A good way of getting on the property ladder at a more affordable price is to invest in a fixer-upper and spend some time (and money!) renovating the property. Alternatively you may look at home loans refinance for the home you already have.
You wouldn’t be the only buyers in Australia with this idea; a 2015 survey from realestate.com.au revealed that nearly one-quarter of people intending to buy a home are likely to renovate, while 12 per cent will definitely do so.
But it’s important not to overspend on your home improvements, and costs can quickly spiral out of control if you don’t plan or research properly. You may also need a loan to finance the project, as you don’t want to underestimate your expenses and end up with a half-finished project.
Calculating the cost of a home renovation relies on a number of factors, however, so here are some issues to consider.
Where is your home?
Figures from ServiceSeeking.com.au show that the average cost of hiring tradies in Australia was $66.20 per hour in the second quarter of 2017, but these prices can vary dramatically based on your location.
For example, building and renovation work will cost you an hourly rate of $75.94 in Queensland, but this slumps to $58.63 in Victoria. The figures show that Western Australian tradesmen, on average, are the best paid, with plumbers charging more than $94 an hour.
Pricing up kitchens and bathrooms
Renovating kitchens and bathrooms is a popular way of sprucing up a new home, but they often don’t come cheap. A 2016 report from the Housing Industry Association showed the average kitchen project was valued at $21,862, and bathrooms will typically set you back $17,779.
However, the amount you spend on these two rooms may depend on the value of your property.
A general rule of thumb for home improvements is that you should never spend more than 5 per cent of the total house value on renovations. Median house prices for the Australian capitals range from $850,000 in Sydney to $366,000 in Hobart, according to the latest CoreLogic figures.
As such, you should limit your spending to $42,500 in the NSW capital if you have an averagely priced home for the city, but your budget would fall to just $18,300 in Tasmania.
Ultimately, you should avoid overcapitalising, which is when your renovation costs exceed the added value it brings to the property.
Are you considering improvements? Please get in touch with a member of our team to discuss your home loans refinance options.