Research, research... and research some more
Knowledge is power – so before embarking on your renovating for profit journey, make sure you’re armed with the information to make the right decisions.
It’s a good idea to start researching the renovation process generally. Jump online to find out what’s involved in the process.
Renovation research
- Council approval requirements and hours of work
- Parts of the renovation you might be able to tackle yourself – YouTube is a good place to start some of the simpler tasks
- Suppliers and showrooms where you can test materials, appliances and fixtures before you buy
- Local tradespeople in your area – paying particular attention to quality, quotes and lead times
- Places you might be able to sell used items that you might be getting rid of – think Gumtree of eBay
- Budgeting templates
- General renovation tips and tricks about renovating
Renovate with the market in mind
Remember that the aim is to appeal to buyers so you can sell at maximum profit. It’s not for your preferences and tastes, so try and take the emotion out of it. You want to renovate with the market in mind. What are buyers looking for? What’s on trend? And will the upgrades stand the test of time if you decide to sell in future?
You’ll need to think about your target demographic (the type of buyer that might end up purchasing your particular type of property) and tailor the upgrades to their wants and needs. Assess the property and choose to renovate the areas and amenities that will catch the eye of your target demographic.
Young families in Australia might be looking for more space and a home that’s easy to child-proof in the suburbs. You could choose to focus on areas like the kitchen and living rooms, the backyard and perhaps an open plan – so the adults can keep an eye on the kids from different areas.
Professional couples may want a luxe, but home that's close to the CBD, so think high-end finishes in kitchen, bedrooms and bathrooms, as well as entertaining areas and low-maintenance gardens.
In the current climate, most buyers will also be interested in things like home offices or studies in order to work from home, as well as outdoor spaces and backyards that allow you to stay home, but also the ability to relax and go outside.
When thinking about what will appeal to the market generally, it’s best to keep it simple. Don't make the mistake of renovating according to your personal preferences – neutral, clean and classy colour schemes and fittings will appeal to a larger pool of buyers.
Set (and stick to) your budget
When renovating for profit, setting your budget is one of the most important steps in the journey. It can make or break your project – so it’s important to get it right from the start.
Your first move should be finding out how much money you have available to fund the project . There are a few options you can explore:
- Home loan top up – if you’ve been in your home for a while or made extra repayments, you may have built up some equity over time. You can find out if this is the case for you using our equity calculator. You might be able to use this equity to increase your loan amount via a home loan top up and fund your renovation project.
- Redrawing on your home loan – taking out extra repayments you may have made on your mortgage and put them towards your reno.
- Adding a construction option to your home loan - gives you the funds to pay your licensed builder throughout the construction process or each stage of your renovation in chunks or instalments.
- Personal loan - applying for a personal loan could help you finance your renovation, especially smaller projects that don’t require much capital.
- Cash savings – rather than financing your renovation through a lender, you might choose to use money you have saved.
This amount will dictate how much you have available to spend overall on the renovation cost and also give you an indication of how much value, at a minimum, you want to be adding to your property.
Budgeting example
Then you’ll need to start allocating those funds to the different elements of your renovation project. Say you have $20,000 to spend on home improvements, and you’d like to upgrade your bathroom and add on a deck. After researching your options, finding out what materials might cost, getting quotes from tradespeople, you might find the costs come out roughly as:
- Bathroom – $12,000
- Deck – $5,000
- Emergency buffer – $3,000
Always make sure you have a 10-20% emergency buffer to cover unexpected expenses that may pop up. Renos don’t always run smoothly, so keeping some money stashed away for any road bumps will help make the experience less stressful.
Cosmetic vs. structural renovations
Simpler is sometimes better – especially when you’re renovating for profit. It’s possible to make small, cost-effective improvements to existing fixtures that can make a big difference on the sale price.
Top tips for low-cost upgrades to your home
- Updating your cabinetry with fresh paint, adding door handles or a new splashback, rather than a full-scale kitchen reno
- Painting the tiles in your bathrooms instead of than replacing them
- Replacing light fittings with more modern, on trend pieces
- Undertaking a DIY paint job or adding wallpaper to spruce rooms that may be looking lacklustre
- Ripping up and replacing carpet, polishing timber floorboards or laying laminate floating floors to create a nice space
- Looking for second-hand materials from renovation hubs instead of buying new
- Adding extra storage in bedrooms and laundry
These slight updates can work wonders your profit margin – so make sure you consider how cosmetic improvements could add to the current property value before commencing a full-scale structural renovation.
Know when to bring in the professionals
As you now know, keeping expenses low is one of the keys to making a decent profit on your renovated home. One way you can do this is by taking on as much of the project yourself as possible. This might be things like knocking down a wall and demolition work, paint and landscaping.
In saying that, it is really important to know when to bring in the professionals. There are certain parts of a renovation should only be carried out by qualified tradespeople. When it comes to structural changes, you’ll need to engage an architect and builder. Electrical and plumbing work should also be handled by certified trades. Make an assessment of what you think you can confidently handle as part of the renovation project and outsource the tasks that are outside your skills to your team of tradies.
It's important to note that the key here is to do the job once – and do it well. So, while it may cost more to bring in a tradie, it’s money well spent if the work is done properly. It will save you in the long run.
Ready to renovate your property for profit?
Westpac can help you fund your project. The best way to get support for your renovation needs is reach out – we’ve got experts ready to walk you through your options. Call us on 131 900 or visit a branch to chat to your local Home Finance Manager.
