Adding Value to Homes With Renovation – A Primer
Renovation is the shortcut to improving your home’s value. Instead of waiting for your home to appreciate over time, you can inject some more value into your home by renovating your bathroom. So how can you get into a home that’s a bit of a “fixer upper” and improve its value through bathroom renovation?
How to buy in a heated real estate market
House prices increased in Australia by 2.1% in February 2021 according to CoreLogic. Some areas are becoming hotter property over time – and using a few key indicators to see what’s on the up and up. This applies to capital-city markets at least 10km from the CBD.
These are the indicators to look out for: are new cafes and restaurants appearing? Are there more developments springing up? Are prices climbing? Is the demographic skew younger or older? Younger professional couples flocking to an area is an indicator the suburb will be the “next big thing.” You can measure property values by looking at the median prices of adjoining suburbs. If there is more than a 5% variation, it’s likely the cheaper suburb will be playing catch up relatively soon. Subscribing to price alerts from Domain or RealEstate.com.au will help you strike before the suburb you’re looking at becomes unaffordable.
Another economic indicator is rental yield. If rental yield is rising, it also means demand is rising – which of course pushes prices up.
Keeping your renovation on budget
According to the Home Industry Association, bathroom renovations cost on average (median) $19,085. The same statistics show that about 90% of renovations also run over budget to some degree. While this may be true for partial or small renovations, renovation professionals state that full bespoke jobs can be anywhere upwards of 30k. The saying “you get what you pay for”, has never been truer.
Though when it comes to adding value to your home, it pays to be realistic about what will provide the most economical return.
The “golden” rule of renovating is to keep the total cost within 10% of your home’s original – not future – value.
However, most budget overruns come down to two major factors: changes of mind and not asking the right questions first. You need to have a complete plan in place before you even engage designers or contractors. You should know if you need to re-waterproof the entire bathroom, have asbestos removed, or rearrange or split your bathroom – the latter costing significantly more than replacing tiles and vanities (more on that later.)
You may also be tempted to hire a tradesperson who deals in cash – “cashies” as they’re known – resist that urge. Yes, it’s cheaper. But you’ll be left high and dry if the tradie hasn’t got the right tickets, insurance, or qualifications. Only agree to work when both parties have it in writing. Changing your mind not only breaks a contract, but also adds more time and labour costs to the mix. This can blow out your budget; even if your change is well meaning.
How to best finance your renovation
According to a Houzz survey of 2020 renovations, 80% of people financed their renovation out of their own pocket. 20% said they used a credit card, and 14% said they drew upon existing home equity.
If or when budget overruns happen, you may hand over more of your hard-earned (or your plastic) with growing reluctance each time. Using an investment home loan can allow you to get into your property and have a suitable redraw facility to complete renovations.
“An investment home loan is geared toward facilitating long-term returns from your property,” Savvy Managing Director Bill Tsouvalas says. “Enhancing your investment value from renovation can be made simpler by flexible redrawing on equity and investing that straight into your bathroom renovation. Better bathrooms also attract higher rents and better yields, if you’re looking to rent out your property to make an income.”
Scheduling contractors – even when they’re busy
If the thought of having contractors come in, complete a certain part of your bathroom, only to never see them for months on end scares you; it can happen. You should interview bathroom renovation contractors who can wrangle sub-contractors for a continuous renovation.
You should lock in a date – in writing – when the contractor and their subbies can concentrate on your home so you can minimise disruption. Hiring small bathroom-specific contractors that specialise in partial renovations may also be worth considering. They may be ticketed in tiling and carpentry, which can save money instead of hiring two separate contractors. The more things you want to change, the more moving parts (i.e. subcontractors) you’ll have to deal with.
How to save money on bathroom renovations
If you want to save money on bathroom renovations, don’t buy the cheapest materials you can find from Gumtree or AliExpress. Shoddy materials will cost you more in the medium-term as they fail and need replacement. Shop around for good quality materials at the right price. Buy smart, don’t skimp.
If your home is less than 15 years old, you may want to consider a partial renovation instead of a total or complete renovation. Partial renovations leave the design intact – total renovations mean bringing in carpenters, electricians, etc. to fundamentally change the layout of the room. It takes longer, with more people – and that costs money.
Most state guidelines for renovation lay out that you should make “like for like” replacements – so if you’re replacing a vanity, replace it with a newer equivalent.
Remember to consult a financial professional before making any major purchase or credit application.