In 2015 Australians spent over 7 billion on home renovations. More staggering than that, over 75% of investors who purchased property over the past two years bought existing residences that were up to ten years old.
Renovations are a proven method of adding value to your property. Even minor cosmetic changes can make the property appeal more to tenants and increase the amount of rent an investor can charge.
While there are benefits associated with renovating an investment property, not all renovations are successful. Investors must exercise caution when deciding which projects will add value to the property.
Below are some key points to consider when renovating.
Getting an independent valuation of your property prior to commencing any renovations is a good starting point. The last thing any investor wants to do is spend more on home improvement than the market will return on it when it comes to selling the property. Getting a valuation and assessing the sale price and condition of homes in similar areas can help investors determine the financial viability of renovations.
Making improvements that add to the street appeal of a property is a no brainer. A more appealing façade will increase the number of potential buyers that walk through the door. For dated properties, rendering or painting brick exteriors, replacing any dilapidated gutters and tidying the landscaping will immediately increase a properties street appeal.
Kitchen & Living Areas
Kitchens and the more contemporary open plan living areas are really the heart of any property. Prospective buyers want to walk into a property and imagine themselves living in the space. To get an idea of how to update your properties kitchen and living areas, visiting new home display areas are a good idea as these properties will feature the latest trends in home design. For a moderate investment, investors can sometimes expect to see the property’s value increase by $50 – $60,000 as a result of updating the kitchen and main living area.
Outside Living Areas
One of the leading trends in the current property market is the demand for separately sectioned outdoor living areas. Whether it be a barbeque pit or alfresco area, any renovations outside should ideally be integrated with the kitchen and living areas of a property as home owners want to be able to move freely from their internal living space to the outdoors, especially where entertaining from home is concerned.
For any major property improvements such as outdoor pergolas or dividing walls, government approval prior to construction is vital. Recently the Victorian Administrative Tribunal (VCAT) ruled that a rear extension to a Melbourne home would adversely impact the rear yards of adjoining properties, sending developers back to the drawing board.
Kim Hallis, director of interior design firm Creative Expectations, stresses the importance of budgeting and selecting the right areas of your property to renovate. Hallis recently spent $85,000 updating a Toorak property with new bathrooms, floors and carpets. Initially valued at $1.65 million, the property sold for $1.92 million. She suggests spending $20,000 on cosmetic improvements for a $1 million property.
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The information provided is of a general nature and is not intended to be constituted as financial advice. We recommend that you seek independent advice from qualified professionals before employing any strategies outlined.