re purchasing a property to ‘flip’, beginners should start off with small improvements rather than a complete renovation. That way, not only can you take your time saving and planning for a complete renovation, but seeing the difference between the property’s actual worth and what you can make it worth enables you to fall in love with the property as you envision its full potential.
Regardless of whether you’re considering minor upgrades or large-scale renovations, renovating a property has the potential to significantly increase your home’s overall value, even in a flat market. To receive maximum return from renovations, always remember to consult the experts and stick to your budget.
About Chris Gray: Chris Gray is CEO of Your Empire, a buyers’ agency which builds property portfolios for time- poor people – searching, negotiating, renovating and managing property on their behalf. Chris’s team buys 1-2 properties a week and often spends $5m+ a year renovating on others behalf, providing a unique insight into market conditions and buyer and seller sentiment. Chris hosts ‘Sky News Real Estate - Smart Investing’ each Monday on Sky News Business channel, where he interviews various heads of property research companies and major industry figures. Chris is a qualified accountant, buyers’ agent and mortgage broker. For more information, visit www.yourempire.com.au, www.chrisgray.com.au and follow Chris on Twitter: @ChrisGrayEmpire