5 ways to add property value with a home renovation loan
Posted December 2016 by Melissa Abraham-Smith
The new year is approaching fast, so what are you looking to achieve?
- Are you planning to travel the world?
- Take action against your debts?
- Or are you dreaming of making that long-awaited kitchen renovation a reality?
According to Statistics New Zealand, you’re not alone. Kiwis spent $1.5b on making those dreams of a modern kitchen, slick new bathroom or extra bedroom come true in 2014. While the number of homes being renovated jumped almost 30% from 2011-2013.
Are you left feeling like those dreams are out of your reach? Renovations can sound pricey, but they don’t have to cost the world. In fact, renovating your home can be one of the best ways to invest in your future and make money in the long-term….
If done right, renovations can add significant value to the resale value of your home.
If you find you’ve been bitten by the renovating bug, do you know which rooms will add the most value? Or what you should do before the renovations begin? Read on as we look at 5 proven ideas that can add maximum resale value to your home.
Don’t start tearing down walls just yet, instead ask yourself these 5 questions
1. Which renovations will add the most value for my money?
Before you start knocking down walls, consider how much you're spending on renovations and compare this to the return you're expecting to see. That new bathroom may look great, but do you know if it will make a sufficient return on your investment when it comes time to sell?
Ultimately, the answer to this question depends on the area that you live, the condition of the property, as well as where your home fits within your neighbourhood. Construction Cost Consultants - via Stuff - estimate around a 50% return on kitchen and bathroom renovations, for example. While for every dollar you spend on turning a three-bedroom home into a four-bedroom one, you’re likely to double your money.
Generally speaking, most experts agree that a good return on your investment is at least double what you spend on it. For example, a $5,000 kitchen renovation should ideally result in a $10,000 increase in the value of your home.
2. Which renovations will suit my home and the property market?
Before you finalise your renovations, consider your location as well as the market you’ll be selling to. Digging deeper still, look at who the typical buyer in your area is, what they want, and what they might be prepared to pay.
A family, for example, will be looking for specific features in your home that a single, 20-something executive might not consider important.
If this sounds like a lot of guesswork, try these simple methods to examine your local market:
Compare your house to others on the market, and make a list of what your home lacks.
3. How much is my home worth?
Renovating your home adds value, but you won’t know how much - or little - your hard work has added if you don’t know what your property is worth before you start. Services like Homes.co.nz can give you a rough estimate based on your area and its history, while the New Zealand Gazette has a list of public valuers who can value your home.
4. How much will my renovations cost?
We’re about to take a look at some great ways to add value to your home without breaking the bank. Once you’ve decided on an idea that you love, you should get a ballpark figure for how much the renovations will cost.
Yes, renovations can add value. But if you don’t know how much they’re going to cost, you won’t know if your investment is worth it. When you do? Don’t just call one builder. Instead, shop around. You’ll be surprised at how different the quotes can be, depending on who you ask.
5. How will I pay for it?
So you know what you want done, but how will you pay for it? Will you dip into your savings? Or maybe take out a personal loan? Not all of us have enough spare cash sitting around to cover the costs of a new kitchen or bathroom, but with a low-interest loan for your renovations you can get the kitchen of your dreams or add extra value before you place your home on the market.
Small-scale renovations don’t require building consent, but more involved projects do. It pays to check the New Zealand Government guidelines for home renovations before you make a start.
Need some inspiration? Here are 5 home improvement ideas that can add value to your home
1. Add a room or reinvent an existing one
It’s true: adding a family room or master bedroom suite to your home usually generates the highest return on investment. For every dollar you spend, you can usually expect to double your money. You’ll also open up your home to new markets, like growing families who are looking for extra space to expand.
This doesn’t mean you have to start laying foundation right away. While a new room can add value, it can also be costly. So before you start drawing up plans for that third bedroom, consider ways that you can repurpose the space that you have already, such as:
Install a partition
If you want to add a new room, the space you’re looking for may already exist. Take a look around your house. Are there any rooms that are only partially used or are too big for their current purpose? If the answer is yes, then adding a partition and transforming that otherwise wasted space into a new room could be your ticket to a higher resale value.
Buyers love versatile spaces, so consider combining areas like the dining, living and kitchen. Not only will you gain extra space that you could then reuse for another purpose, you’ll also create a modern, open-plan area that will make the space appear that much bigger.
2. Give your kitchen a modern twist
Kitchens are the heart of the home: we cook in them, eat in them, and often entertain in them. It’s where we sneak a late snack, and where we serve the kids breakfast in the morning.
Kitchens can also make or break the sale of your home.
The thing is, kitchens can be costly to renovate due to the extensive electrical and plumbing, and prospective buyers know this. What they don’t know, is that you don’t need to tear out your entire kitchen or burn through your budget to give it a new look. A tidy, modern look can be achieved through some simple adjustments that will impress your family as much as it will potential buyers, such as:
Update doors and fittings
You don’t need to gut your existing kitchen to give it a fresh look and feel. Instead, take the cost-effective approach and consider simply updating cupboard and cabinet doors, drawer fronts, skirting as well as handles and taps.
Install energy-efficient appliances
Energy-efficient appliances continue to grow in popularity, and for good reason. They boast a smaller carbon footprint, and they also save you money in running costs. Sure, an old power-hungry fridge or freezer may not lose you a sale, but a new, energy-efficient appliance could win you one.
3. Update your bathroom...or add another!
Whether it’s bickering over who gets to use the shower first, waiting in line for someone to finish their makeup, or lining up to brush your teeth: more than a few household arguments have arisen over the bathroom.
These conflicts are likely partly responsible for the extra value an additional bathroom can add to your home’s resale value. Like the bedrooms we talked about earlier, look at your existing layout and see if you can steal space from another area of the home before you start erecting new walls.
If you don’t have the room or can’t afford such a massive undertaking, consider the following ways to update your existing bathroom:
Update fixtures and fittings
Like your kitchen, there’s no need to overspend when you’re updating your bathroom. Instead, simply replace old cabinet fronts, taps and faucets.
4. Give your garage a new purpose
Garages sit at the bottom of the list when it comes to their return on your investment. At least in most cases. Inner-city areas, for example, can benefit from the addition of a garage, as parking spaces are at a premium.
If you’re further out from the city, there’s no reason you can’t make the most of your existing garage space. It’s cheap, adds versatility, and turns a forgettable garage into a real selling point to potential buyers. To do this with your garage, try these ideas:
Add a mezzanine storage area
Potential buyers just can’t get enough storage space. By adding a mezzanine storage area to your garage, you capitalise on your existing space, and gan that all-important extra storage room.
Repurpose your garage
Do you have an internal garage that’s underused? It doesn't just have to be somewhere you park your car. Instead, consider lining, insulating and transforming it into an office, sleep-out or a new bedroom.
5. Insulate your home
You may be surprised to learn that many New Zealand homes don’t have insulation, and many that do are considered inadequate, due to thinness and deterioration over time.
Insulation isn’t just a good way to increase the value of your home, it’s also one of the most effective ways to cut down on your heating and cooling costs and, in turn, save money.
To help New Zealanders tackle this issue, the EECA Energywise programme currently subsidises the cost of insulation for New Zealanders, so there’s no reason not to add insulation to your home. While you’re doing so, consider some of the following ideas to further increase the energy efficiency of your home:
Seal up the cracks
The average house contains enough small holes and cracks that, if put together, would equate to a 1x1 metre hole in your wall. If you were looking at that every day, you’d probably fill it! Any areas like this are also likely to be mentioned in any building inspections carried out on your home before you sell. So if you feel a draft or a cold spot? Fill it!
Check the Energywise site for more ideas
You’ve heard our ideas, so which room is getting the renovation treatment?
From giving your tired kitchen a long-overdue facelift, to transforming the unused space in your garage into a great place to kick back and relax, the ideas listed above highlight just some of the ways you can add value to your home when you decide to renovate.
Renovations, like most things in life, take some serious planning to do right, but with our ideas and tips you should be in a great position to give your home the long-awaited makeover you’ve always been dreaming of, while ensuring you’re making a wise investment should the day come that you decide the grass is greener on the other side.
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