Should I renovate or should I sell?

This is a dilemma faced by many property owners every day who have decided their property is inadequate and does meet their needs. This question needs to be considered carefully as all too often I have seen renovations which take longer than expected, cost more than initially thought and in some cases are not finished or end in a disaster.

Most home owners usually have an attachment to their home and would prefer to renovate their property rather than relocate if the property no longer meets their requirements. There is also the inconvenience involved in selling and purchasing a property along with the headache of moving. However, before a decision is made to renovate a property the home owner should address the following questions:

Is it possible to renovate?
You need to seek the advice of professionals including architects and builders to make sure your planned renovations are possible. Before you outlay any resources on architects you should contact your local council to make sure you are aware of all regulations they may have in place.

Can you afford to renovate?
Most property owners remortgage their property to fund renovations to the property, meaning their mortgage is greater which can lead to loan repayments also increasing. Often there are unforseen costs involved with renovations which are not initially considered by the builder or property owner so it is best to have some surplus cash available if needed.

Will the renovation add value to your property?
You can expect that all renovations will add some amount of value to your property but the amount of value needs to be considered carefully. An industry standard is that for every $1 you spend on renovations you should recoup an extra $2 when you sell the property. This means that a $200,000 renovation should increase the value of your property by $400,000. Due to the difficulty in completing some renovations not all renovations are going to increase the value of your property by 200% of the cost of the renovation. In my opinion which is purely based on capital gains and financial benefit, these types of renovations should never be considered.

Who will perform the renovation?
Are you planning to perform the renovation or will you engage a professional(s) to complete the renovation on your behalf? If you choose to perform the renovation then you need to make sure you have the necessary skills, experience and equipment to successfully complete the job. During home inspections it is often easy to pick which renovations have been performed by building professionals and those performed by novices trying to save money. You save money in costs but lose money on the sale of the property!

If you are going to pay contractors to complete the renovation then you need to carefully choose them. You always hear the nightmare stories regarding dodgy tradesman and renovation disasters. Selecting the correct contractor(s) is the most important step in completing any renovation. A few points you should address when selecting a contractor include:

• Have you physically inspected renovations they have previously completed?
• Do they come with a recommendation from a reliable source?
• How are they priced in comparison with their competitors?
• Do they pay their creditors on time?
• Have they won any industry awards?
• Do you feel comfortable in discussions with them?
• Have they ever run over budget in regard to time or money?

Be careful when comparing prices between contractors as the cheapest contractor is not necessarily the best contractor to select. Contractors may be cheaper because they don’t do things correctly or they may use inferior quality products to other more expensive contractors.

Do you have alternative living arrangements?
If you are living in your property during a renovation you should expect the place to be untidy and uncomfortable to live in. For serious and long term renovations people often relocate to alternative accommodation during the renovation. You need to consider a number of factors including finding an alternative place to live, budgeting to pay for alternative accommodation and the burden of having to temporarily move the family.

You should expect delays
Bad weather has been known to prolong renovations, along with unforseen problems which occur during the process and an under-supply of tradesman. It is reasonable to expect that renovations will run longer then first estimated so this should be taken into consideration when planning living arrangements.

Property Security
This point is often overlooked but when renovations are performed on the exterior of a property the property becomes unsecure and it’s fixtures and contents are an easy target for thieves. The matter is further compounded when the property owners move out during a renovation and there is nobody there to watch over the property.

As you can see there are a lot of factors to consider when determining whether to renovate a property. It is important to consider equally the financial consequences along with any sentimental or personal aspects of renovating or selling a property.