04 Oct The Value of Renovating
Let’s assume you’ve decided that renovating is the way to go in order to improve the value of your home. What are the next steps and how do you go about deciding what your budget should be? Your budget should not only reflect the amount of money you have at your disposal to spend, but should reflect the amount of money you have to spend in order to make the whole exercise worthwhile. There is little point to going to the trouble of renovating if you don’t make plans to maximise your efforts.
Two Key Approaches to Renovating
There are two ways to undertake a renovation and they are:
(a) Piece-meal: that is, area by area as money permits, or
(b) All at once approach: tackling the whole house in one concerted effort.
Both have their advantages, it’s a matter of what works best for you.
The pros and cons of a piece-meal approach to renovating
Advantage: rooms or areas are tackled one by one as financial circumstances permit and often you can still live in the home while the work is carried out.
Disadvantage: this approach can feel like it takes f-o-r-e-v-e-r, which means your house is in a perpetual state of renovation that can be disruptive to every day living.
The pros and cons of a ‘one-concerted-effort’ approach to renovating
Advantage: Disruption is limited to a defined period of time and at the end of the renovation, you have the home you desire.
Disadvantage: Can be financially draining as most people borrow funds to complete the planned works. Often you will need to move out of the home while certain work is carried out.
Setting the Budget: keeping a handle on home renovation costs
Often clients ask me what their budget should be. There is no direct answer to this, so it’s usual for me to work with the client asking a series of questions, starting from the end and working backwards. Having corporate origins means my approach to tasks often have a commercial bias. Creating a Vision Statement and a Mission Statement for each room or area is the first step I use in determining the budget. This process also ensures the project stays true to the goals of its owner.
Step 1 – The Renovation Vision Statement
A Vision Statement is the ticket to a successful home renovation. It should reflect the dreams you have for your home and outline what lifestyle outcomes you want to achieve. It’s all about what you want your house to become. Without a clear vision of where you want to end up, you cannot plan how you are going to get there. A clear Vision Statement serves to resolve issues pertaining to the current state of the house and provides a cross-check for the scope of works.
A sample Vision Statement might look like this:
The Delaney House will be a place for our family to co-exist with peace and tranquility. It will allow us to accommodate the needs of our tween-age children through their teenage years to the completion of high school. It will be a place our children will happily bring home and entertain their friends and a place, as parents, that we will be able to live and entertain our own friends.
Step 2 – The Renovation Mission Statement
The purpose of a Mission Statement is to answer the fundamental question “why does this exist?” If we apply this to home renovating we can move from room to room and ask the same question of each space. Take a notebook and dedicate one page per room or area of your home (draw up a spreadsheet if you must!). Sample questions you may like to consider are the what, where, when, who, how and why:
What is the purpose of this room? What needs to be changed (walls, floors, doors, windows, lights, furniture, storage)? What is the feel of the room to be?
Where is this room in relation to other rooms in the house? What other rooms or spaces are used in conjunction with this one?
When in the order of things does it need to be renovated?
Who will be using this room?
How will the room be used? How often does the room get used?
Why do I want the room to look or feel this way? Why does it need to serve this purpose?
Tailor questions to suit yourself, categorise and document answers room by room, then write an overarching Mission Statement for each.
A sample Mission Statement for your bedroom may look like this:
My bedroom exists as a haven for me to sleep, relax and read. It is a place for me to retreat, away from the children. The room is a place I share with my husband and the space needs to look and feel like a romantic haven that we both enjoy.
Step 3 – Wish List of Changes
Use the answers to the above questions to compile your list of desired changes, room by room. Undergo this exercise for both inside and outside rooms. Dare to dream. Don’t leave anything out. Leave a space (or column) to categorise the priority for each work task, this is the next step in determining your budget.
Step 4 – Determine renovation priorities
Once you have identified and listed the desired physical changes for each room, go through and allocate each work task a priority of 1, 2 or 3, where 1 = “must do”, 2 = “should do”, 3 = “nice to do but could be left for another time”.
Step 5 – Area by Area cost estimates
The next step requires you to place an estimate next to each item. You can either guess or speak to a professional who can help you. Look for places you can save money. What can you do for yourself? Is there a family member or friend who can help you with some tasks? Perhaps you can offer some of your specialist skills in exchange for their time? Every place you save a little will end up saving you a lot! Tally the Priority 1, Priority 2 and Priority 3 work tasks and reprioritise a second time if you have too many work tasks in your “must do” category.
Step 6 – Budget Allocation
Your suggested budget will now be starting take shape and you should have a better feel for what your budget might look like. You will need to allocate money for a contingency, so be disciplined in your approach to selecting work tasks.
Take a look at Priority 1’s and 2’s a third time. Are you happy that this list reflects your overall Vision Statement? The two MUST be in alignment otherwise you need to go back and prioritise again. If you have difficulties with this exercise go back to your work task list and ask (line by line) “Is this desired change in alignment with the Mission Statement for this room?” If it’s not directly bringing you closer to your room’s Mission, then move it to priority 3. Keep doing this for each work task until you get to the last task in the last room. Once complete, check it back to your Vision.
Beware of over-capitalising on your renovation
None of us can predict how our life might change in a few short years. The birth of an additional child, an illness or decline in family income can provide an unexpected financial burden. You don’t want to be in a position where you need to sell your property – fast! It’s devastating to find yourself in the wrong part of a property cycle if you have an urgent need to sell. You want to avoid this scenario at all costs. Since none of us have a crystal ball, the best way to avoid this trap is to make sure you don’t overcapitalise.
Overcapitalising refers to spending more on a renovation than you would be able to recoup when it comes time to sell. For example, if your un-renovated property is valued at $500,000 and similar (but renovated) properties in your area have recently sold for $600,000 it’s safe to assume spending $50,000 will not be overcapitalizing on the home for the area. As a general rule, you want to recoup around 2x the cost of the renovation, otherwise it’s not worth the effort. In better real estate times and in highly sort after areas where there is tight supply, you may get back as much as 3x or more but in today’s economic climate, you’ll be doing well doubling your renovation expenditure.
There are many rules of thumb that can be applied, (for example a percentage of the total value of a property, dependant on the length of period the property is likely to be owned etc) however that is just what they are – rules of thumb – and therefore need to be assessed on a case basis.
Ready, Set, Go! Renovate!
Once these grass-root exercises have been conducted, you are ready to call in the professionals. Select your architect, interior designer and building contractors and get set to realise your dreams for your property. It is important to continuously refer to both your room Mission Statements and your overall Vision to ensure you stay on track at each decision point. With the right planning you are best equipped to maximise your efforts and thus dramatically increase your chances of securing a healthy profit on your most prized investment, your home.
If you find the renovation process more than you can deal with, let us help you. At North Shore Interiors we can put together a team that is best suited to your individual needs. All you need do is email us at email@example.com.
About Linda Delaney and North Shore Interiors
Linda Delaney is the owner and manager of North Shore Interiors, a company that provides interior design, decorating, styling and project management services to Sydney’s lower north shore and greater Sydney metropolitan area.
Linda has been seen in Habitus, Inside Out, Grand Designs Australia and Money magazines. She is also a regular contributor for leading Australian interior design publications, Home Design and the annual Design & Decoration. Watch out for more of Linda’s work featured in the media.
Contact Linda at Linda@nsinteriors.com.au or on 0432 716 558.