Overcapitalising on home renovations or extensions is a big concern when it comes to selling soon after construction is completed. The fear of overcapitalising or under-investing could derail us from the potential profits when the time comes to sell our home.
Here are some considerations to evaluate how much you should spend on home renovation. What is “the right amount” of money for you to spend, even if resale is not a principal factor now?
What is “the right amount” to ideally spend on home renovation?
There is no magical number or equation to inform you of “the right amount” to spend. You can however spend too little or too much.
Firstly, will the renovation or extension make the difference to your lifestyle that you are seeking now and into the future?
If you add an extension and not rectify some structural issues with the property you could eventually spend more than you intended. If you rectify the structural issues before you plan your renovations, you may miss an opportunity for a better floor plan layout. The idea is to plan first, for optimal functionality and flow of your home.
Planning before investing in renovations gives the best value.
Speak with the professionals
Speak with your local Real Estate Agent for an indicative value of your property as it stands now and with the renovations you would like to build.
Talk to your builder regarding their advice on the current building rectifications required.
Speak with your home designer about getting this balance of “the right amount” for you to spend and the best use of space for your budget. While planning your renovations, it is wise to include rectification of the structural issues.
Focus on the big picture first
Ensure you focus on getting the structure and dimensions right. This means you want to make sure the windows are well positioned for ventilation and views. Also you want to have your ideal floor plan layout before focusing on the fit-out of each room. To modify the structure in the future is considerably more expensive than changing, or completing the fit-out, of a room or two.
Every extension impacts the roof design. Therefore, planning to change the roof a minimal number of times is most cost effective.
A typical extension at the rear of the property will include moving the kitchen to the new section. This will have the ramifications of renovating the vacated space or room where your kitchen used to be. That space can now serve as a new bedroom or dining room in the new plans.
The most expensive rooms to fit-out are the kitchen and bathrooms. The least expensive are the children’s’ bedrooms.
Trade-offs to consider
For example, your budget may not yet extend to completing one of the bathrooms.
If your family can manage without this bathroom for a year or two, the best decision is to ensure that your extension includes this room. This means construct the walls, plumbing through the floor and roof for this new bathroom now. You can add the door and leave it locked until you are ready to complete this room.
The quality and selection of the fixtures and finishes can impact the total cost of the renovation. Varied materials for kitchen benchtops are available, or manufactured wooden floors instead of solid timber.
If you have the capacity, borrowing some extra money to complete the job may be worthwhile. Factor in the interest you will pay to the current costs and compare this to the increased costs that you would pay when changing or completing the fit-out later.
Structural renovations over cosmetic ones
A new kitchen in the same position is considered a cosmetic renovation. It will add marketability to your home, yet it may or may not add value when you sell.
Increasing the number of bedrooms or living spaces is more likely to add value when you sell, based on my experience in the Sydney housing market over many years.
Choose to style your home and room configurations to have a wide market appeal. This way you will have more prospective buyers when the time comes to sell.
Most of us dream bigger than our budgets so prioritising your dreams is essential. How your family wants to live in the renovated home is your best guide for what is essential and what is nice to have. This will give you the best guide on how much to spend on home renovation for your family.