Renovations are often done to increase a property’s value, and as in any wealth-creation strategy, it is strongly recommended to plan well to maximise your earning potential. Here are the three must-do pre-renovation steps.
According to Hotspace Consultants’ Jane Eyles-Bennett, the cornerstone of a successful renovation is proper financial management, which she breaks into three sections.
According to Ms Eyles-Bennett, knowing the potential price range of the property post-renovation is the first step to take before renovating.
“Knowing when to spend money, and when not to spend money, is one of the most important skills to master when renovating,” she said.
This data could be hard to determine, but one way to have a good idea about the probable sale price is to find comparable properties in the same area that have been renovated.
You can also utilise RP data and websites or get in touch with real estate agents.
The interior designer said: “Make sure comparable properties have the same number of bedrooms and bathrooms and on a similar land size, and preferably of a similar style but already renovated to a standard you think you might match. If any of these factors are off, make adjustments to your predicted sale price/revaluation as necessary.”
She also recommended working around the median price to increase the number of potential buyers.
“Start with 8 to 10 per cent budget and adjust this according to the suburb,” she said.
Another data to determine before proceeding with a renovation project is your target market and its specific needs, Ms Eyles-Bennett said.
In the same way, you confirm the probable sale price or revaluation range, you can also engage real estate agents or property managers in order to get a good grasp of the demand for dwellings based on the area’s demographics.
Researching competing properties can also help you know the type of clients that you will be catering to, the interior designer said.
She explained: “For instance, young families will want a bath, a fenced yard and open-plan living spaces. Retirees can do with fewer rooms, more storage and easy access. Find out what your target market places value in and establish whether your property meets those needs.”
It is important to remember that a renovation is more about making the property functional for its future owner or tenants rather than merely making it beautiful, the expert said.
She said: “The first part of your budget needs to be spent on fulfilling your target market’s functional requirements. Once the property is functional for your target market, then you can begin to make it look good.”
Factoring in the data you got from the first two steps, you can now begin to plan how to allocate your budget.
Ms Eyles-Bennett encouraged doing due diligence in order to allocate the correct percentage for the various elements of the property.
According to her, you must examine each room and know exactly what you want to do with them based on your target market’s needs.
She highlighted: “How I work is by allocating a certain percentage of my budget and then translate these into dollar figures. For example, I might allocate 20 per cent to the bathroom, 20 per cent to the exterior, 30 per cent to the kitchen and 30 per cent for general improvements. Think about target market needs and how much to spend fulfilling them.
“Specify what you want to do and what you can afford to meet your target market’s needs and the aesthetic requirements of the dwelling.”
In the event that you run short of money, Ms Eyles-Bennett suggested doing partial renovations first. Instead of a full strip out, find a way to work with some of the materials you have and change only certain elements of the property.
For example, you can opt to paint the kitchen doors and replace the bench top and splashback first instead of completely stripping the kitchen.
Ms Eyles-Bennett said: “I’m a big fan of partial renovations… If you can afford a full strip out, then you can, of course, add a lot more value. However, you still need to make sure you’re not overcapitalising.”