Renovation v presentation
Tips from the experts
Programmes such as The Block NZ put plenty of attention on the benefits to be gained by renovating. And although the teams this year are working with new terrace houses, the idea of renovating to sell for a higher dollar is appealing.
There are many instances of young people trying this for themselves with great results. Some, like Alice and Caleb Pearson who won The Block NZ in 2013, have even become serial renovators and sellers, and say it is paying off for them.
But when the Pearsons look to buy a house, they are looking for potential, not a house that’s already perfect. And they are very experienced and have sussed out a winning formula.
Which begs the question, if you renovate to sell, will your renovation be to another’s taste? Is it better to renovate before you sell or simply leave your home as is and sell the potential? And if your renovation takes time, do any gains simply reflect the change in the market?
The owners of a large apartment above my flat spent a lot of money putting in a new kitchen before putting the place on the market. But the first thing the new owner did was gut the entire interior and order a completely new kitchen.
Real estate agents see this sort of thing happening all the time.
Craig Lowe of Lowe & Co in Wellington says spending $40,000 to $80,000 putting in a new kitchen, or $20,000 to $40,000 on a bathroom is not worthwhile. ‘‘There is no way you will get that back. It is far better to sell the potential.
‘‘But you should also advertise that fact, so people are not coming in expecting it to look perfect. It is better that they arrive with lower expectations and may be surprised it looks better than expected.
‘‘Preparing your home to sell should be about presentation, not renovation. Painting walls, sanding floors or removing a lot of rubbish from the back section to create a new lawn will all add value.
‘‘Those things are relatively inexpensive and they make sense. But investing capital in major structural renovations is not worthwhile.’’
Lowe believes the rise in popularity of renovation shows such as The Block has created a demand for ‘‘do-ups’’.
Consequently, the price of such houses tends to be much higher than it should be when compared with properties that have been renovated.
‘‘It’s really a cultural thing – our national pastime is investing in real estate and doing up houses. There’s also that desire to make money quickly by flipping or renovating for gain.’’
Lowe says he has had nearly two decades of watching some people do this well, and some do it badly. ‘‘So many people take a stab in the dark, thinking their work will be right on-trend for buyers. They also don’t factor in their own time, or the holding and transactional costs. If you do the maths, there is no money in it.’’
Lowe says many renovators feel like winners because housing prices have gone up while they worked on the house, but that doesn’t mean the renovation paid off.
‘‘It’s interesting that the minute the market flattens out, no one is renovating to sell any more. If there really was money in it, then they would still be doing it [during those periods].’’
Jeremy Wyn-Harris of Builderscrack.co.nz agrees that over capitalisation – when you spend more than you get back in the sale – is to be avoided. He says it helps to understand the market for a house in your area pre-renovation, and the market post-renovation.
‘‘If you are in the ‘worst house on the best street’, you may find that renovating shrinks demand, even though your home’s value is higher and presentation is better.
‘‘If you have an average house on an average street, renovating could make your home stand out, and increase demand.
‘‘Preparing your home to sell should be about presentation, not renovation.’’
Craig Lowe
‘‘Your best course of action is to discuss the market with several real estate agents, and buyers if possible. Get a feel for what people are looking for. If your unrenovated home pretty much ticks the boxes, then a simple paint and redecorate will deliver a nice profit.
‘‘If your home has any issues or flaws that are likely to put off buyers, then it’s a good idea to address them before sale.’’
Wyn-Harris says roof and guttering maintenance, exterior painting, gardening and addressing water damage and drainage are all simple fixes that work to add value to your property.
‘‘Interior paint and decorations, updating kitchen joinery – doors and handles – and bathroomware, new carpets, curtains and a heat pump are all basic renovations that usually add value. Bigger renovations, such as adding rooms or reconfiguring a home have the possibility of adding significant value, but also come with the risk of bigger investment.’’
Alice and Caleb Pearson, who have seven renovations behind them, are looking for the next project, which will be in the South Island. They know they are on to a good thing.
‘‘So many people went through our house at the open home and said, ‘Oh man, I wish we could do what you are doing’,’’ says Alice Pearson.
‘‘So we know we are living the dream but we definitely have a whole lot more dreams with property.’’