FIND THE RIGHT RENOVATION PROPERTY : THE ULTIMATE GUIDE
For many people taking on a renovation project is just too scary.
There are too many things that can go wrong and a budget blow-out seems inevitable.
It doesn’t have to be that way.
Renovating a home can be one of the most rewarding things that you do, but it can also be a lot of work. In order to avoid tumbling head-long into a potential money pit, you need to make sure you ask the right questions from the start.
Sometimes is pays to think like a property developer (only sometimes), and heres why:
Location, Location, Location
Its a cliche but it is true. Location is probably most important factor in any property purchase.
Location is the one thing you cannot change about a property, no matter how much money you choose to spend on it.
We’ve all heard the old adage: ‘buy the worst house in the the nicest street’. It is a good rule to follow. However, if the area is already well established, chances are such properties will be overpriced or have already been snapped up by somebody else. Its not as easy as it sounds.
Its time we talked about the ‘Ripple Effect’.
Instead of focussing on the super-hot suburbs, look at the areas next to them instead. As people are priced out of the popular areas, but want to still be close to the action, they look for next best thing in adjoining, lower priced suburbs. As this buyer demand ‘ripples’ outward from one suburb to the next, so these areas will start to improve as new businesses & services follow them.
The key, as always, is to do your research. You want to be as close to the established areas as possible, without blowing your budget (more on this below). A good tip is to look for areas with decent infrastructure and public transport links already in place. The kind of place that has seen better days, but only really needs a bit of a facelift to get back on its feet.
Pin Down Your Budget Early
It is vital to have your budget absolutely nailed down before you even make an offer, and there are several factors to consider.
Obviously you will establish how much money you can afford to borrow and intend to spend. Then you need work out how much value you could potentially add to the property, before costing any renovation works.
Start will the re-sale price and works backwards.
You want to live in this house for a while, its not about how much you could sell it for….I get it. At the same time you don’t want to overcapitalise and invest too much money that might serve you better elsewhere. Put that property developers hat on again.. just for a little while.
Stop looking at run-down properties.
Go and look around some recently refurbished properties in the areas you are thinking of buying instead. Visit as many as you can stomach to get a real feel for what you like, what works and more importantly what doesn’t. Talk to the real estate agent and ask what sort of things buyers go for, makes notes of each visit and ask permission to take photographs. This might feel a bit rude at first but it will be invaluable to refer back to later.
Try to get a feel for the average price of a fully refurbished property in the suburbs you are looking at. Thats your starting point.
Look at the standard and level of finish in the renovated properties you visit. Note the quality of the materials used and the workmanship. Now roughly workout how much it would cost for basic renovation items, such as new kitchen or bathroom to the same standard. You could use online calculators for this, but I would recommend asking a local builder if you can.
This is your budget.
For every property you are considering buying, start with the average sale price, subtract the cost of the works you think need to be done (plus 20% for contingency), and the remainder is the maximum purchase price you should be prepared to pay.
What Potential Looks Like
How to spot the diamonds in the rough? The key is to be able to look beyond plain ugliness. Indeed, the uglier the property the better, as it will put a lot of other people off!
Try to visualise what it could be, rather than focusing on what it is now.
Cosmetic renovations will always give you the biggest bang for your buck. You can see where your money has been spent and a small change can have a big impact. Properties with an old kitchen or bathroom, but a decent layout, offer great renovation potential for this reason.
Also think about removing walls to create open plan spaces to combining two adjacent areas, such as a kitchen and dining room. You may even consider adding walls to divide up overly large spaces and create more functional areas, such as a study niche, laundry cupboard or even an extra bedroom.
Small windows are another good thing to look for, especially if there are decent views or an outlook of some sort. Adding a larger window to introduce some natural light and better connect the inside and outside spaces can have a dramatic effect on the feel of the interior.
Always check the building’s orientation. Living spaces with a northern aspect and minimal east/west glazing is a great starting point. Ideally you don’t want to have to dramatically change the layout, but rather make the most of what you already have.
Common Mistakes and Pitfalls
Hidden costs have killed many a renovation project before it even got started.
While you can never be 100% certain what you will find, it is vital you look past the superficial details and decoration, and focus on the ‘bones’ of the building first. Unless you get the basics right it will undermine anything that you try to do later, no matter how much you spend.
Initially, try and spot obvious flaws such as big cracks, springy floors or damp patches. Structural work is expensive and has the potential to seriously blow your budget, so be careful. Look for floors that aren’t level and doors that aren’t square as tell-tale warning signs.
Also, don’t ignore plumbing and electrical items – such as a faulty boiler or dangerous wiring – as this can cost a significant amount to replace with no obvious, outward sign that anything has been done.
Generally, I would recommend checking the following areas as a minimum:
- Structure – Will it stand up or does it look like it will collapse with the next strong gust of wind?
- Foundations – Are there any worrying cracks inside or outside the building?
- Waterproofing & Insulation – Are the roof and walls keeping the damp out and the heat in?
- Damage – Look for obvious signs, specifically from damp and/or termites/pests.
- Electrical – Does the property have enough power and how old is the wiring and circuit board?
- Plumbing – Are the various appliances and fixtures in working order? Can you spot any leaks?
- Heating/Cooling – What sort of system is it and is it working? How old is it?
- Doors & Windows – Check the condition and working order – these can cost more than you think to replace! Are they single or double glazed?
A pre-purchase building inspection is a must.
Be careful though, not all building inspectors are created equally. It is important to do your research and get recommendations from friends and colleagues. Be wary of taking recommendations from Real Estate agents. If you are looking to buy a period property you may want to find an inspector that has experience in properties of a certain age. You may even recruit a local builder to walk round the property with you (expect to pay them for their time – it will be worth it!)
Most people avoid properties with obvious structural issues, and that is probably good advice. However, if you are prepared to take on the work you may well grab yourself a bargain. It can seem scary, but everything can be fixed, it just comes at a price. If you need to do some serious structural realignment to a property, ensure this is reflected in the purchase price (assuming you have the stomach for it of course), and get it checked out by a qualified structural engineer before even considering making an offer.
Finally, do a quick check with the local planning department to see if there are any legal easements or heritage overlays which might curtail your plans later on. This is a more common mistake than you think.
Beware of cutting corners
Most of us are aware of the dangers of over-capitalising and spending too much on a property, but spending too little can be just as dangerous.
A cheaper reno may save you money in the short term, but it will reduce the properties appeal and hence the sale price in the longer term. Things like cheap tapware, thinner carpet or budget tiles are a false economy. They just don’t last. You will find yourself having to replace everything again in a few years time, and the overall cost will be greater.
My final piece of advice is don’t get carried away.
Try to stay emotionally detached (it can be tough I know) and consider each potential property logically. Don’t rush into anything without doing your research. It may take a bit longer than you had hoped but you will find both a beautiful, comfortable home and a great long-term investment if you do.
I hope you found this guide useful. Id love to hear your renovation experiences in the comments box below!