To Renovate or Not to Renovate When Selling
Do you renovate before you sell, or just put it on the market as is? The answer isn't a simple yes or no, but a maybe. There are many things to consider before being able to make a call. So how to know if you should put in the time, effort and dollars into renovating before selling?
Must-do home improvements when selling
Without the shadow of a doubt, having a well-presented property when looking to sell is super important. If you don't take care of at least these six jobs, you will be throwing money down the drain:
- The big property clean – you want your property sparkle; Touch up any chipped paintwork;
- Remove or store your clutter and any highly personal items;
- Fix any obvious detrimental defects;
- Tidy the front garden;
- Ensure you have the best possible street appeal – sweep paths, ensure your gate is working, your street number is visible, etc.
Treat it as a business decision
When deciding on renovating your property before putting it on the market or not, whether it is your family home or an investment, always look at it as a business decision.
Will the renovations add value to your property immediately and will you be able to sell the property for a higher price? You are not renovating your home so you can enjoy the end result, you are purely doing it to attract more buyers and add value. That also means that you should not renovate with your personal taste in mind, but what the market expects. Think very carefully.
Real Estate expert Andrew Winter says that "if your home is a genuine renovator, then it is probably better to leave as is. Tidy up and do the essentials, of course, but recognise that this is an entry-level home that may even have buyers fighting over it."
He also suggests that "significant renovations are not advisable on homes that have been adequately looked after and are in line with your demographics expectations of size and style."
A priority if you are looking to renovate to sell, is to ensure that you do not overcapitalise. This means that you don't want to improve a property beyond its resale value, so you are not able to recoup the money when you sell.
An example would be a homeowner spending $200,000 on home renovations who then decides to sell the property. They may find out that the upgrades only added $100,000 to the value of their property, meaning that they have effectively lost $100,000 as a result of renovating. They have over capitalised on their property by $100,000, and that isn't good!
You need to do your research and think very carefully before renovating to sell. If you are unsure, be sure to ask your local real estate agent for some advice.
Understand the current market value of your property
You can't determine how much value a renovation will add to your property if you don't know how much your property is worth before you event start. The first step here is to get your home valued by a qualified real estate agent.
If you would like to get a free property appraisal from an LJ Hooker expert, get in touch today.
Understanding how much your property is worth in the current market, how its value increased since you bought it, and how much similar properties in your area are selling for is crucial. Also, ask your agent about the value of similar renovated and un-renovated properties in your area.
Keep in mind that each neighbourhood has a median sale price and an upper sale threshold. This can vary significantly even within one suburb as a result of the housing style, streetscape, and demographics of each area.
What do your potential buyers want?
It is tempting to want to put your stamp on your property, but some features you love might actually put potential buyers off. Talk to your local LJ Hooker agent about what your buyer demographic would deem valuable, what features are really selling homes in the area.
Renovations before selling are all about following the crowd, playing it safe, not overspending and never allowing your personal tastes to dominate. It is about giving your buying audience what they want.
Local real estate agents can give you a good insight into what are popular features for buyers in your area. So consider whether your property has these features and if it would be worth investing.
How much should you spend?
Once you know how much your home is worth and what your buying audience values, you can determine how much you want to spend on any renovations (if anything).
Professional renovator Cherie Barber, who has been renovating properties for more than 20 years believes that "if you are doing cosmetic renovations like painting, floor sanding, ripping up carpet and landscaping, and if you are looking to sell your home in the near future or you are renovating an investment, you should allow 10% of your property value for your renovation budget. For example, if your home is valued at $700,000, a good budget to work with would be around $70,000.
Renovating an investment property
If you are thinking about renovating an investment property, you should consider things from a 'need' point of view. That is anything you do needs to improve cash flow, rentability, or the value of the property.
To make the call on renovating or not, you should ask yourself questions such as:
- Will it increase the rent?
- Will it increase the value?
- Am I better off without a renovation?
All your decisions need to be strictly business decisions.
6 questions to ask yourself before you renovate
To sum up, before making the final call on renovating or not, and what to focus on to increase the value of your property, you should ask yourself the 6 questions below:
1. Has my property been well looked after and is it in line with my potential buyers expectations of size and style?
2. How much is my property worth in the current market?
3. Can I add value to my property with a good spring clean and a coat of paint and avoid large expenses?
4. How much will the renovations cost? Do you have the available funds? How much is the expected value to be added to the property? Will the improvements actually cause your home to lose value?
5. What is the condition of my current home? Will I be renovating more than 50% of my home? In many states and territories, if you renovate over 50%, the rest of the home will then need to comply with current building regulations, such as new wiring, plumbing and energy rating. This can add a significant cost to your renovation.
6. Will my improvements suit the style of homes in my area, or will it stand out like sore thumb? Often, many people like an area for its style of properties and poor or odd design can devalue yours.
DISCLAIMER - The information provided is for guidance and informational purposes only and does not replace independent business, legal and financial advice which we strongly recommend. Whilst the information is considered true and correct at the date of publication, changes in circumstances after the time of publication may impact the accuracy of the information provided. LJ Hooker will not accept responsibility or liability for any reliance on the blog information, including but not limited to, the accuracy, currency or completeness of any information or links.