A smart cosmetic renovation is one of the most effective ways to completely transform a home on a modest budget. There are many different approaches to take, but you can be sure that paint will figure prominently.It’s cheap, it’s a straightforward DIY project and you can achieve miracles in just a weekend of hard yakka.
On a limited budget, you want to be looking at easy gains for minimum outlay and maximum impact. If you’re renovating to make a profit, as opposed to improving your own home, you need to educate yourself about what style of renovation suits your area: i.e, what do your potential buyers or tenants want? Laminate benchtops and budget flooring might be perfectly adequate for some properties but won’t cut it for a $1 million-plus property.
Whirlwind magic
Just to give you an indication of how much a quick, targeted cosmetic renovation can boost the value of your property, I’ve dipped into the archives to pull out this renovation from 2012. I spent around $2,500 on cosmetic improvements to this one-bedroom unit in Sydney’s northern beaches that the owners were gearing up to sell. But you’d never believe it was such a meagre budget when you see the transformation.
BEFORE kitchenAFTER kitchenBEFORE loungeAFTER loungeBEFORE bedroomAFTER bedroom
I painted throughout, steam-cleaned the carpets, gave the bathroom an industrial scrub, updated the light fittings and window coverings, and treated the kitchen to a quick cosmetic refresh. For that, I simply painted over the old tiles and cupboards with specialty White Knight paint, resurfaced the benchtops using the Rust-Oleum countertop transformations kit, added a couple of overhead cupboards and updated all the cupboard handles to some nice, modern ones.
None of the improvements were particularly complex, so any competent DIYer could tackle them. And it’s a quick makeover and styling effort that is pretty much timeless. Pre-reno the apartment was valued at $380,000. One week after the makeover was complete the owners accepted an offer of $412,500. Not a bad profit for a few days’ effort. I can only imagine what that Dee Why one-bedder would sell for in today’s heated Sydney market!
Nowadays in Australia, property does not come cheap and there are so many people out there who have a great strategy of buying property that needs some work. They imagine they can complete small or large renovations to increase the value of their investment and either hold or pull out their equity to continue on with their property portfolio.
This is a great strategy in the right circumstances and many people do it so well, but there is a large proportion of people that get caught in the overcapitalisation trap. Even when they purchased the property at a great price, they have overcapitalised during the renovation process and hence minimised their chance of leveraging their investment as much as they had hoped.
First of all, let’s all get on the same page with what overcapitalising is… it means, in short, to improve a property beyond its resale value. So here are my top tips to make sure you avoid this pitfall when renovating.
Tip 1 –
Get an independent valuation. The value of a property can vary from when you bought the property and it is also very important to get a completely independent value before you look at how much you are going to be investing into the renovation. Potential buyers and valuers will also be looking at these types of figures so it is essential that you start your planning from a good baseline.
Tip 2 –
Consider your market, what are they willing to pay? Whether you are looking to have the property re-valued, leased or on sold, you need to look at what the market is willing to pay in your area and for your property type. Many properties have a ceiling on prices of sorts and it is essential that you consider this when planning your renovations. For example, if you spend $4-to-5k on amazing stone benchtops, are you in the market or area that is willing to pay for that? What will this inclusion do to your budget and hence the bottom line of what the property owes you at the end of the project? If this pushes you over your resale value, forget about it.
Tip 3 –
Ensure you include in your budget a healthy buffer for “unexpected” items. This being said, it is essential to have a detailed and live document that contains your budget. It can be very easy during the renovation process to say “yes” to small increases in the budget — $250 here and $500 there — so make sure that your budget stays live and is updated daily to allow you to look at how you are tracking and if necessary, try and identify areas that you can pull back on.
It is important to mention that avoiding overcapitalising on a property is not just about sticking to budget, it also about planning well, being realistic and removing any rose-coloured romantic glasses you might (or might not) be wearing in regard to the property value at each stage of the project.
Starting with these three things is a great way to give yourself the best chance at not only staying on track but also avoiding spending more that the market will pay, leaving you with some tough choices.
By Lana Taylor (one-third of Three Birds Renovations)
You’ve all heard the cliché that “you don’t plan to fail, you fail to plan”. Well, in the world of property flipping that couldn’t be more accurate. And the most crucial thing to realise is that most of this planning has to take place before the house is even yours – in the settlement period (which usually takes about six weeks).
So for all you budding flippers out there, get your notepad and pencil out as I interview our Operations Guru-slash-Standover-Woman, Erin Cayless, to share the 10 steps to success when planning a 30-day flip. And even if you’re not flipping a house, just renovating your own home, you might pick up some tips on how to make your reno as fast and painless as possible. There’s nothing worse than a home reno that drags on ’til the cows come home — all that dust!!
Lana: HOW IMPORTANT IS THE PLANNING STAGE OF A RENO?
Erin: In my opinion it is the most important part of a reno. Without thorough and detailed planning, the reno will fall apart and run over budget. This is especially important if you are running the reno yourself to maximise your profit rather than paying a builder to do it.
Lana: WHAT ARE THE STEPS TO PLANNING A 30-DAY FLIP?
Erin: I think there are 10 main steps:
Step 1. Before buying the house, contact a local certifier to get the 149 certificate checked. This will confirm that the renos you want to do at that property, can be done e.g – a 149 will tell you if you are in a flood zone which could mean you need to get a DA (Development Application) and that could take months. That would be a showstopper for us as we are only interested in doing renos that are either Exempt or Complying Development as a CDC can get passed through council much more quickly.
Step 2. Assuming you get past step 1 and have purchased the house ie – exchanged contracts, you need to spend time at the property to work out exactly what changes you want to make. This will include drawing up a new floor plan. We hand-draw our plans using a pencil, ruler and rubber (it’s easier and more enjoyable than you think). Remember, you don’t actually own the property yet, as it hasn’t settled, so you need to negotiate “access visits” with the agent. On one of our projects, the house was already vacant and the owners were happy for us to spend as much time in the house as we wanted. This is the ideal scenario as it gives you maximum time for planning. If the house is still occupied, you should still get at least 2 access visits and if that’s the case, try and stretch them out to be several hours in duration.
Step 3. If your reno plans extend beyond replacing just fixtures and finishes you may need to engage a structural engineer. If so, meet them onsite to discuss your hand-drawn plans and see if they are possible. The engineer will tell you how much significant structural work will be required to meet your reno vision.
Step 4. Meet a builder on site to run through your plans. Share with him any feedback your engineer may have given you. Give the builder a written scope of work (which you may have adjusted during his visit) and ask him to come back with a quote. You should repeat this step with a few builders to get comparative costs. Once you’ve received all the quotes from your builders, check to see if they are within your budget. Discuss with each builder if necessary – especially if you need to bring costs down. Appoint a builder.
Step 5. Engage a draftsman to draw up official plans for the certifier and ask your engineer to return to the site so he can prepare final drawings. Give the draftsman’s and engineer’s plans to the certifier for the CDC (Complying Development Certificate) application. The sooner you get the plans to your certifier the better. This also allows the certifier time to give you feedback on your plans if they think they need adjusting in order to get them through council.
A Three Birds reno BEFORE
Step 6. Choose a proposed start date for your reno. You can’t start your reno the day after settlement because you need to wait for council to issue the CDC, and that process can’t commence until they you are confirmed as the new owner. Get your solicitor to send a letter to your certifier confirming you as the new owners. How long the council will take to issue your CDC depends on the council and can take between 2-21 days. Ask your certifier to give their best estimate on how long approval will take based on the complexity of your plans and their experience with that council. Use that as your start date.
Step 7. Sit down with your builder and develop a week-by-week, day-by-day reno schedule with him. His work schedule will determine when other trades need to be onsite so it’s important to sort this out first before locking in other trades like plumbers and electricians.
Step 8. Co-ordinate all other trades (eg – tiler, plumber, electrician, landscaper, glazier, painter) to meet you on site and quote. Give them a written scope of work including the dates they are required on site (which you should have worked out with your builder prior). Get a few different companies to quote for the same scope of work so you can compare costs, then appoint your Tradies. This should ideally happen 2-3 weeks out from settlement.
Step 9. Determine what fixtures and fittings you want and can afford. You need to know this so you can order in advance and have them ready onsite when the Trades need them. Some things have long lead-times (eg window shutters) so you need to place orders in the pre-settlement planning phase.
Step 10. You’ve settled on the property and the house is yours. Get the letter from your solicitor (see step 8) and await your CDC. You may need to adjust your reno schedule based on exactly when the CDC comes through.
Lana: IS THERE ANYTHING YOU’VE EVER FORGOTTEN TO DO?
Erin: Ordering the porta-loo and working out where to put the man-hole — gets me at every house.
This real reno for profit was completed by our resident expert Naomi Findlay in Newcastle NSW. I’ve had the pleasure of looking around it myself so I can vouch for what a beautiful and clever job she did!
This four-bedroom brick and tile home transformation took the serial renovator and her team six weeks with a budget of $110,000. To look at it now, you’d never know what a challenge it was: “It had an impossible layout and floorplan with disproportioned spaces and rooms with far too many doors,” says Naomi. But of course, she saw the potential. It wasn’t straightforward; the whole place had to be rewired and pretty much re-plumbed.
After: kitchen
Before: kitchen
The floorplan changes were complex but as you can see, more than worth it!
I’d agree with Naomi that creating the master suite (a bedroom large enough for a lounge area with the benefit of having a deck off it, and an en suite so generous most people would be delighted to have it as the main bathroom!) made the biggest impact. Not surprisingly, it’s also her favourite part of the reno, along with the main bathroom.
The new master suite
Before: master suiteThe impressive en suiteBefore: en suite
Creating the large deck area brought the yard and the house together and Naomi says the best bargains were the locally made timber vanity tops and above bench bowls.
After: deckBefore: exterior
“The biggest learning was to keep it simple. Good design does not have to be tricky but instead simple and clever.”
Before: bedroomAfter: bedroom
As a true reno addict there’s no question of Naomi doing it all over again!
Her advice for would-be renovators:
Have a plan from the get go
Have a budget and a healthy buffer
Be surrounded by a team you trust
Be proactive and assume nothing when it comes to communication. Comms are key!
It’s finally time to reveal the finished reno and let you know how much money was made on the investment. In this episode, we have more keeping-it-real information and advice from Naomi Findlay and we also hear from real estate agent, Damon Sellis. We think the house is transformed and looks amazing! We think you’ll agree…
An offer was received and accepted after a mere five days on the market. Over 135 parties went through the property during open inspection during that time.
The final project profit, after all costs were taken into consideration, was $25,000. Not bad for six weeks’ work!
“What makes it all happen is a great team of trades and a great agent working hard on the overall goals of the project,” Naomi says. “Vision and design obviously play a key role but it must always stay grounded on the goal of the venture and the business. It is not all about design. It must be grounded in market research and a budget. Top that off with some targeted styling and you are away!”
Watch all five episodes of our Diary of a Reno video series as we take you through a real life renovation, from purchase to sale and $25,000 profit six weeks later! Our expert Naomi Findlay, an experienced property developer (and busy mum of four!) owns successful business SILK Home Staging & Styling and teaches others how to stage for sale and set up their own styling businesses through her International Institute of Home Staging. Former Block winners Alisa and Lysandra are just some of her students!
Watch videos 1 through to 5 to follow the whole story of this project in Newcastle, NSW.
Video 1
Video 2
Video 3
Video 4
Video 5
We hope our warts and all, keeping it real advice has inspired and helped you. If you have any questions for Naomi, please put them in the comments below.
I’ve teamed up with Naomi Findlay to bring you a real-time video diary of a reno. In true Interiors Addict ‘style without the snobbery’ fashion, we’re keeping it real, warts and all, telling like it is. Our camera work and editing skills are by no means world class, but we’re less interested in that and more interested in bringing you practical, useful advice and giving you a realistic view of the highs and lows of renovating for profit, hopefully making you realise you could do it too.
Naomi, with various business partners, has done more than 20 renovations in the last three years (eight just last year!). She also owns Silk Home Staging and Styling and the online International Institute of Home Staging (IIHS). She’s also a mum of four. As well as helping people get the best price when selling their homes, it makes sense that she should renovate and stage her own for profit too
The house we’re bringing to you in this series is in the suburbs of Newcastle, NSW. “It’s an old home that has been bastardised over the years and the original features, other than two lovely ceilings, sadly removed,” Naomi says. “It is in ill repair and needing piering, sub floor repair, re-roofing, and a whole lot more!”
We won’t reveal exactly how much it cost until after it’s sold in case this affects the final sale price, but it was in the $300-to-$400k range. The budget for the reno is around $70K.
“I want to allow people to see the real and unedited world of renos; super quick and in the case of this property, super budget! I am by no means a feminist but it is great to show how a woman like me, juggling a family of four and running my own businesses, can reno for profit and enjoy it,” Naomi adds.
“I hope that people who want to have a go get an insight into what it is like and a thirst to know more about it!”
Naomi’s top five tips for renovating for profit are:
Buy well. This is where you make your money.
Have a team of trades as they will keep you alive.
Don’t forget to count your own time as money.
Keep a hold of the budget and review it weekly.
Time is money, so don’t lick stamps!
Know your market and spend you money based on ROI.
There are two main ways she sees other people get it wrong and these are putting too much or too little money in, depending on the market they are selling to, as well as trying to do everything themselves and it taking far too long. “They will go wrong if they think it is a ‘get rich quick’ thing and if they think it is glamorous!”
Naomi Findlay
Many people put off having a go themselves and Naomi wants to encourage them to have a go, armed with the right information. “Some think that they are too time-poor or have no idea of where to begin. It is really hard as there is so much available on the net regarding developing property and there are so many valid and variable ways to develop or flip or reno for profit. All have their merits but it can be hard to sift through the information and work out what is best for you and your circumstances, considering your time, family, finances and skill level.
“Mentoring is one of the best things that you can do when getting into this game; learning from someone else’s mistakes and their wins! They can help you work out finance, joint ventures, time schedules, budgets, roles and responsibilities.”
Naomi runs courses in home staging and styling, and business mentoring, through the International Institute of Home Staging (IIHS). Find out more.
