Brisbane’s optimistic property outlook has encouraged owners and ‘flippers’ to spend-up on renovation plans.
But even as analysts predict Brisbane to be the best performing East Coast capital city next year, it’s important not to assume every dollar in your reno budget will come back.
Popular television shows like The Block and House Rules encouraged Queenslanders to spend $1.46 billion on private alterations, additions and conversions in the latest Australian Bureau of Statistics data. That 12-month snapshot is 11 per cent more than what was spent in 2013, when the ‘Block-effect’ gathered speed, and almost double the national increase (6%) on reno projects.
But if you want to make a quick buck from your reno, budget for cosmetic work only. Re-do the bathroom and kitchen at the most, because you can add value there.
But unless your father-in-law is a builder, expensive structural works like extensions or reconfiguring internal layouts are a money-pit when you’re seeking a quick sale. Even with Brisbane’s outlook, you'll get caught with your pants down when the For Sale sign goes up.
Structural works should be left to owners or investors wanting to sit where they are for a long time, allowing organic market improvements to support their reno works.
Over the last 35 years, I’ve personally undertaken dozens of renovations. At the same time, I’ve seen scores of renovators burned after completing extensive overhauls of homes in the bid for money.
If you drive around Brisbane’s inner northern suburbs and Coorparoo, Camp Hill and Hawthorne on the south-side, you can see Brisbane’s love-affair with renos.
But history has shown us that price growth is underpinned by land, not the home, so in many instances, people are better off just waiting for the market to do its own work.
As they say, buildings depreciate while land appreciates.
John Fitzgerald’s top 3 reno tips:
1. Worst house best street
In 7 Steps to Property Wealth, I talk about the Established Capital Benchmark (ECB). This is about finding the house priced well-below the best home in the street.
Ideally, it could be as low as half the price of the best house. This allows the most room for growth at selling time.
2. Makeup, not surgery
Just do cosmetic changes; don’t do anything structural. The limit of cosmetic work should include replacing kitchens and bathrooms which will add value. But unless your father-in-law is a builder, don’t do anything of a structural nature.
One of my close relatives bought an 80-year old home to renovate in the inner city and it’s been a nightmare for him. He undertook only minor structural works and the job turned into a money pit.
Committing to a structural reno in a market that’s softening is the definition of getting caught with your pants down – and no one wants that.
3. Make a friend in the business
Your real estate agent is the one who is going to make you the money.
They’re the ‘guns’ in the industry who will find the right reno for you, maybe even in an off-market sale.
They’ll advise you on the right price and project the growth you could make after the renovations and devise a marketing campaign to target that price.
I know lots of reno specialists and regardless of the market conditions, finding the right real estate agent to work with has been a common denominator in their sales result.
Related reading:
Deteriorating housing affordability driving a spike in home renovations