Number crunching is one of the less exciting parts of renovating – but unfortunately it’s also one of the most important. Whether you are turning over an investment property or renovating your home as a long-term nest for your family, it makes sense to know you are not overcapitalising and the money you are spending is adding value in the long term. What’s more, the scope of the work can often determine the best type of finance you need to put in place.
This is the second part in a series about steps to take to ensure the hard work you put into your renovation pays off financially.
The flip – where should you spend?
It’s a tricky situation: you’ve decided to sell your home, but it’s looking a bit shabby around the edges and probably won’t fetch you the price it’s potentially worth without some TLC. It’s got good bones, but definitely needs some work and you are really keen to move on.
What should you do? You can either put it on the market as is and suck up the shortfall in sale price, or you can bite the bullet and spend some money on a makeover to bring it from blah to beautiful.
If the house does just need a freshen up, spending a little bit of money on some cosmetic changes will not only bring you a better sale price, but also help sell it quickly because buyers won’t be immediately confronted with a whole heap of work that needs doing.
Before you start any work, you need to assess the project objectively so you can make the most financially viable decisions in order to get the outcome you want from the sale. The best way to do that is have the house appraised by a real estate agent, who’ll be able to tell you where you should spend your money in a mini makeover, or even whether it would make more sense to not do anything and just put it on the market as a renovator’s delight.
Once you’ve made the decision to update the property for sale, you need to be selective about the work you are going to do.
Go for the low-lying fruit – key areas that will make a big difference, increase the home’s appeal and impress buyers. Remember, even if you love renovating, many people don’t (or are too busy to have the time) and you’ll probably be selling to people who just want to move into a home that doesn’t need any work.
Do your sums and work out what the house is worth before the work, what it will be worth once everything is done and the price you will put it on the market for. Decide on a budget for the work and stick to it. Flick through magazines or watch television programs like Selling Houses Australia for ideas on the latest styles and quick ways to improve your property.
There are a number of options for financing a mini makeover for sale. Because you’ll be selling the house once the work is complete, you’ll only need a short-term option, which is when a personal loan, redrawing on your loan or even financing the work on a credit card can really be a good option.
Here are some simple, but profitable changes you can make:
Exterior
- Lay new lawn
- Simple landscaping to give your yard some structure
- Replace dead or dying shrubbery
- Remove clutter
- Fix broken window screens
- Replace your mail box
- Painting – or a good wash may do the trick
- Replace shabby light fixtures
- Replace or fix broken fencing
- Replace the front door
- Replace house numbers
Interior
- Wash/paint walls
- Replace dated fixtures, such as lights, light switches and window coverings
- Recarpet or refinish floor coverings
- Replace old door knobs and handles
- Re-spray or replace kitchen cupboard doors
- Replace kitchen benchtop and tapware
- Replace bathroom vanity
- Replace tapware and showerhead in the bathroom
- Re-grout tiles in bathroom and kitchen
Once the work is complete, the house is looking a million dollars and you are ready to put it on the market, you need to remember that you aren’t trying to win Lotto, you are trying to sell your house! That means if you thought the house owed you $700,000 before your makeover and you spent $50,000 on the work – then $750,000 is a good price! Don’t be greedy! Hanging on for more money than the house is actually worth often only ends up costing you more in the long run and a quick sale means you can move on to the next house of your dreams and begin a new project.
— Paul is the Director of CVG Finance, a leading brokerage offering financial services across all areas.
