Renovations give a property a fresh, new feel, and can be as small as a few rooms to a large-scale complete home renovation.
With the Federal Government introducing the HomeBuilder scheme this year – a $25,000 grant to build a new home or substantially renovate an existing one, the latter on a contract of more than $150,000 – this may spur more people to consider renovating.
Whether you are renovating to create your dream home or to maximise your ROI on a house flip, you need to start with a solid plan to keep you on track and minimise the chances of things going wrong. Having a clear plan is even more important when flipping homes, with the goal to make the property more desirable, while not overspending. Understand that it is common for things not to go as planned during renovations, so account for this early on.
DG Institute CEO and founder Dominique Grubisa is an experienced property investor, developer and entrepreneur. A two-time winner of the APAC Female Entrepreneur of the Year Stevie Award, she is also a practicing lawyer, debt management specialist and wealth management educator.
Here, she shares her top five tips to help you avoid renovation catastrophe.
Determine your main project goals
Are you looking to refresh a home which you plan to sell in the next three-to-five years, do a major renovation on your forever family home, or are you an investor looking to make a profit? It is essential to clearly outline what your main goal is in renovating and what you hope to achieve. For instance, if you are an investor flipping a house, your goal will be maximum profit and a figure in mind on how much ROI you expect. Your goal may also include your wish list of must-haves too. By determining this before you start, it helps you manage the scope of the renovation to avoid you wasting time and money on aspects which will not serve your goal.
Set a budget
It is common to get swept up in the moment when renovating and allow this to influence the budget. However, setting a budget should be an emotionless process that looks solely at the figures. If you are an owner-occupier, you want to ensure that you are not spending more than you can afford, which could get you into debt issues down the track. For investors, you want to determine the maximum amount you can spend before the project becomes a loss. Ensure you also create a buffer, as issues may arise along the way that you did not initially plan for.
Refine your scope of work
Now that you have outlined your project goals and set a budget, it is time to determine whether it is realistic, or if you need to make changes to suit your budget. The common reality is that you will have to make some compromises, and you will not be able to carry out everything you have in mind.
Over-capitalising refers to spending more on the cost of a renovation or build than the amount of value it will add to a property when it comes time to sell. If you plan to renovate a home you will live in for the rest of your life, this may not be of great concern. However, those who plan to sell immediately or down the track will want to ensure the numbers add up and they are not spending more than they will get back. To avoid this, keep budget of how much you are spending throughout the project and update this regularly. If you decide to spend extra on one area, this will have to come out of another one. Many new investors make this mistake and end up spending more to make it work, but this results in over-capitalising.
Choose the right team
Many different professionals will be involved in your project – from architects and engineers, if you are working on an extensive renovation, to builders on smaller-scale projects. Avoid going for the cheapest offer and rushing the process to get it completed quickly. Invest time in finding the right people for your job, and even allow for an extra one-to-two weeks on this. This can save you money down the track and increase the chances of a successful renovation. For those who want some an extra hand with the process, the team at DG Institute can also assist.