Profit from renos
What $10k, $50k, $100k & $750k gets you
INVESTING IN PROPERTY COMMERCIAL v RESIDENTIAL POWER BILLS THE CHEAPEST PLANS ON OFFER PREPAY & SAVE FUEL, PARKING, AIRFARES, CAR HIRE
Some 213,000 kitchens and 429,400 bathrooms were installed in Australia in the 2015-16 financial year, reports the Housing Industry Association (HIA). If you are going to renovate, these high-traffic rooms are the ones to work on as they are likely to give more bang for your renovating buck.
The renovation market is in recovery after 10 years in the doldrums – last year marked just the second consecutive year of growth. But these strong numbers show Aussies are not afraid to spend money to improve the value of their homes and rental properties. And why not? Debt is cheap and property prices, with the exception of Darwin and Perth, remain strong.
HIA’s Renovations Roundup predicts that renovation activity will increase by 2.5% this year. Growth of 1.7% is forecast for 2017, followed by 2.8% in 2018 and 2% in 2019, bringing the total value of projects to $33.3 billion.
After renovating two properties, I can vouch that there are good profits to be made but it’s certainly not easy. As Paul Eslick, one of the three experts who make up the Reno Kings, says, “It’s more difficult now than in my paint-and-profit days, due to the low stock of good-quality homes suitable for renovation”.
Their plan – to subdivide an 809 square metre block, shift the house to one side, sell the created vacant lot to pay down the loan on the remaining house and then hold a positively geared rental property – isn’t a simple reno job. It’s what the Reno Kings like to call an “RDC” – a renovation-development combination. All up they estimate their strategy should bring them a $131,000 profit.
If this is a little bit too much to take on, you can take comfort in knowing that even small renos can add big profits. Interior designer and TV presenter James Treble shows how a $10,000 entrance makeover can add three or four times that to the home’s value. He says while it’s difficult to pinpoint the extra value that this one job, part of a bigger project, has created, the
As rule of thumb, every dollar you spend should return at least $2. Allow 5%-10% extra for contingencies
“dramatic change to the look and feel of this home has added between $35,000 and $40,000”. That's a return of about $3 for every $1 spent. As Treble says, “the entrance is one area that's always worth presenting at its best”.
As a rule of thumb, every dollar you spend should return at least $2. If you're doing a cosmetic renovation then spend no more than 10% of the purchase price. Allow 5% to 10% extra for contingencies and always have an end goal in mind about how much you want to make. A good way of working out what may be achievable is to compare a newly renovated home in your area with yours to see what price spread you have to play around with.
Whatever your budget, this month's cover story shows you how profit can be achieved even when you do blow your budget – see the $500,000-plus makeover. Our renovating experts reveal how they managed their projects and share what they have learned about the best ways to create value.