Many people believe that renovating your house or apartment before you sell it is a guaranteed strategy for increasing its worth and the price potential buyers will pay.
However, the reality’s not nearly so simple.
While renovated properties almost always attract more buyers, that doesn’t necessarily mean that renovating will bring you a premium price or a profit.
Determining whether or not you should renovate before you sell involves considering a number of factors, including your property’s age, the time you bought it, the going price for property in your neighbourhood, and more.
So to bust a few myths around renovations – and to answer one of the most common questions we get asked – we’ve put this blog post together for you.
The most important question you can ask yourself
Potential profitability is the key to understanding whether or not you should renovate your property before you sell it.
Most people believe that this equation is straightforward: subtract the cost of renovations and your house’s current value from the anticipated value of your renovated house and see if you end up in the green. But it’s not actually that simple.
Instead, you should begin by asking yourself this question: How long ago did you buy the property and how much did it cost? Your answer is a good guide to whether or not renovating your house will help you turn a profit when you sell.
If you bought the property many years ago, renovating will generally help you to increase your selling price and make a profit. (There are always exceptions, but this is a good rule of thumb.)
However, if you only bought your home or investment property in the last year or two, you need to factor in several costs including purchase price, stamp duty, agent’s fees and renovation costs. Then you must subtract these costs from your property’s selling price post-renovation. Either the answer will suggest that you’ll make a profit from renovating your property or it will suggest that you won’t.
The “right” kind of renovations
Even if “on paper” it looks like you’ll make a profit from renovating, you still need to make sure you’re doing the “right” kind of renovations.
In this context, the “right” kind of renovations are the kind potential buyers in your area are willing to pay for. After all, you don’t want to overcapitalise and complete renovations that don’t actually add to your property’s value.
Buyers tend to appreciate renovations such as updated kitchens and bathrooms or new built-in wardrobes. However, this isn’t necessarily true of every suburb. In other places, a new patio may be a better investment.
To determine the “right” kind of renovations for your area, speak to a real estate agent who specialises in selling properties in your suburb.
Even if you aren’t planning on selling in the near future, it can be worth ensuring that any planned renovations you complete now still fit into this category. After all, you will sell eventually, so you may as well make sure you’ll get your money back!
Keeping up (or down) with the Joneses
It’s also important to ensure that your planned renovations are appropriate for a property in your neighbourhood.
If your neighbours’ houses are selling for up to 1 million dollars and your house will be worth $950,000 after renovations, you should be fine. But if your post-renovation house will be worth $950,000 and all the other houses in your suburb are selling for $650,000, you’re going to have a hard time finding buyers who are willing to pay your price.
If the end value of your renovated home doesn’t compare with the price of other properties in the area, give renovations a miss.
Whether you complete a complicated extension, add a patio, or simply replace the sink in your kitchen, always make sure you get certification and council approval. Buyers will want to make sure that any additions to your property have been properly approved and certified. Providing buyers with proof that your renovations are legal will add to their peace of mind, in turn improving your chances of selling for the right price.
Get an expert opinion
As you can see, there’s plenty to consider when determining whether you’re likely to profit from renovating your property before selling it.
So, why wouldn’t you get an expert opinion – especially if it came for free?
Even if you aren’t planning to sell in the near future, The Henry Wong Team are happy to visit your property and chat about whether renovating before you sell is the right choice for you.
Contact Henry today on 0412 471 588 to arrange a visit. We look forward to helping you make a smart choice about renovating your home.