Easy ways to renovate when short on cash and costly mistakes to avoid
You don’t have to have thousands of dollars of cash on hand to carry out a renovation, with a number of strategies you can use to create your dream home sooner.
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A renovation boom is rescuing businesses and tradespeople and restoring some sanity for many Aussies whose 2020 plans were turned upside down.
The value of renovation building approvals hit a four-year high of $784 million in August despite the biggest economic downturn in 70 years, latest Australian Bureau of Statistics data shows
Improving your home can be a smart move but renovators should understand the mistakes that can cause their project problems.
Renovation specialist Werine Erasmus, author of The Happy Renovator, says homes have become workspaces so “we want to make them an environment we love and enjoy being in”.
However, renovators should be careful not to overcapitalise by spending more than the value of the improvement adds to their property, she says.
Here are seven costly renovation mistakes to avoid.
LACK OF A BUDGET
“Starting a renovation without an agreed-upon budget will result in the goalposts constantly moving, going deeper into debt, and possibly overcapitalising,” Erasmus says. “In a nutshell, do not spend more than you can afford,” she says.
PLANNING PITFALLS
Erasumus says renovators should involve tradies in their initial brainstorming.
“They will be able to point out potential issues or ways to save money,” she says. “If you are not experienced in estimating plumbing or electrical costs, for example, rely on qualified tradesmen to help you plan and set a budget.”
DIY DRAMAS
“Avoid tackling DIY tasks if you do not have the knowledge or the right tools to deliver a professional looking result,” Erasmus says. “The actual task or job will cost you double if you end up having to pay for a tradie to repair, or re-do, your substandard DIY efforts,” she says.
David Hancock, a director at Binnari Property and Montara Wealth, says renovators who DIY without the required skill-set may find their project takes more time and money than if done professionally.
“You may find the improvements you make are not within your local council’s guidelines, or even worse, you run the risk of serious injury if you don’t have all the right equipment available,” he says.
FINANCE FAILS
Hancock says for large improvements requiring serious borrowing, renovators should speak with their bank or mortgage broker before proceeding.
“Your bank will typically want to revalue your existing home and also assess your current financial position,” he says.
“Starting a renovation prior to gaining bank approval can be a costly and painful experience if your lender doesn’t play ball.”
COST BLOWOUTS
Many experts suggest renovators budget to spend 10-20 per cent more than they think. “Look to engage with reputable builders and tradespeople via a fixed price contract, so that you have some certainty and clarity with your costs moving forward,” Hancock says.
IGNORING COUNCILS
Structural changes typically require approval from your local council and Hancock says you should at least understand its policies. “If you undertake works that are against the local council code, you could end up with up a structure that is uninsurable and you may end up spending even more money to reverse the changes,” he says.
CHEAP AND NASTY
The cheapest solution isn’t always the best, Hancock says, and renovators should instead focus on a builder’s reputation.
“Fixing poor craftsmanship can be costly, as can the extra finance costs for lengthy delays,” he says.
Erasmus says when it comes to labour hire, obtain two or three quotes where possible. “This is not necessarily to obtain the cheapest price, but to ascertain who you can see yourself working with the best and has provided a reasonable quote.”
CONSIDER THESE OPTIONS IF YOUR SHORT ON CASH FOR A RENO
1. Use equity in your home, if you have some, and redraw on your existing mortgage.
2. Get a construction loan – which releases progress payments to builders – for large projects.
3. Personal loans can deliver flexibility but often have higher interest rates than using a home loan.
4. Credit cards should only be used for smaller amounts and where you plan to pay off the debt within the card’s interest-free period. Otherwise the debt can be dangerous.