Renovation mistakes that make property professionals spill their tea

If you want me to spill my tea as a property valuer, make me watch what I see time and time again - investors overcapitalising on their investment property renovations.

And I can’t hold my tea down as long as investors are not starting at the end and working backwards.

Let me explain.

I want you to think about your property as a piggy bank. Your property (depending on where it’s located) has a finite size and a limit as to how much money it can hold (aka market value).

Just because you spend a lot of money on a renovation doesn’t mean it’ll add a lot of money to the market value.

It’s like trying to add money to an already full piggy bank. Try and work out what the property’s end value will be once the renovations are complete (starting at the end) and then work out the most cost-effective way to achieve the desired renovation.

Property valuation is first step

Start by obtaining a professional valuation of your property. Understanding its current market value provides a baseline for assessing renovation costs. After all, investing significant sums into renovations for a property with limited value or potential may not yield desirable returns.

Consider the neighbourhood context as well. Understanding the surrounding properties, their level of improvements and streetscapes. This should set a benchmark for the quality and level of your renovation.

Overspending on renovations that exceed the neighbourhood’s market value ceiling may not attract the desired returns. Different areas call for different renovation approaches; what suits an affluent neighbourhood may not be appropriate for a more modest suburb.

Selective renovations

Next up is learning to be a savvy renovator and only renovating what needs to be renovated in order to add the market value.

Ripping out a perfectly good kitchen to replace it with a super modern high-end kitchen may not give you the return you are seeking.

Think of it this way; spending $50,000 on a new kitchen, only to add $50,000 in market value isn’t really a smart investment, especially if you take your own personal time to organise and arrange the kitchen installation in the first place. Unless the return on your investment is 2:1 as a minimum, it might not be worth the effort.

Budgeting for capital growth

Develop a detailed budget to guide renovation efforts. Proceeding without clear financial boundaries increases the likelihood of overspending.

A well-defined budget helps align renovation plans with financial capabilities.

Then go out and bargain hunt. There is a lot to gain and save in shopping around, comparing quotes and engaging in some fee negotiations. Also, don’t underestimate the power of social media marketplace forums and taking advantage or clearance and discount sales. Work smarter – not harder.

Taste, haste and waste

Avoid personal biases when selecting renovations.

While it’s natural to prioritise personal preferences, focus on improvements that offer broad appeal and financial benefits.

For instance, you may love a Hamptons-themed interior design style but a potential buyer may not.

You can always add some colour and personality through artwork and furnishings when styling the home for sale.

Strategically prioritise renovations that offer the most value. Avoid renovations that restrict future customisation options, such as converting rooms into highly specialised spaces.

Think fully kitted out cinema rooms, garage conversions into man caves or turning unused bedrooms into dream walk-in robes. These may seem like cool ideas, but they likely add nothing to the market value of a property.

Do not undertake DIY unless you are a qualified tradie or have allocated more than a “weekend here and there”.

I have seen my fair share of failed DIY projects that have blown out in both time and money. It’s not a TV show, it’s hard work and long hours, not to mention a very expensive project to redo if you make a mistake. Pick your battles.

Overcapitalising on a renovation

And finally, buying very well in the first place is probably the best way to save money.

Starting at the end and working backwards is to buy a home that you can envision what a great renovation will look like before you buy.

The less you touch in a renovation, the cheaper it is and the less likely you are to overcapitalise.

Replacing an old kitchen with a new one in the exact same space and not having to move the electrical or plumbing, or replacing the bathroom and leaving the layout the same, can be the best and cheapest way to undertake a renovation.

Get a home that has great bones and keep the renovation as cosmetic and aesthetic as possible.

When considering a renovation project, it is crucial for renovators to possess confidence, adequate resources, a comprehensive plan, and a deep understanding of the property’s current market value and condition and potential for added value.