February 23, 2022

Is renovation worth it in today’s real estate market?

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Louis Lin

Is renovation worth it in today’s real estate market?

Renovation can be an effective way to create more equity for your investment property. This can be a valuable resource when it comes to property upgrades or looking to add value to an existing investment property. However, in today's rising market, is renovation worth it?

As property prices grow organically, is it worth investing in home improvements or renovations to further enhance property values ​​for owners who may be looking to sell in the near future?

It depends on what the owner paid initially and when they bought the property. If they bought the property 10 years ago, the price was much lower, so the risk of overcapitalizing now is lower, but the risk of overcapitalizing is much higher if they bought a property last year where the prices have risen.The key is to make sure you know what will add value without overcapitalizing.

Here are our top tips on how to ensure maximum value for home improvement/renovation;

1.     It is always important to consider the renovation with the rental yield. In the current market, a savvy investor will see the benefits of staying invested, securing good long-term tenants and minimizing stress on all sides, which will mean some investment properties will need improvements/renovations. Contact AUV team to start planning and budgeting now to keep everything in control.

2.     One of the biggest mistakes is renovating your property far above the average for neighborhood houses. Prices often reflect the tastes of local buyers and what they are willing to pay. For example,luxury entertainment upgrades may not give you a high ROI because they are not what all prospective home buyers need, and they are also largely dependent on personal preference. These include swimming pools/spas, finishes with very expensive materials, luxury or upscale kitchen/bathroom designs, home theater,wine cellars, home theater, or other highly specialized Spaces. The only exception is if you live in a high-income area. However, if you live in a low -or middle-income area, these will offer little or no ROI because prospective home buyers will be reluctant to pay for them.

3.     Bigger is not always better! Being able to add value at minimal cost is the best way to maximize ROI. There are small improvements you can make to your house to immediately increase its value. A fresh coat of paint, a deep cleaning, updated door handles and light fittings can increase the appeal of a home. Outdoors and gardens can be improved by selecting new plants, bark and grass fertilized, as well as power hose cement/tile areas. Some more costly updates such as adding wood decks, kitchen and bathroom upgrades, and window replacements, have shown the greatest ROI,regardless of the location of the property or the state of the residential real estate market.

4.     Do some research and get comparative quotes. The first option is easier, but you can save thousands of dollars if you shop around, especially when it comes to kitchen and bathroom upgrades. You can get a better price through multiple suppliers.

If you would like to know how we can help you achieve your property goals, please contact AUV Team on 03 9572 0002.

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