I’ll also be holding a live webinar:
Mon 23rd November
6pm Sydney local time
Register by clicking here
Part three of my renovating series today and I wanted to talk about “what” I spend money on when renovating and a little insight into deciding my renovation budget.
Before I get into things, if you missed part one and part two, you can catch up here:
What are the first things I look at to improve a property?
This may sound ridiculous and obvious…
A deep clean of any property can add instant value for a sale or for tenants. Often you find that a professional carpet or floor clean can bring things up brand new. A good scrub of the bathroom and kitchen can take years off their age.
Curtains and blinds, cupboards, windows, doors, walls and floors. Don’t underestimate the value of having a professional clean.
Have I changed my approach to work done on an investment property?
In the past, I would always start with basic cosmetic work.
Today, I am more inclined to completely gut and start from bare bones.
Sometimes it’s easier to take everything back to bare walls and start again. I have heard countless stories how people have tried to tile over tiles or do a cosmetic makeover of a kitchen, only to discover problems down the track which cost more than replacing the kitchen or bathroom in the first place.
How much do I spend on renovations?
This really is a million dollar question. Unfortunately, there’s no hard and fast rule. A multi million dollar property is going to need more work, attention to detail and ultimately budget, than say a two bedroom apartment.
Having said that, I generally get two valuations at once on a property to give me the best idea.
The first valuation is for the current value of the property and the second is based on what it would probably be worth based on my planned renovations.
If you know the difference between the two, you can budget for the work, ensure you don’t put in more than you can get back and possibly calculate any additional equity you can expect as a result of the work before you even get started.
Property valuation at purchase: $1m
Property valuation based on planned renovation: $1.1m
Likely additional equity after renovation: $100k
Now I know that I don’t want to spend over $100k in total in order to get additional equity in the property, though I generally want to make sure the work is worth my while.
In this example, I would look for a fixed quote for the work for say, $50k. This leaves me with a buffer in case things don’t go according to plan and all but assures me of an increase in equity once the work is complete.
The mistake most people make:
Too many people rush in and it’s not until the work is done that they realise they’ve actually lost equity by spending too much on the property. They simply have no idea of what the property is actually worth either now, or once work would be complete.
Did you know Your Empire can manage everything from A-Z for your renovation? I was surprised to hear that many of our clients had no idea. We have our very own list of contacts, valuers, construction managers, tradespeople and even mortgage brokers that do all the hard work for you.
Book a free, confidential mini strategy session with our property expert Luis Lequerica: https://calendly.com/yourempire/15min
Or simply, get in touch with us today on our contact page to discuss your requirements.