Chapter 1: What are the initial considerations before starting a renovation?
It's the Real Estate Podcast, brought to you by ANZ Home Loans for financial well-beings. And welcome to another episode of the Real Estate Podcast, available on iHeartRadio every morning and also on Spotify and Apple and wherever you get your podcast from. It is a Friday morning, the 25th. First day for October, the weekend just about here and Christmas too, just 65 days away.
We are into the countdown. Coming up this morning, if you are in the middle of a reno or you're thinking about a reno or you are currently looking at properties with a view of doing a reno, whatever the answer is, We are going to be talking with Rich Harvey very shortly about this all important subject.
And there is a lot of planning and scoping out any Renault project, especially when you're wanting to make a decent profit. And that is not easy. So that is all coming up in just a moment. And from CoreLogic this morning, auction volumes this week saw an increase across the combined capital cities, rising above 2,000 for just the third time since late June.
There are currently 2,211 capital city homes scheduled for auction this week. Now that is up from 1,741 last week. And Melbourne is set to see the biggest auction week since the week ending the 19th of June. There are currently 1,167 homes scheduled for auctions this week. That is up by 69.1% from last week. So that is heading in the right direction for sure.
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Let's Talk Property, a podcast series with Rich Harvey. Well, we all like a great reno to make our properties more attractive, more desirable, and more importantly, more valuable.
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Chapter 2: How can homeowners avoid common renovation traps?
That's the most important thing. But the ability to stick to a budget to make that profit is what most people really do struggle to tame. Whether you buy a property to rent, sell or live in, buying a house in Australia is a form of investment. And as you know, property doesn't come cheap these days. Even a bargain is going to cost a pretty penny.
So it makes sense to maximise your investment and renovating is a golden way to add value and profit from. So let's drill down on this more with some great reno tricks and tips. We've got Rich Harvey, CEO and founder of propertybuyer.com.au because it is a Friday morning. Good morning, Rich. Welcome back. Good morning to you, Craig. Great to be with you yet again on a Friday.
Yeah, you've got a fantastic subject here talking about the renos. Let's look at the numbers first. So how many homeowners renovated their home in the last 12 months? Well, we have become a nation of renovators. I mean, you just turn on the TV, right? Like the block and... Selling Houses Australia, but we've become the renovation nation.
So actually last year, around 37 to 40% of homeowners did renovations. So there was a survey by Rate City that did a thousand people in their sample size. And they found that the most popular amount to spend was between 5,000 to 25,000. And part of the reason for that is that obviously during the COVID period, people couldn't travel. So what did they do? Hey, that wall needs painting.
I need to build a deck. I need to upgrade the bathroom. So what did they do? They upgraded all of those things. So the total amount that Australians spent on renovations in 2021 was a massive $12.49 billion.
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Chapter 3: What steps should be taken to establish a renovation budget?
And that was up 34% in the previous year in 2020. And that's according to the Bureau of Statistics numbers. Wow, that's an enormous amount. And as I mentioned at the top, people have different reasons to buy and reno a property. What do you think the motivations of most renovators look for and what the benefits are that they hope to achieve?
Yeah, there's a whole variety of reasons that people renovate their homes. Now, if you're a homeowner, obviously you want to take pride in your home and, you know, nothing worse than coming home and having that musty smell and the mustard carpet and the vertical blinds all staring at you every day and you feel really, you know, crappy about your home.
So people want to increase the capital value of their home. That's a key reason. I mean, we spend half our life or more in our home. And with working from home, we're spending probably three quarters or more of our life in our home. The other motivation, particularly for investors, is to increase the rental return and increase the equity in your property.
And so by doing really clever strategic renovations, and I'll be giving some more tips shortly about that, you can really dramatically increase the value of your home. For every dollar that I'm gonna spend on a renovation, I'm looking to make back $2 in equity uplift.
I'll just also mention there was a report done by Mortgage Choice about a year or so ago, and it showed that a large number of, probably around 40% of people, again, wanted to increase the value of their home and improve their quality of living. So again, those two things, it's about value and it's about quality of living. But it's also about proving a lifestyle.
You know, when you have people coming around, you really want to share that lifestyle factor. And particularly getting outdoor areas and those entertainment areas was really important. So, yeah, and I think the benefits, as we know, is obviously just having feeling better about yourself and obviously getting some great returns from doing those renovations carefully. Yeah, some great returns.
Well, we mentioned renos. They're tricky to perform. What do you reckon are the most common traps and problems with renovations? I think the first one is everyone goes over budget. Very unrealistic with their estimate of what it's going to cost. With construction costs rising anywhere from 20% to 40% in the last two years, you've got to do your numbers carefully. So Going over budget is one.
Running over time, another classic one.
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Chapter 4: What are the most important rooms to renovate for maximum value?
Another really big trap is the DIY trap. You know, we watch these programs and we watch these teams of people transform a room in seven days and think, oh, that's not too hard. And then when you try to get the wallpaper off, you realize, hey, that's going to take me five days to fix that one wall. Or trying to get tiles that are stuck on with double superglue.
Be very careful thinking about how much you can do yourself and how much time it takes. And particularly be careful with electrical stuff. You do need a licensed electrician and a licensed plumber to get those types of things done. The other mistake that I often see is poor quality finishes, as in poor quality painting or poor quality materials that have been used.
And you can really tell it when a DIY has done it versus a professional. And another problem or trap is that people use over-the-top finishes, getting gold-plated taps for every single part of the house. Well, you don't need that if it's not in a really premium area. And so let's go to the start of the reno. What is the first step to starting a profitable renovation?
Well, it really starts with working out what your property's worth, doing an appraisal or even better, doing a professional valuation. So you can get a professional valuer to come in and say, hey, what's your property worth? And then you can discuss even with that valuer, look, if we did these kind of valuations, how much more do you think it would increase the value?
So you can do some of that yourself. You could get an estate agent in as well to help you, but a qualified independent value is probably going to be a very good start. Go around the neighbourhood, look at other open homes, look in the papers and see what renovated properties are selling for versus unrenovated properties are selling for.
And just take note of the really impressive renovations because if you can work out what the renovated property is worth versus what your unrenovated property is worth, then you've got a margin to work with. So looking at bridging that gap and not going above that gap. So that's the key start. Yeah, and it is so easy to see the blowout of expenditure that you talk about on a reno.
Rich, what else can people do to avoid overcapitalising on a property when renovating? I think if you look at that budget, get an Excel spreadsheet, go through every single room and go, what is absolutely essential? What will make a dramatic difference for not too much outlay?
Even if you can't afford to change the kitchen, just even painting the kitchen cupboards and putting new knobs and handles on can make a dramatic difference, right? Obviously ripping out the kitchen and putting in a new kitchen is ideal, but there are certain things you can do. Choosing the right paint colours. The other thing is don't make it too personal.
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Chapter 5: How can you ensure quality finishes during a renovation?
Like if you're an investor, what I mean by that is if you're an investor and you're doing a renovation, you don't have to live in that home. So there are certain level of finishes that could be quite appropriate for that property rather than going something over the top.
So, for example, you know, everybody loves the stone benchtops, the really beautiful marble look and the marble splashback, you know, but if you're going to be buying a property in a lower demographic area, you don't necessarily need to do that. It's not really going to make too much difference to the rent you're going to receive.
You might love to have a pool, right, and feel that swimming all the time is great, but I tell you, the maintenance on that thing, where the pub's going to go, you're going to need all the chemicals, it's going to chew up so much of your return. And it's something that the tenants don't really want to have responsibility for either. So it may not be such a good idea to do that sort of thing.
Our subject is managing to keep within a budget when renovating a property. We should really step through what the most important rooms are to renovate to maximise a property's increase in that value. Obviously, kitchens and bathrooms bathrooms are the perennial favourites. And I think they make a dramatic difference to the house. I mean, the kitchen's the heart of the home.
It's where the heartbeat is. It's where you make your morning tea or coffee. It's where you'd be cooking all your meals. So it's really important to have that area really in an open plan going into your lounge and dining areas. So you've got a really great community and socially interactive space within the home. Secondly, the bathrooms, they've got to be full of light.
Full height tiling is ideal. You know, nice, clean, seamless glass shower screens, you know, quality vanities with polyurethane is really good. I'll probably say the third area would be to do the outdoor entertainment area. We love living outdoors and we love to bring the outside in and have that indoor outdoor connection. That's really important.
The other thing is having a home office or a study or a quiet place. And really I'm seeing some people do some amazing renovations to just an average room to make it a delightful place to work from home. The other thing is the bedrooms. Make sure they've got good size robes, double hanging and good size spaces so you can get a bedside table beside a queen bed, for example.
And just putting good quality blinds and block out blinds so you can sleep well is important. The other thing is just the appeal at the front of the home, making sure that it's got really good street appeal.
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Chapter 6: What role does professional help play in successful renovations?
So putting in a couple of plants, putting in some bit of landscaping can make a huge difference. And that's often the forgotten part of the budget, Craig. People do all these beautiful renovations and there's this big pile of dirt out the front. So make sure you leave enough in your budget to do a renovation on the outside as well.
And just before I let you go, obviously you've done renos yourself. Perhaps tell us how many you've done and some of the results that you've had with your renovations. Let me talk about the first one. We lived in a little old post-war home in Pennant Hills, tiny little three-bedroom, double-brick house, and it had the mustard floral carpet, right?
It had the old drapes that grandma used to have, and it had that smell, right? So my wife and I ripped up the carpets. We got a guy in to polish the floors. We did all the painting ourselves. And it had this pokey little kitchen that was sort of tucked away. And we just knocked walls down, opened it up and really transformed it. And that was great.
And I actually personally built a pergola out the back. And it was great. We just really enjoyed having that outdoor space. That was great. I've renovated a house in Alexandria. I've done one also in Leichhardt, a couple of townhouses and we just transformed. We did all the light fittings, painting, put in much better robes and also putting in an air conditioner, particularly in Queensland.
We're doing quite a big reno on a place in Queensland at the moment. getting it all painted, putting in a new kitchen, but air conditioning really adds, you know, probably $20, $30 a week more to there. I've also done a commercial office fit out on the office that we're in. There's a number of things I've done, but probably not long enough to talk about them all today, Craig.
All right, so if you're looking at doing a reno, you can call Rich Harvey. He's the guy that is very handy to help out. Okay, Rich, well, thanks for coming on once again. Have yourself a fantastic weekend.
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Chapter 7: How can renovations improve lifestyle and property value?
Catch you back next Friday. Thank you, Craig. Always a pleasure. We connect you to the best real estate information across Australia, The Real Estate Podcast.