PROPERTY

How properly planning your renovations can help you avoid a DIY disaster

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Whether your home renovation is two, six or 18 months away, the lead-up can be more nerve-racking than the build. But it doesn't have to be this way - there's an abundance of renovation experts, self-help books and online guides to help you plan and manage any project.

Done properly, renovations will be challenging but can provide homeowners and property investors with higher yields and more growth and profit potential, which in the longer term means increased wealth, says author and buyer advocate Andrew Crossley in his recent book Commercial Property and Residential Development Made Simple.

"The first message is to dig deep. Get real about your goals," says Crossley. "Ask yourself what you are trying to achieve in doing the reno in the first instance."

set a budget for your renovations

Online property design and research platform Houzz says its 2019 survey of more than 8800 Aussie homeowners shows the top reason for renovating is to stay in the current home or area, outranking those seeking a return on investment.

Staying in the current home is the biggest decision driver for baby boomers and generation X (ages 40-54), whereas millennials (25-39) choose to stay and renovate because it is more affordable than moving.

"If you were to sell your home and buy elsewhere, the buying and selling costs alone can equate to $100,000," says Crossley. "So redirecting and and putting this money into your current place of residence, or the house you have just purchased, can be very worthwhile."

He adds that if you plan to stay in your home for the long term (at least seven to 10 years post reno) then you will most likely see a return on your financial investment.

Where to begin

Your budget is critical, yet most people begin planning a renovation without a proper budget - or they significantly underplay their budget and are soon exceeding it.

Tony Been, managing director at Houzz Australia, says the group's survey shows generation X and millennials point to budgeting as the biggest renovation challenge outside the funding of their projects.

In their recent book, Nail Your Renovation Without Getting Screwed, experts Steve and Suzanne Burke write that many people "simply have no clue how much a home renovation project would or should cost".

It's why the couple believes the first step in planning a renovation is to hire a designer. Then you should work with a builder who specialises in renovations to provide a fixed cost for the entire project.

"A well-planned building project should be fully costed in advance," say the Burkes. "The true cost of each project may include items that are not apparent at the outset. This can include items such as renting (living somewhere else during the reno), storage, painting, landscaping, air-conditioning, carpet and security."

Ninety per cent of homeowners hired a professional in 2018, with electricians, plumbers and carpenters in greatest demand, according to the Houzz study.

What does it cost?

Houzz's Been says historically homeowners have mostly relied on cash and savings to fund their renovations and it's pleasing because they're at least waiting until they have the financial means to begin. Millennials have the highest reliance on credit cards, but cash remains their core funding source for renovations, he adds.

What's interesting, though, is that it appears renovators haven't flooded to the new financing options available, such as peer-to-peer lending. Been says it indicates renovators have a more conservative risk profile, but there is definitely an opportunity for financial services providers to educate homeowners more broadly.

The median spend on a renovation in 2018 was $20,000 with gen X spending slightly more at about $23,000, according to Houzz. Spending in the top 10% reached $180,000. Kitchens were the most popular project last year, also with a median spend of $20,000, closely followed by living rooms and then bedrooms, bathrooms and laundries.

Tim Gauci, commercial director at Design +Diplomacy in Melbourne, tells Nicole Haddow in her book Smashed Avocado: How Cracked the Property Market and You Can Too that fixing any waterproofing and replacing the shower and vanity shouldn't cost much more than $1500-$2000. A new toilet will set you back $450.

In the kitchen, ideally you'll only need to replace the cabinet doors and benchtops. He replaces old bulbs with downlights, and if that's not an option he'll seek out feature pendant lights.

"If we're lucky and the house is on a slab, we'll do polished concrete floors," says Gauci.

For painting interiors, keep it simple. He says an antique white is best. For the property's facade, select something that's contemporary and isn't polarising. You might choose a bold front door, but only if you're in a suburb where that's appealing. Finally, make sure the garden is tidy.

Where it can go wrong

Mozo research tells us that Australian homeowners have paid $10.5 billion to cover building defects in the past decade. We paid $6434 for the average apartment defect and $5839 if something went wrong in your house.

Internal water leaks, cracking to internal or external structures, water penetration from the outside, guttering faults, tiling problems and defective plumbing were the most common problems among homeowners, the 2019 Mozo study says.

Repairs for these issues can take months as well as create a budget blowout, so it's important to take preventative steps and hire professionals.

A separate report from Chubb Insurance confirms that reports of internal water leaks are on the rise and are potentially costing Aussie homeowners thousands. The insurer estimates the average claim from water damage has increased 72% in the past five years - from $17,627 in 2014 to $30,361 in 2018.

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Darren Snyder is the managing editor of Money magazine. He is a former editor of Financial Standard, where he had worked as a journalist, predominantly covering superannuation. Previously a mining and wine industry reporter at the Mudgee Guardian, Darren was awarded the Sir Harry Budd Memorial Award for Australian Country Journalism in 2012.
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