03 Apr Will I Make Money by Renovating my Home?
In this video Henry looks at what you need to consider when renovating your home, delving particularly into over-capitalising. Before renovating you need to look at the value of your neighbour’s houses and what people expect when they look at a property in your suburb. Here’s more on that from Henry:
Hi. I’m Henry Wong for RE/MAX United Vision. We’re here today to talk about renovations. I guess when you’re renovating your home, you want to make sure every dollar that you spend, you can actually make money on it or at worse, get your money back.
We’ll start here, renovations. Now the three biggest parts of renovating your home, I guess the ones that can add the most value is number one, we have the good old kitchen. Number two, we have your bathrooms. Number three, we have the outdoor entertainment. As we all know, most Aussies, we like to have a good barbie so outdoor. Most of your renovations should be catered towards, the kitchen, the bathrooms and the outdoor entertainment. Everything else like painting the house, doing the roof, that should be secondary to these three.
Now when you’re also renovating a property and spending money, you also have to take into account a few other things as well ’cause at the end of the day, you don’t want to overcapitalize. Now when you’re renovating a home, you should always take into account, “What if I need to sell one day?” Yeah, I know that some of you will probably think, “You know what, I’m going to renovate. I want to stay here until I kick the bucket,” but sometimes in life, we don’t know what may happen. Always take on the assumption that “What if I need to sell?” You want to renovate that if you need to sell, you can easily sell it.
Now a few other things that you need to take into account when you’re renovating is, number one, you need to take into account the value of your neighbors. Now what I mean by that is say, for example, your house is around about 600,000 and you want to spend say another $200,000 on renovating your home. That equates to $800,000, but all your neighbors are worth $500,000. That’s probably not a good idea because you’ll be $300,000 more expensive than all your neighbors and if you had to sell, it would be quite hard to sell because most buyers will be looking at buying an $800,000 house in a more expensive pocket. Not to say that you can’t sell, it just makes it a bit harder. That’s what the buyers’ expectations are.
Number two, now what I want to explain is a concept that I have actually thought of called the price bracket. Now at any given suburb, at certain price brackets, buyers have certain expectations. For example, in your suburb say, for example, if your house is $700,000. For that, look on realestate.com or domain or any of the online portals and you see what all the other houses have. If all the other houses in the $700,000 to $800,000 price bracket have en suite, it’s probably a good idea that you yourself have an en suite. If you don’t, you renovate the home and your house becomes worth around 800,000 and you don’t have an en suite, you will have a lot less buyers because out in the marketplace, that is what they expect.
Some houses, for example, in a suburb over $1.2 million, the buyers expect a pool. If you don’t have a pool, you’re actually going to have a lot less buyers because in that price bracket of all the houses that have sold and currently for sale, if all the other houses have a pool and you don’t have a pool, you’re going to have a lot less buyers. Not to say you can’t sell. I’m just saying you have less buyers. At the end of the day, when you actually renovate a home, you want to make sure you take into account the value of your neighbors and also what buyers are expecting in the price bracket of your home.
What I do is I get a lot of homeowners that are selling or maybe not looking to sell at all, but they’ve asked me, say, “Henry, can you come have a look at my place. We’re thinking of doing this, this and this,” and actually I can pop in and give them some advice. I can do the same thing for you to make sure that you don’t actually spend money that you won’t get back later in the future.