With shows like The Block and The Renovators inspiring the inner-renovator inside a growing number of Australians, we are fast becoming a renovation nation.
And it’s no surprise. A smart renovation can deliver astounding results – both in improving a property's condition and its value.
But a renovation, carried out with little planning or smarts, can easily turn into a money pit.
So how can you make a renovation work? There are certainly a lot of secrets to getting a renovation right, but without a doubt, doing the math is of utmost importance.
That’s right, budgeting is king and all too often renovators neglect to accurately scope out – and stick to – a budget.
The first thing you need to do when it comes to budgeting a renovation project is a financial feasibility statement, which is, essentially, a financial assessment of what a project is going to cost.
Of course renovation expenses are often hard to predict. The best way to estimate renovation costs is to do your homework and get as many quotes as possible. This will help you to build up a comprehensive database of prices, so that when you start looking at properties you can make a quick estimate of what it might cost, for example, to re-tile a bathroom.
While determining the initial costs of a renovation can be straight forward, the real nitty gritty can be much more complex to figure out, particularly for large-scale renovations. For this reason some rookie renovators may prefer to approach a quantity surveyor who can price up the whole project for you. Although it may cost you an extra thousand dollars or so a professional hand can really help inexperienced renovators go into a project more confident and assured.
When budgeting for a renovation it’s crucial to build a buffer of at least 10 to 20 per cent into your budget as renovations rarely run according to plan. It’s also important to allow for price differentials as well, as prices can go up within a short space of time.
The key to successful budgeting is to keep an eye on your finances and track and update your expenses regularly throughout the course of your renovation. This will help you keep on top of exactly how you’re tracking. If you’re coming in over budget, you can start to look at ways of cutting costs in other ways – rather than coming to the end of the project and realising you’re thousands of dollars over.
Constantly review your budget so that you can tweak it and make changes that keep you on track – and on the road to profit.
Renovation can be an exciting investment strategy but it’s not without its risks. While there are numerous renovation success stories, there are just as many disastrous ones. So go in with your eyes wide open, understand the potential challenges and, most importantly, work to a budget!