If the popularity of television shows like The Block is anything to go by, we Australians don’t just love our homes – we also love to decorate, renovate and generally improve them.
The Housing Industry Association’s (HIA) latest Renovations Roundup report found renovations activity grew in Australia in 2015 for the second consecutive year, rising by 4.4 per cent. A home in need of love can tug at your heart strings, but unless you’re careful it can also drag on your finances.
Here are six steps you can follow to prevent a rundown home leaving you financially skewered:
- Talk to your lender
Don’t assume you’ll get a loan just because a home is cheap. If a property is in need of major repairs it may not pass muster with the lender’s valuation. In the worst case scenario that could mean losing your deposit. It’s best to discuss whether a property you’re thinking of buying could hit hurdles at valuation time with an expert.
- Arrange a pre-purchase inspection
A professional pest and building inspection will show up all the faults on a property giving you a warts and all idea of exactly what you’re up against. But don’t think a poor report is the end of the world – it can be a useful tool in price negotiations.
- Take off the rose coloured glasses
There’s something romantic about the idea of restoring a home to its former glory, but before you start creating a Pinterest wish-list, make no mistake that major renovations can be hard work. Be sure you’re up to the job. It helps to have contacts in the building industry who you’ve worked with before and know you can trust, otherwise speak to your friends and family to see whether they’ve got someone they would recommend.
- Crunch some numbers
Before putting your offer in, ask a licensed builder whom you trust for a quote on the likely cost of renovations. You need to go into the project with your eyes wide open.
Unless you are a tradie or you have excellent DIY skills, don’t assume you’ll save money doing a large chunk of the work yourself. A professional finish not only enhances the value of the property, it ensures your home meets council building standards.
- Contact the local council
Building regulations have changed in many areas over recent years. You could face solid restrictions on what you can do to the property and what you must do as part of a refurbishment. The pest and building inspection will be useful for negotiating on your permit applications.
- Check your budget
Be honest with yourself about whether you have the funds to pay for renovations. Even small projects can dish up cost blow-outs. You also need to be wary of overcapitalizing – that is to spend more on improving a property than the market will return on it when it comes time to sell. The last thing you need is for your planned renovations to cost more than they add to the value of the property. Speak with local real estate agents to get a feel for whether the improvements you’ve got planned will add genuine value.
Overall, be sure your renovations reflect what buyers really want. After all, at some stage you’re likely to sell and upgrade to your next home.