Wagga Wagga Blog

So you are considering renovating a home, either to live in or to improve the capital value and sell. I guess the first consideration for me is the financial side of things. Are the improvements I am proposing going to improve the capital value of the property or am I spending too much (over capitalising)? It is easy to get carried away when carrying out renovations. You will need to set a budget and stick to it as closely as you can. I would always build in a contingency of at least 10-15% of the overall cost to be added to the budget for those unexpected expenses that will no doubt arise. So set your budget and compare your ‘potential finished product’ to the market. This is very important if you are renovating for a profit, not as important if you are renovating to live in the home for a number of years, but still you want to be improving the value in line with the cost of the proposed renovation work.

As a valuer, when it comes to valuing improvements, the age and condition of those improvements are major factors considered in determining the value of a property. A renovation of a home can add a lot of value, particularly in locations where the underlying land value is at a premium. The quality of a home renovation should really be kept in line with the location, as it is easy to overspend when carrying out a renovation. For example if the property is located in a premium suburb, then you are more likely to attract the highest value out of a premium-high end renovation. The same goes for lower value suburbs, a renovation can really improve the value, but you may not get a good return on your investment if you overspend on high end inclusions.

Improvements such as swimming pools, tennis courts, solar systems and extensive landscaping can add a lot of value to a property, but sometimes the cost of these improvements can outweigh the benefit or capital gain. We should remember that these additions are depreciable assets and as such their value reduces as they age. Land on the other hand appreciates over time, due to the limited supply and availability. So how much a renovation adds to the value can depend a lot on the overall cost of the renovation, the quality of the renovation and the correlation between the value of the land and the overall value of the improvements. If you do your homework, pick the right market and keep your costs relative to the location, you will be successful in adding value to your property with a renovation.

Craig Tait,

Director