Why renovations aren't always a good investment

While it is true renovating just one thing may be a dramatic improvement to a home, if you were to have the property valued before and after the work, the outcome could be disappointing.

So how can this be and is it really possible to make a profit from renovating?

Interestingly Aristotle provided a solution to this question in mid 300BC when he said that  “The whole is greater than the sum of its parts.”

To make profit from renovating as well as cover the costs, your approach needs to be co-ordinated and “whole”. This is particularly true of purely cosmetic improvements when refurbishing kitchens, bathrooms, floor coverings light fittings, window dressings etc. Each individual improvement in isolation may not do a lot for the value of the property but done together as a complete makeover, the effect is exponential as each improvement builds on the overall effect.

Often newly renovated properties are supplying a sector of the market that would like new in suburbs where the density of housing means that's not an option. So to fetch a premium price the renovations need to be done in one operation and fresh when the property goes to market.

Of course many structural improvements can defy Aristotle’s logic because increasing the function by additions or reworking the layout to create more rooms and better flow tend to stand on their own. For instance adding a bedroom or living room will generally add real value and can move the property into a higher price bracket.

Improving the street appeal is the one exception as  it is a powerful way to increase the value of a property instantly purely because it gets more prospective buyers in the door and in doing so broadens the market.

When selling any good idea there are always conditions attached! The improvements must be consistent with the style of the property and the neighbourhood. They should have broad appeal in terms of design, colours and finishes. The quality needs to be right up there and of course you can’t blow the budget because that will end you back where you started.