3 things to understand before doing any home improvement
A renovation can be a smart financial move, if you plan ahead. Here's how.
A Renovation is (usually) a great way to increase the value of your home. Whether you intend on living in the house for years to come, leasing it out or selling, your home is an investment and improving it is often a smart financial move.
But, there are a few important considerations to make before rolling up your sleeves and getting stuck in.
1. Is your decision to renovate a lifestyle or a financial one?
Many people renovate to make a house more suitable to their needs and taste. In fact, among the most common lifestyle driven home improvements are a new outdoor entertainment area, kitchen and bathroom. But, these are all big ticket items. For example, recent realestate.com.au research shows an average kitchen renovation costs between $12,000 and $16,000. While an average bathroom of about six square metres costs between $9000 and $12,000.
If you intend to live in your home for the next five years or more, it's worth using the best quality items that you can afford and employing some third party experts such as an interior architect and registered builder to help you get the best results. However, if you are renovating with the view to rent or sell the home, you might be better off prioritising the works that will provide a face lift, while not costing too much. A DIY coat of paint and landscaping are a great place to start.
2. How to avoid over capitalising
Setting a home improvement budget of around 10 per cent of the total value of your house is typically advised. This is because a budget blow-out of anything more could see you over capitalise, meaning the cost of your renovations outweigh how much value it will add to your property.
Start by getting a free Property Valuation Report so that you have a realistic understanding of what your home is worth. Then, for added peace of mind, also order a Local Area Report or Suburb Report. This will outline what similar houses renovated or not are worth in your area. Then, speak with a trusted advisor about how much you should spend on your home improvements. It's about making strategic financial decisions so that your home improvements are right for your lifestyle and your financial future.
3. Understand how to secure finance that's right for you
When it comes to financing your home improvements, there are many options available. For example, you may have sufficient equity in your home, you could refinance your home loan, apply for a line of credit or a building or construction loan. The most important step is to secure funding that suits your circumstances because everyone's finance path is different. To help understand your needs your lending consultant will ask things like: whether your renovation is structural or cosmetic and whether you want to be hands on and manage the renovation yourself or engage a third party builder.
Contact us today for a free 10-minute money management consultation.
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