Renovating can be challenging and very rewarding, both in terms of personal satisfaction and financial gain, however, get it wrong and the reverse can be true.
A minute on your money - Renovate or relocate?
It’s never an easy decision. In this short video we take a look at the pros and cons and the financial implications of the decision.
|Setting your budget|
The first thing to ask is what you can afford, and factor in a buffer for cost overruns and delays.
Secondly consider whether you’re overcapitalizing with the proposed renovation, that is, spending more money on the improvements than the value they’ll add if you eventually sell your home.
Get estimates of the value of your home now, perhaps from experienced local real estate agents:
The keys are knowing your financial limits and what the renovation will cost. If you’re using a builder, architect and/or renovation company, you should receive quotes from them on which to base your decisions. You’ll need specifications and good working drawings so builders can accurately tender for your job.
Avoid a cost-plus contract. Insist on a fixed-price contract, although there may be some provisional sums quoted in the contract to cover work difficult to estimate. Cost blowouts are the last thing you want and can be caused by delays and also misunderstandings, which need to be ironed out in the planning stage.
|Renovating for profit|
Overcapitalisation becomes a critical issue to consider if you’re renovating to sell and make a profit.
Tips if you’re renovating for profit:
|Choosing building professionals|
Architects are university-qualified building designers and project managers. In most cases they’re accustomed to handling the entire project and should have experience coordinating project teams – including builders, tradespeople, landscape architects, engineers, quantity surveyors and interior designers.
Their designs usually consider important things such as site conditions, sun and views.
The cost depends on the level of involvement you request. You may want the architect to handle the entire project or you may want to be involved and take on some parts of the project on yourself.
Tips for choosing an architect:
An experienced builder should have access to a range of specialised tradespeople, knowledge of materials and where to get them at the right price.
Talk to friends who’ve had work done – after all, the most important thing is seeing a good finished product and knowing it was done on schedule and on budget. If you speak with a builder who hasn’t been recommended to you, ask for the names of people they’ve worked for. As a rule, try to get at least three written quotes for the same job.
|Doing it yourself|
Ask yourself some tough questions.
An owner-builder takes full responsibility for the project. This includes getting the necessary permits and taking on responsibility for the safety of the worksite, for you, your contractors and members of the public.
If you plan to sell the home within a certain period (check with consumer affairs in your state or territory) and the project is valued above $12,000, you’ll need Builders’ Warranty Insurance.
Issues surrounding contracts, permits and insurances vary for each state and territory. You should check with the Department of Fair Trading or relevant body in your area.
|How we can help|
Anyone who has done a renovation, either DIY or through a professional will tell you that it can be expensive. You may need financial help during the renovation and insurance as well.
1. Money magazine Home Lender of the Year Award 2010, 2008, 2007, 2006 and 2005, and AFR Smart Investor Magazine Home Lender of the Year Award 2005, 2004, 2002, 2001, 2000 and 1999. Australian Lending Awards, Mortgage Lender of the Year 2011 and Best Investor Lender 2011. The Australian Lending Awards is an independent initiative of The Adviser and specialist research and advisory firm RFI.
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