By Werine Erasmus, The Happy Renovator
We all have that desire to apply our own taste and style to a property. This is a really nice intention but, keep in mind that adding value to a property is the wise part of the renovation equation.
You do not want to set yourself back financially. Be honest and realistic with yourself on how much you can afford to spend on a renovation.
Renovating to flip a property – industry experts advise the renovation budget should be no more than 10 per cent of the property purchase price (this is the renovation expenses only and does not include the holding, purchase or selling costs).
So, if a property was purchased for $600,000 the total renovation expense budget will be $60,000. If renovating to flip is something you are interested in, the qualifying question you should ask yourself is: Can I stick to the budget?
Renovating to rent a property – for female investors, the focus will be on making the property safe, liveable, and comfortable. There is not a set percentage gauge on how much to spend on renovation works for a rental property. The aim is minimal spend to maximise the rent and in turn build equity over the long-term.
If the property is structurally sound, the bathroom and kitchen are in working order, you may be up for a bit of paint, cleaning, and elbow grease. There are many clever ways to uplift a property at minimal cost, so that there are little ongoing maintenance costs.
Again, there are two questions you should ask yourself to guide your renovation plans for a rental property:
- What are the tenant’s needs?
2. Are there any factors that compromise the liveability and therefore the rental return?
For example, is the property located in a hot and humid region where tenants would pay more if there is air-conditioning in the property? Or is the property located on a very busy intersection and having the windows double-glazed would attract a higher rent than if it is not?
In all of these scenarios, the key is to add value to the property whilst always sticking to a budget.
Work out the scope of works
So, you’ve decided to renovate, and you are super-excited. The to-do list is drawn up and you are super keen to see that first tradesperson on site working their magic. Hold your horses and take a deep breath!
You can save yourself some major potential stress by investing the time in preparing a proper scope of works – or working with experts to help you.
What is a scope of works? It is a list of duties for your tradies and what you want them to do, or exclude, for example if you are purchasing your own tiles or appliances.
This list can also summarise the material needed, the person-power required, the costs associated, and the agreed timeline to complete a specific job. It is imperative that the scope is finalised by both you and the appointed tradesperson for three reasons:
- To ensure you are both on the same page and keep you on track
- Obtain quotes and compare against your budget
- To avoid disputes.
It does not have to be a fancy typed up document. A handwritten list is quite alright. But the wise move here is that both parties initial this document as a form of agreement.
Whether the tradesperson is someone new, or a recommendation from a trusted adviser or friend with renovation runs on the board, this document may save you a lot of potential stress later on.
No one, female or male, should start a renovation project without a scope of works. You’re just asking for trouble if attempt a reno with out one.