Avoiding the money pit - 13th September, 2007

We’ve all heard the stories about the couple that buys a run-down home, renovates it within an inch of its life and ultimately recoups hundreds of thousands dollars’ profit on their initial outlay. (You usually hear these loudly embellished at barbecues and later go home to kick the cat.) We’ve also heard the stories about the couple that does the same thing and loses the lot: their savings, their dreams and unnecessary years off their lives. Somewhere in between the two brands of anecdote, a more common story lies: a fair return for a fair investment. There are simply no hard-and-fast rules to the art and science of renovation. This is because there are just too many variables involved that have little to do with the renovation process itself – the home’s position and the current state of the market being the two most obvious. There is also the very fluid nature of tradesmen’s prices and availability (when one isn’t going DIY) and the fickleness of renovation trends themselves (polished floorboards today, sandstone tiling tomorrow). And of course it’s impossible to predict to what extent a potential buyer will want to have scope to do further renovation themselves. While some people covet a home that is completely finished, others fear the limitation of having no way to add further value. Given all this, it seems incredible that people still embark on pre-sale renovation projects without any qualified advice. A quick call-out by a real estate expert will soon tell you how best to strike the right balance between over-capitalising and under-capitalising … in other words, how to avoid the money pit. Until next week … Gerard Baden-Clay, Principal Century 21 Westside