Our specialists share their insight on what to look out for when buying a do-upper.
Authorised Financial Adviser at Stuart + Carlyon
Most people buy a modest or tired house to renovate because the initial house price fits their tight budget. So it’s important to ensure the renovation cost is affordable too.
First, consider the scope of the project. Are you embarking on a refurbishment or a major rebuild? Installing a new kitchen and bathroom plus painting the house may be a $50,000 job whereas extending the exterior structure with new kitchen, living room, deck, bedroom, en-suite and garage could be a $200,000 job.
Chances are you’ll be borrowing more to renovate: $50,000 will add $322 to your monthly repayments at 6 per cent for 25 years, whereas $200,000 will add four times as much. Make sure the higher repayments don’t blow your budget.
Sort out the extra borrowing facility with your bank at the time you buy the house. For a major renovation, the bank will require a registered valuation that includes your rebuild plans. Before you buy, go to open homes of well presented houses in the same suburb to compare values with the total cost of your purchase plus your renovation quote. This will help avoid overcapitalizing. A suburb that is changing dramatically can reduce this risk to consider new schools, malls, cafes or motorway on-ramps that will make the area more attractive in the future.
Make sure you factor in a contingency sum. Old houses can reveal unexpected maintenance problems when walls are torn down and you don’t want lack of money to halt your renovation project.
Managing Director at Mike Pero Real Estate
We’ve all heard the cliché ‘worst house in the best street,’ but the basic fundamentals have remained the same in real estate. If you’re thinking about buying a property with the objective of renovating and then selling it on, you’ll take a different approach to a ‘buy and hold.’
Renovating a home is one way to get ahead or move up the ladder when it comes to property equity and thousands of kiwis have used this ‘snakes and ladder’ approach to getting ahead. Just try and avoid the snakes because too often people can underestimate the work and costs of renovating.
The key is to buy right with a buy price hopefully well below market. Research your chosen area well and ensure you study the recent sales. Also spend time visiting open homes and see where vendors think their homes have value against others. Once you’ve found the right home ensure you’ve checked it out in all respects before you go unconditional. Ask yourself ‘where am I best to spend the money?’
There are many ways to improve the value of a home through renovating but it’s often a good idea to take an agent with you, once you own it, to get a professional’s opinion on what could enhance the value of the property with the least amount of input. For example carpet on the garage floor might not be as important as new paint on the front side of the house or renovating the kitchen. Continually check with yourself that you’re getting the best bang for your buck.
When you consider selling, presentation is the single biggest factor when it comes to showing a home to a potential buyer. The home must be warm, fresh and bright. No clutter, cleanness and spaciousness are what can add value. I’m a great believer of street appeal, and like a book the front cover of your home is what’s going to attract buyers.
I am often approached to ‘check out’ homes for prospective purchasers – great idea and an essential one given the issues you can be faced with! I’m quick to point out that I am not a registered house or building inspector but I will look over (and under) it as though I was the purchaser.
The main areas I cover? Cladding, joinery, roof, plumbing, electrical and foundations. I look for indications of rot, leaks, and movement in the house or land around. Are there leaks, has the house been rewired, how much life does the roof have, is there insulation?
If the house has just been spruced up, painted inside and out, you may not get to see areas of mould or rot. In a typical weatherboard home you can still get a pretty good feel for the condition. However, in a plastered dwelling it can be more difficult – particular attention needs to be paid to cracks, movement around joinery, surrounding ground levels below cladding and the presence (or not) of flashings.
If I feel there is cause to be suspicious I always recommend the use of specialists, whether it’s because of signs of subsidence or moisture detection. I have recently bought an endoscope because of the number of houses that have water damage – it allows me to get a positive ID’ on framing conditions without the upheaval and cost of opening walls or removing cladding.
A few hundred dollars spent before you purchase could save many thousands down the track – or could at least give you the confidence you’re making the correct decision.
This expert advice featured on page 58 of Issue 004 of New Zealand Renovate Magazine. New Zealand's first and only magazine solely dedicated to home renovations.
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*All information is believed to be true at time of publishing and is subject to change.
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