'It’s a calculated gamble': How much should you really be spending on a renovation?

Pouring thousands of dollars to transform a dump into a dream property is a “calculated gamble” for homeowners with some making hundreds of thousands of dollars and others lucky to break even on their eye-watering splurges.

Experts told OneRoof that the cost of doing up a property can often come as a big surprise to homeowners – especially when they go over time and budget – and that extra cash injection does not always result in a much higher sale price.

Harcourts Hamilton salesperson Craig Annandale said homeowners had to decide if they were renovating the home to flip or to live in themselves.

“Where a lot of people go wrong is if you are renovating to resell then you’ve got to think about resale when you make decisions. In terms of what you pick for colours, it’s a very calculated risk. You go down two paths.

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“Flippers are still making money off flipping houses – they will buy a house that’s a decent buy and then they will go and pretty it up with some paint, a new kitchen and sparkly bathroom and buyers go through and go ‘this is really good’. But you’ve got to ask yourself was the insulation upgraded, was it double glazed, was it a full renovation or was it just a dolly up?”

Annandale said items such as central air conditioning, luxury tiles, plush carpet and double glazing were “hidden value” that homeowners often did for their own benefit and didn’t always flush through to the sale price.

He’s selling a unique, renovated villa at 9 Oakley Avenue, in Claudelands, which he said the owners renovated for their own benefit and which would not be out of place in Remuera.

While renovating could be quite costly, he said, the attraction was that properties such as the Oakley Avenue home were usually in more central locations.

“That’s the big advantage – if you’ve got something special, then that’s when you get the heart buy and that’s when people can get a premium if two people want it then they will pay whatever they have to secure it.

“It’s a calculated gamble and it relies on someone to really fall in love with it.”

Landscaping was just as important and those wanting a premium needed to renovate both the inside and the outside of the property.

“There’s nothing worse than people renovating the house from the inside then you come up the driveway and it’s covered in the cracks – it’s that first impression.”

Barfoot & Thompson salesperson Rawdon Christie said there was no doubt renovated homes were easier to sell and fetched a premium.

Homeowners need to decide if they are renovating for themselves, like the owners of this stunning villa on Oakley Avenue in Claudelands, or to make a quick profit. Photo / Supplied

“The properties that are struggling to sell all have one thing that is putting buyers off and making them very cautious and it may also be putting banks off lending on them, which doesn’t help.

“People may also know that they will struggle to get a loan to do what they want – there’s no doubt that the home that is already done is far, far more attractive to buyers in this market based on interest rates and building costs.”

However, homeowners planning to sell their properties could make clever decisions around making small improvements without risk of over-capitalising.

Minor upgrades such as replacing cupboard fronts and new bench tops for between $3000 and $5000 rather than putting in expensive kitchens for $30,000 to $50,000 made a kitchen more attractive and liveable, he said.

“So, if you are renovating the very big parts of the projects just to sell, be careful with it because it could cost you a lot more than you think it would. However, there are certain factors such as freshening a property up, making sure that a property is in really good condition and you go around and get rid of the scuff marks and get rid of the little bits of rotting barge board and you just do a little bit of general maintenance, it can make a massive difference when it comes to selling.”

Bayleys Canterbury salesperson Adam Heazlewood said buying the right property, in a good location and for a low price was key to making a profit on a renovation.

“It all comes down to the buying side. It doesn’t matter how well you’ve renovated anything, if you’ve purchased incorrectly in terms of location, you’ve paid too much or you’ve got something that’s going to receive a lot of negative feedback from the market – it doesn’t matter what you do, it’s not going to be a good renovation project.”

Bayleys Canterbury salesperson Adam Heazlewood said the key was buying the right do-up in the first place. Photo / Supplied

Heazlewood said do-ups could usually be picked up for a good price because there was less demand for them and as long there were no defects then they could usually end up making a good profit.

“I would generally say the majority of people we work with that have done renovations come out the other side really well, but it’s the age-old thing that you need to have a contingency that your budget will be broken, you do always spend more than you anticipate and it will often take a lot more time as well.”

Simm Projects director Jared Simm, who is a builder and former real estate agent now helping homeowners to renovate their homes for a profit, said the best houses to renovate were the ones on a flat section with easy access and have the potential to be opened up and even create additional bedrooms without needing a building consent.

Simm, who carries out the renovations himself, said replacing the kitchen and bathrooms were a definite must. He has just completed a renovation on a home at 358 Glenfield Road, in Glenfield, where he managed to create a fourth bedroom from a laundry. The renovation cost $144,000 excluding his own time.

He usually looked for houses in bad condition, steering away from buying homes made from plaster or weatherside cladding.

A basic renovation could cost $200,000-plus for a three-bedroom, one-bathroom home, he said, but any nasty surprises can blow the cost out considerably.

“The bigger the house, the bigger the renovation cost.”

He usually works out how much to spend based on what the house would sell for after it was renovated and works out his budget from there taking into account the property, the location and the target market.

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