Taking on a renovation project can be a great way to improve your existing property and add value to your home. Renovations can range from small improvements such as installing a skylight, to adding an extension to a house. These improvements can often require considerable time and cost - so why do people undergo renovations?
The National Association of Realtors (NAR) and the National Association of the Remodelling Industry (NARI) published a ‘Remodelling impact report’ that cites kitchen, bathroom, and interior renovations as having the most appeal to buyers. The report also cited new roofing and vinyl windows are popular choices for exterior renovations. People surveyed in this report cite “upgrading worn-out surfaces, finishes, and materials” as the top reason to perform these upgrades. Other reasons cited for popular renovation projects include:
- Adding features and improving livability;
- Home customization, and;
- Increasing energy efficiency.
Pro’s vs Con’s of Renovation
While home renovations sound attractive based on the reasons that were provided, renovations don’t always offer advantages - they can also come with some disadvantages, some of which may be unexpected.
In addition to the reasons for renovation projects cited in the remodeling impact report, other advantages could include accommodation for an expanding family, and to add value to a property from an investor’s perspective.
Renovations can also come with some disadvantages. Particularly, renovation costs can quickly spiral out of control without proper planning, and could even take up an unexpected amount of time. Renovations can also be stressful, mainly in the case of family homes where relocations are needed before proceeding. Local regulation and unexpected difficulties such as previously unidentified structural problems could also have an impact on the complexity of remodeling and add additional strain on resources to comply.
Differences Between Renovating Old & New Properties
It may be worth hiring a professional to assess your property to identify renovation opportunities, the feasibility of renovations, as well as identifying obstacles that can hinder renovation progress. Renovations with older buildings can come with hidden costs, as you may find that some properties may have hidden structural damage or other issues that may not have been immediately visible until the renovations have begun. An example of this is finding rotten beams when a project to add insulation has gone underway. Additionally, there may be additional costs involved with the older property regarding modern building codes.
Newer properties tend to have things like insulation and double-glazed windows already incorporated as a minimum. Unlike with older properties, newer properties are also already compliant with modern building codes. Ventilation systems are also quite common in newer properties. Opportunities to improve on newer properties are often more cosmetic to suit the homebuyer - examples of this may be replacing bathroom tiles, replacing doors, and minor kitchen improvements such as bench tops.
Now that you know the pros, cons, and what to look out for in new and old buildings, here are 3 keys to success to keep in mind when renovating your property:
1. Assess the property before purchase
If you’re purchasing a new property, there might be different things to look out for when identifying renovation opportunities. Investors will often look to older ‘ugly duckling’ homes to renovate. These homes may need extensive renovations to bring them into this side of the 21st century, and so it is important to assess the building’s structural integrity for any extension work, as well as any opportunities to add extensive value with simple things such as insulation, double-glazed windows, and flooring.
2. Make a detailed budget for the renovation
Renovations can range from cheap improvements to expensive projects. The key to ensuring that a renovation project is successful lies in the budgeting. Creating a detailed budget is crucial - however, it is important to allow for revisions as circumstances can change. If you are new to renovations, it might be worth consulting an architect to help create your budget.
In saying that, plan for mistakes. Even the most experienced architect or contractor may not get the budget right.
3. Incorporate a construction loan into your budget
Some people use construction loans to fund their renovation projects, which gives a little more freedom with respect to their financial limits. As with every loan, you need to be confident in paying the loan back. Ideally, construction loans should be used as a buffer where unexpected costs or lack of funds could lead to a delay - however, this should all be planned for in your budget.
Construction loans should not be used to fund a large proportion of the project. If unexpected costs happen, you run the risk of running yourself into debt for a project that could potentially fail and not provide the expected return.
Renovating to sell?
If you’re renovating to sell, do you really want to pay 6% of your hard earned equity just to sell your property, and lose out on the potential profits from the renovation? We didn’t think so. That’s why we created Clever.