Investors who are looking to add value to their properties are overcapitalising on ‘the two most important rooms in the house’.
Todd Hunter, director of wHeregroup, said even though kitchens and bathrooms can make a big difference to a property’s eventual sale price, investors had a tendency to overspend on these rooms when doing cosmetic renovations.
“Full bathroom replacement and new kitchens can be very expensive, but makeovers can be very cost effective,” he said. “Resurfacing companies can make dull kitchens and bathroom tiles look new and bright – combine that with a new vanity and stainless steel appliances in the kitchen and it will attract prospective purchasers to your property and then they will inevitably pay more.”
Cherie Barber, founder of Renovating For Profit, said one of the biggest mistakes inexperienced renovators make is failing to crunch the numbers before they purchase a property.
“The general rule of thumb for a cosmetic renovation is that you spend 10 per cent of the actual property value on the project. So for example, if you buy an un-renovated house for $350,000, your total cosmetic renovation should be 10 per cent, which is $35,000," she said.
“Where people go wrong is that they might know the broad figure, the $35,000, but they don’t know the sub-formulas of renovating. You may not know there are certain amounts of that budget that you should allocate to the kitchen, the bathroom and what you spend on the front façade, so try and educate yourself as much as you can.”
Bernadette Janson from The School of Renovating said as a basic rule, renovators could spend 1.8 per cent of a property’s purchase price on the kitchen and 1.5 per cent on the bathroom.
Figures from the Australian Bureau of Statistics (ABS) show spending on renovations jumped substantially in the first quarter of 2014. In March alone, Australians spent $586.2 million on property renovations.