Avoid making costly mistakes if you're planning to renovate a home.
Television renovation shows encourage people to spend time and money doing up homes, but how can you avoid making costly mistakes?
Whoever came up with the term "renovator's delight" must have been a master of irony, because most renovation projects turn out to be anything but delightful.
These labours of love usually take twice as long and cost twice as much as intended, not to mention the strain they put on relationships.
Yet dilapidated homes continue to hook in buyers who, at inspection time, walk starry-eyed over rotten floors and past mouldy walls and dream big.
Sometimes it's the thought of making a quick buck that fires these desires, while others can see only home, sweet home.
So is there a way of turning a dump into a dream house without breaking the bank?
Don't pay too much
The first thing to do is research what the unrenovated house would be worth already done up. By subtracting your renovation costs from the finished price, you arrive at a price you should pay for the property.
Calculate how much it will cost to get to the required standard by adding up all the costs involved - having a builder look at the house before purchase would give a rough estimate.
You can use a spreadsheet to tally up costs: don't forget the small things that can add up, and consider items such as consent applications, rent, storage, rates and mortgage.
If you want to onsell for profit then that purchase price has to be even lower.
The only way you will not overspend is to do your research and work backwards. Look at the end value, do your numbers and have a cool head.
If you are planning to live in the home this is less important, but you still want to add value and avoid over-capitalising.
Shop for tradespeople
The cost of labour is one of the biggest - typically more than 30 per cent of the total renovation.
And while this makes it tempting to do some of the work yourself, this needs careful thought.
To produce a quality product you need to do a quality job, so those without much experience or skill should consider hiring professionals. Get three quotes and choose people you will have a good relationship with.
A builder or an architect can also manage tradespeople for you.
A fixed price
One way of containing the costs is to get a fixed-price quote from a builder. But this isn't always a guarantee against nasty surprises as there are unknowns in every old house, and you'll have to add a buffer of 10 per cent to 15 per cent on top of the fixed price.
Cost overruns are common, even for experts. First-timers should be prepared to add 20 per cent to their costs, while others might get away with a buffer of 5 per cent to 10 per cent.
One way to ward off these budget blowouts is to cut down on holding costs at the beginning of the project, especially if you mean to resell quickly.
Negotiating a longer settlement with the vendor can sometimes buy time, especially if during that period you are able to make plans for the house. This means when you pick up the keys you can begin work straight away.
Doing a renovation cheaply doesn't mean it has to look cheap. You can find bargains on the internet, but look at them in person to make sure they are up to standard before you pay.
If you plan to sell soon after, renovations should be done to the standard of the other houses in that market. If you undercapitalise, buyers will adjust what they are prepared to pay.
- © Fairfax NZ News
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