If you’re renovating a house, you know that it’s going to improve the building. Perhaps it’s a kitchen renovation with marble benchtops and European appliances.

Or maybe a sprawling back deck that transforms an old home into an entertainment and relaxation hub.

There remains one key question during the planning stage: are you spending too much on the property? Would you realise the full value of the improvements should the property be sold?

There are two ways to answer this:

  • If it’s a home that you intend to live in for many years, then the answer is almost always that there is nothing to worry about. You are making the changes for your own comfort rather than for investment purposes. Sit back and enjoy the changes.
  • If you intend to soon sell the house, look around your suburb. Are people spending much on improving their homes? If there are few properties being improved, then you’re probably not in sync with the neighbourhood. If there are a bunch of properties being improved and the suburb is on the up, then you’re on the right track.

Investors or occupiers renovating to sell should get valuations done before any renovations begin. The valuations are a very good guide but remember they are not the final say on some occasions.

It can come down to your equity. If you owe $100,000 on a house and you intend to spend $50,000 on renovations, then it’s not going to worry the lender too much.

Investors may be able to increase rents, therefore improving their cash flow.

There is no fixed rule for these situations, that’s why it’s always wise to talk to your broker before you start.

We’ve helped many clients through these questions over the years. And we’re more than happy to speak with new clients.

Call us anytime on 1300 888 299 or email us here.

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Finance Tips Are You Overcapitalising?