Renovators can make money and avoid a cost blowout with these golden rules, writes Susan Edmunds.
If there are three golden rules about renovating, says property consultant Jane Eyles-Bennett, they are: buy well, don't spend too much money and renovate wisely.
Sound simple? She says you'd be surprised by how many times she has seen renovations go horribly wrong. Eyles-Bennett runs a business called Hotspace, helping people to maximise financial returns from renovations through services such as online Renovation Action Plans. And she says there are some common rookie mistakes that are essential to avoid.
CRUNCH THE NUMBERS
Before you begin a project, you really need to know your numbers. What is the property worth now? What could it be expected to be worth once it's renovated? How much can you afford to spend on renovations?
You can get an idea of what a property could potentially be worth by talking to real-estate agents or property valuers.
Local real-estate agents can also advise on who will likely be interested in your property and what kind of work will appeal to them. If you're in an area that is popular with young families, paving a lawn to make an entertaining space is unlikely to be a good option. Eyles-Bennett says:
''I start by identifying my target audience and thinking about the sorts of things they place value on.
''Families value homes with a yard and fences, and perhaps a bath and areas for children to play in and outside the home. Young professional couples might value mod-cons, a double shower and great entertaining spaces. ''I also think about the end use of the property. Does it need to last a long time because it is being held and rented out or is the owner selling?''
Once you know how much you can afford to spend, break your budget down into percentages. Allocate 20 per cent of your total budget to the exterior, 10-15 per centto the bathroom, 20 per cent to the kitchen and so on.
''This means the whole of the property can be renovated without running out of money.'' You can then work out what can be done for the amount of money you have to spend in each area.
''Obviously $6000 is not going to buy a whole new kitchen, so you need to figure out what you can do to your particular kitchen for $6000. What are the priorities? This is where one needs to stay unemotional.''
Don't just assume you know how much everything will cost - work it out to the finest detail. If the costs don't stack up, go back and do the budget again.
Eyles-Bennett says renovators need to do this over and over again until they are sure of each price tag.
Talk to contractors about how long each bit of work will take and let them know about your plans for the property as a whole.
Don't take the wrecking ball to the property just yet. Eyles-Bennett recommends maximising returns by keeping as much of the property as you can.
''Some renos you can pull the whole house apart and start again - but this doesn't happen very often. Whatever is in good condition, try to re-use it. Look for anything that can be easily renovated - but be aware of false economy.
''Also be aware of compromising the look of a space by re-using. It's a fine line.
''What you do to a particular area will depend on the budget you have allocated to that particular area. If you have $10,000 for a bathroom, you could most likely gut it and start again. However if you only have $2000 then you'll need to be super savvy with what you chose to do to it.''
Things like replacing tap fittings or door handles can make a big difference - and a fresh coat of paint will help rooms to look crisp and modern.
MIND THE GAP
Watch out for hidden costs.
''Where something wasn't accounted for at the beginning of the job, tradies often will charge an arm and a leg to get it done on the spot,'' she says.
''I always suggest having a contingency. Surprise costs usually hit inexperienced renovators hardest.''
She gives the example of a bathroom: an inexperienced renovator might budget for a new bath and a plumber to install it.
''In fact, you need to factor in a plumber to disconnect the existing bath; removal and disposal of the existing bath; installation of the bath itself; plumbing the new bath (and taps/spout etc) in; re-tiling the walls, side of the bath and most probably floor.
''All of a sudden, a $300 bath and a $150 plumber turns into a $1000 job. Make these sorts of mistakes through the rest of the property and the profits may not be looking too good.''
If you are renovating a property to sell or rent, put your own tastes aside. Keep things as neutral as possible to appeal to a wide audience.
Newbie renovators often spend too little or too much on a renovation - cheap materials in an otherwise good job, or splashing out on a house in an area where prices aren't at the level where the renovation will pay for itself.
''Also spending money on things that do not add value to the property or spending money in the wrong areas. For instance, spending $4000 on a laundry storage unit where, say, the overall budget is only $30,000. Or spending $15,000 on the exterior of the property where $4000 would have worked just as well.''
And that old adage about buying the worst house in the street? Not true if you're looking to renovate for profit, Eyles-Bennett says.
Be realistic about how much you can actually achieve with your budget.
''I think this is the number one reason people go over budget and lose money. As long as the numbers work and a solid renovation process is followed, then I believe money from property is definitely there to be made.''