It’s always nice when the first house you buy turns out to be your dream home, complete with all the bells and whistles on your wish list. For many of us, that’s not the case as we’re forced to settle for what we can afford at the time.
As your situation in life changes, from finding a partner and having kids to simply needing to upgrade your house from the 50s, it’s time to take the next step – renovate or sell to upgrade your home.
We’ve outlined things to take into consideration before you decide on renovating or selling.
Renovating your home
A renovation may seem like a long and arduous journey, especially if you have a big family with small kids. But shopping around for a new home may be difficult if you live in older suburbs with period homes that do not accommodate today’s needs, or if bigger homes and apartments are way above your budget.
So, what are the items you must take into account?
1. Council planning and permit
You don’t need council approval if your renovation is cosmetic, like replacing your kitchen cabinets and painting your home. This is only required if you take on a big renovation project such as extending your house or adding an extra level.
Before you decide on renovating on a big scale or knocking down your house to build a new one, check with the council if your plans and designs adhere to their rules. This may seem trivial but there are cases where home owners have gotten themselves in hot water and lost thousands of dollars for failing to follow the rules.
The process varies and it may take several months if your plan needs revision to fit your council’s guidelines. We suggest to engage with experts such as architects and builders to obtain council approval, which means you need to factor in the time and cost for this.
2. Temporary Lodging
Where will you stay while the renovation is taking place? What happens if the project halts or derails from the schedule due to unforeseen issues?
Depending on the project, some people choose to put up with the noise, dust, limited space and temporary inconvenience and stay put. This may take a toll on young kids or the elderly.
This is not an option when the renovation makes the home unliveable so you need to arrange for an alternative accommodation.
In a reno project, anything can go wrong so always estimate a worst-case scenario by putting in a buffer in your schedule. Have a backup plan for your accommodation if your project takes much longer than expected, such as renting on a month-by-month basis.
3. Equity Building
One of the biggest benefits of renovating is it will increase your home’s value – if done right. Usually, upgrading the kitchen and bathroom will boost your home value significantly as they are big ticket items in a house.
Nowadays, it doesn’t cost as much to upgrade your kitchen by using flat pack cabinets. They’re cost effective, last long and look stylish and modern. Bathroom renos also doesn’t cost a bomb if you don’t change the layout and piping. A new shower screen, vanity and a splash of paint will do wonders for a bathroom.
Doing cosmetic changes can boost your home’s value instantly. Don’t underestimate the improvement from just a fresh coat of paint. You can landscape your garden, change your doors or knobs, buy new curtains, put in new carpets, polish floorboards, add new tiles or paint them, and upgrade light fittings or tap wares for quick wins.
However, some older houses may not be worth renovating due to critical structural issues or the presence of asbestos, which is expensive to remove in a large amount.
This is the biggest item to consider for most people. When drafting a budget, put in emergency money of up to 50% buffer in case something goes wrong.
Cosmetic changes can add up if you’re doing a lot and using expensive appliances and fittings. A kitchen project may cost between $15,000 - $30,000 while a bathroom can be between $10,000 to $20,000 depending on the extent of the renovation.
Meanwhile, extending your home can easily go up to a few hundred thousand dollars, so you should calculate whether selling your current home to buy another one is cheaper. A knockdown and rebuild will cost you a lot more but will ultimately give you the home you’ve always dreamt of.
Don’t forget to factor in temporary lodging if your project requires you to move out of the house.
The number 1 rule is not to go over your budget and overcapitalize. If you need to sell your house after, you may lose money as the home value may be less than the renovation project and initial purchase price combined.
5. Time and Effort
A big renovation project will take up a lot of your time and effort. Ask yourself whether you have the time if your project is 50% delayed? Or would you have the energy to track the budget, deal with issues and shop for a bargain when you work long hours, and have kids to tend to?
Big projects can be draining physically and mentally. But it can also be satisfying once you see the end product and get to live in your dream home.
Selling and Upgrading
Upgrading your home usually requires less effort and time compared to renovating. Sometimes, this is the best option if renovating costs too much money. Here are things you should consider.
1. Location, location, location
Is this the suburb that will grow with your needs? Facilities such as parks, bus routes, train stations and shops make a big difference to your quality of life. Proximity to work, entertainment, family and general safety are also vital in considering a suburb.
If you bought in a suburb you’re not entirely happy with, it’s best to sell and upgrade rather than renovate. However, be careful with tightly held suburbs, where there is more demand than supply. You may find yourself priced out of your dream suburb with less people willing to sell their homes.
There is also a possibility that you may not get the house you want, and must contend with what’s currently selling in the market. If you’re planning to buy in the same suburb, check out the average price for your wish list. If it costs less to sell and buy, then this is a better option than renovating.
2. Costs including renovation and moving
You need to factor in moving costs as well as renovation, if required. There may be other charges, such as refinancing your loan, and exit fees for your loans. Upgrading to a bigger house may also increase your monthly expenses such as utility bills and maintenance costs.
How to finance your next move?
Whether you decide on renovating or buying a new home, there are options with financing. You can refinance your current home loan to release some equity to fund renovation projects.
Alternatively, you can take out a personal loan if the amount is small and you have significant savings. For buying and selling, you can take out a bridging loan if you have bought a home before selling your old one.
Talk to an expert to find out all your options. Your dream home may be attainable once you talk to the experts such as a mortgage broker, builders and lenders.