Renovating for profit can be risky if it is not thought through. You may think that all renovations will increase the property’s value by that amount, but that isn’t always true.
There are plenty of changes and additions you can make which usually add value. Some examples include adding in a second bathroom or upgrading the kitchen. But what improvements are on the “may not add value” list?
Most Australians love the idea of having a pool, especially in the warmer months. However, when it comes to maintaining and cleaning the pool, you may find that most people don’t want to put in the effort. According to a recent survey by Aussie, when looking at homes to purchase or rent, only 11.3% of Australians look for a home with a pool. This is only a small percentage of potential home buyers and renters you will be appealing to.
It is usually all those extra costs that add up when you install a pool so it is important add these all up when you are crunching the numbers. These include fencing and any other safety requirements as well as tiling, pool cover, cleaner, lighting, heating and pool maintenance products. A swimming pool will, on average, cost you in excess of $30,000 to install.
If you are selling it may take longer to find the right buyer that is prepared to pay what you spent on the pool. More often than not sellers have to reduce the selling price which means that they don’t get the full value for what they have spent.
Property investors may also steer away as swimming pools can be considered a safety risk and something extra that a tenant has to maintain to keep it in good condition. Therefore, having a swimming pool may mean that it is predominantly owner occupied buyers that will be interested further limiting the pool of potential buyers.
Although landscaping plays a big part in the first impression appeal, which is important for attracting buyers, it may not add value to the property if it is too “over the top”.
Studies show that landscaping can add up to 12.7% to the value of a home, if done properly. If you are planning to plant trees, shrubs and other plants in the garden, remember to leave room for them to grow. If they are too close together, it won’t take long for the garden to look choked and overgrown. You also need to create a landscape that suits your climate zone. If you live in an area that has warm weather all year around (e.g. Northern Territory,) there is no point in planting flowers and shrubs that can’t handle heat.
A deck or patio has the potential to increase property value as it offers an additional living space all year round and the average cost for an outdoor deck or patio is $2,000-$8,000.
Not everyone enjoys gardening and may cringe at the thought of spending their spare time weeding and pruning. It is often the simple, tidy gardens that buyers find most appealing as the house will still look attractive, but will only require minimal effort.
To ensure you don’t overcapitalise when renovating, it is best not to spend more than 5% of the purchase price on upgrades. According to realestate.com.au, a well-planned renovation can add up to 10% to the value of your home, particularly if you have the property for over five years.
Firstly, there are a number of projects that can be expensive and the buyers may not even notice the change. Although upgrades to amenities such as air conditioning and plumbing may need to be upgraded to keep the house in working order, don’t expect buyers to pay extra for it. Most buyers will consider these things to be regular parts of the house and shouldn’t have to pay extra for it.
Also, your renovation project may become trickier if you are fixing up an older house. If you are only planning on renovating one or two rooms, you will need to be careful about what rooms you choose. The kitchen and bathroom are usually the most popular choice for renovations. According to Sydney Property Finders, in order to avoid overspending on room renovations, home owners should follow the following rules of thumb:
• Kitchen: Between 4% and 6% of the property value.
• Bathroom: Between 2% and 3% of the property value
If you are upgrading an older house, renovating the kitchen or bathroom may not increase the property’s value if the rest of the house looks dated. So, before you begin renovating, take a look at the house design as a whole and see how you can have one clear design throughout the whole house.
It will be beneficial before beginning to have a certain type of buyer in mind (eg. families, couples) to help keep cohesiveness. Remember, the more neutral the house design is, the better chance you will have at appealing to a larger pool of buyers.