Adding value to your home

Nearly every home requires a spruce-up before sellers head to market. The complexity and expense of that update has been contentious since the first cave dwellers hand decorated their walls!

The Block and other reality renovation programmes, in which contestants spend a large amount of money and effort to fix up homes, has helped fuel an obsession with renovation. What The Block fails to teach is a crucial factor in playing the real estate game well.
Every potential renovator must understand this: increasing your sale price does not necessarily mean increasing your profit.

Recently, The Block’s Australian production company set realistic reserves on the 4 properties in the first series based on what they paid for the dwellings and the renovation costs. In an extremely awkward TV moment, three of the 4 properties failed to come close to their reserve prices.

Subsequent series set the reserves at lower levels so that reserves were met, and contestants were rewarded for their efforts. However, it is understood that the production company would have failed to break even on the project when the true dwelling and renovation costs were added together.

Here is a very simple rule to follow when considering renovating to add value for profit: look for $1.50 in extra value for every $1 you invest. This principal can often become derailed when, for example, an unwary seller invests $50,000 in renovations that only add $50,000 to the final sale price, or – worse still – much less. Even if a 0% profit is returned, the time and energy expended in planning, managing and undertaking those renovations make the real rate of return a major loser.

Often when if comes time to preparing a property for sale, uninformed homeowners will raise the cost of the house by the amount they spend on the house. The net dollar effect of this $1 for $1 renovations is zero but the pressure it creates on the sellers can be enormous.

You can avoid getting into situations like this by enlisting a trusted real estate professional to advise on the saleability of your home in its present condition. Then you can compare that to the price your agent might expect to achieve if clearly outlined improvements were made.

Interestingly landscaping may cost 1% of the property’s value but may increase your selling proposition more than any other renovation on a dollar-for-dollar basis. But you need to do your homework.