Making house improvements pay off
More often than not, you have to spend money to make money. It's an age-old adage, but one that still rings true for today's property owner thinking about renovating a house or apartment with the hope of bagging top dollar at sale time.
But what and how much a vendor decides to do - and, more to the point, invest - depends on a host of competing factors, such as the type of property, the suburb in which it is located and the potential buyers. In some instances, such as with a classic ''renovator's delight'', it can be better to do nothing at all.
The important thing is to understand your market, says Belle Property principal Tim Foote. "You need to know the difference between what a renovated place will sell for and what an unrenovated one will," he says. "Sometimes, an unrenovated place gets more, because buyers are excited about doing the work themselves."
Shannan Whitney, of BresicWhitney, says vendors choosing to renovate must consider whether they undertake extensive modifications or something more cosmetic. Major works usually involve altering the layout of the home: knocking down a wall to open up an area, sectioning a room off or adding an upstairs bedroom - works that generally cost $50,000 and beyond.
Cosmetic repair covers work such as revamping bathrooms and kitchens, both popular with sellers. It also incorporates more minor jobs that agents typically refer to as styling - from replacing floor coverings and updating furnishings and fittings to painting, refreshing the facade and doing up the garden.
"Anything that functionally or stylistically discourages a buyer needs looking at," says Whitney, adding that apartments are easier to do up than houses.
The trick is calculating what to spend on capital improvement against the expected return. For example, Hayden says when it comes to adding an extra bedroom, he advises sellers to research the value of comparable properties with the same number of bedrooms in that area before spending the money.
"About 40 per cent overcapitalise, 40 per cent undercapitalise and 20 per cent get it right," says Patrick Bright, a buyers agent and author of The Insider's Guide to Renovating for Profit.
Phillips Pantzer Donnelley principal Alexander Phillips says he recommended one seller invest $25,000 for a second bathroom in a three-bedroom Bondi apartment to appeal to the family market. "Without a second bathroom, you possibly miss that," he says. "You need to appeal to the widest market possible."
Bright, who recommends buyers focus on properties requiring cosmetic rather than structural work, says about two-thirds of his clientele opt for renovated places - particularly with new kitchens and bathrooms - "because it removes the fear of the unknown" with cost and time.
Whatever you decide to spend, you need to double your money to make it worthwhile, Whitney says. If you spend $50,000, you want to add $100,000 to the value. For styling, he says $10,000 should net you even more, as much as $100,000. "It isn't how much you spend; it's what value you'll get from any capital investment.''
Looking good - Five common renovations before you sell
1. Bathroom and kitchen. These two areas are the most popular areas of the house vendors look to renovate. While an average kitchen can cost $10,000 to $30,000, buyer advocate Patrick Bright says these rooms tend to add most value.
2. Painting. A fresh coat of paint inside and out is a relatively quick way to turn dull and drab into bright and new.
3. Interior refurbishment. Vendors can look at redoing floors and floor coverings, such as new carpet. Renewing light fittings and window furnishings are other options, as is general styling throughout.
4. External facelift. If you do not repaint, at least wash the exterior thoroughly, make repairs, add pot plants and relandscape the garden, create parking, if possible.
5. Structurally change the floor plan. Improving the flow and feel of a house internally and to the outdoors is common, although not always cheap, and can involve removing non-supporting walls or altering doorways and windows.
Sydney Morning Herald