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Are you thinking of renovating your home? | Real Estate Blog – Niche Portfolio

Tuesday, November 22, 2011

It goes without saying that the main concern for a lot of renovators is spending too much money on the wrong things. Owners can pour big money into expensive fixtures, the highest-quality floor tiles or a swimming pool and add nothing to the value of the home.

Average Return on Investment

Robert Caulfield, managing director of Archicentre (the Institute of Architects' building advisory service), says it’s not uncommon for renovators to only add 60% off the renovation costs to the value of their home.

Is my home suitable for renovating?

You need to assess whether the home is suitable for renovation. Not every home is a candidate. Caulfield says weatherboard homes are generally not as suitable for first-floor extensions as brick homes. With a weatherboard home, it's better to extend at ground floor level.

How much value will it add?

How much is too much? Engage a valuer to assess the current value of your home and what the value will be as a finished product.

What is my budget?

Danger! Do not start your project without a firm budget! This can result in an unfinished project or unexpected borrowing which cuts the investment potential dramatically.

Caulfield says renovators who don't seek competitive tenders from builders can end up paying 50% to 100% more than they need to.

Detail Detail Detail

Home owners then need to get a proper contract in place, one that deals effectively with changes that arise during construction. "Variations are inevitable," says Caulfield. "They may strike rock during excavations or find termites or faulty wiring or plumbing that's not up to scratch. You need to have someone realistically calculate a fair price for those variations."

How not to over-spend

  • New kitchen: Spend between 4% and 6% of the property value.
  • New bathroom: Spend between 2% and 3% of the property value.
  • Landscaping: Spend 1% to 2% of the property value.

Robert Caulfield of Archicentre suggests these pointers:

  • If you're rebuilding a home from scratch, don't spend more on the structure than the value of the land.
  • If you're doing a significant renovation of an existing house, don't spend more than half the value of the property – i.e. if you buy an old house on land for $500,000, don’t spend more than $250,000 on renovation.