Making money from property renovation

May 4, 2012, 10:39 am Karina May Yahoo!7

If done correctly, renovations can significantly increase a property's value. But in order to reap the renovation rewards there are certain guidelines that should be adhered to and financial traps that must be avoided.

A good renovation can help homeowners make their property stand out from the rest. A freshly spruced interior – or exterior – can do wonders for upping a property’s re-sale or rental value.

Be careful not to overspend

With any renovations you undertake, it’s important not to overcapitalise. By spending more than the house will be valued at once you’re finished your renovation, you will lose money in the long term.

If you’re unsure how much to spend on your renovation, budgeting for 5% of the purchase price is a good starting point. However, before you finalise your renovation plans and your budget, you should do some careful research in your suburb to see whether your investment will be recouped.

For example, if you plan to do a $100,000 renovation and your property is currently worth $400,000, are there other similarly sized properties in your area that are worth $500,000? Or do renovated properties go for less than that? No matter how fabulous your property looks when it’s finished, it will still be compared with similar sized properties in your area.

You should speak to real estate agents to get a sense of what buyers are looking for. Take into consideration the style of other houses in your area. If your style is inconsistent it might lower the value of your house.

While it can be tempting to go crazy with expensive fixtures and fittings, money is better spent on more modest furnishings with universal appeal. Unfortunately renovations won’t have added any value if buyers have to modify them to suit their own tastes. It’s best to stick to neutral, muted colours instead of a risky palette.

Renovation winners

To make your budget stretch as far as possible you should prioritise your renovation wish list.

If you have limited funds and want to make some big improvements fast, you’re best to target the bathroom and kitchen first.

As the most highly trafficked rooms in the house, bathroom and kitchen renovations will make the biggest impact to the overall look and feel of your property.

Other improvement winners include adding to or extending:

  • Number of bedrooms
  • Outdoor living space
  • Storage like built-ins
  • Off-street parking
  • Air conditioning

Then there are those cheap and cheerful improvements that can make a huge difference for pretty minimal effort – think a quick lick of paint, new curtains and flooring.

Sourcing contractors and materials for your renovation

The less money you spend on renovating your property, the better.

To cut costs you should shop around for contractors and materials. Ask friends and family who have done recent renovations which contractors and suppliers they used.

Or, you can find all the specialised tradespeople you need to complete your renovations online at quotes websites like ServiceSeeking.com.au .

You can also make great savings on your appliances, tiles, sinks, taps and even benchtops by shopping online at auction sites such as eBay and Grays Online.

Fixtures and fittings (and their installation) typically make up 50 percent of the total cost of your renovation, so by sourcing cheaper materials online you can dramatically cut your overall spend.

For a guaranteed return on your renovations take your time planning and selecting the right contractors for the job – and most importantly – make sure you stick to your budget!

Visit ServiceSeeking.com.au to get quotes on your next renovation job.

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