What to look for and avoid in a renovation project

It’s tempting to save money on a ‘blank canvas’ property, but sometimes the cheaper price tag can cost you more than you bargained for

It’s good to have a team of experts to help you renovate – but even better to avoid any costly mistakes.

It can be tempting to buy a “blank canvas” property. Not only do they tend to be cheaper than their turnkey neighbours, they also come with an alluring proposition – the ability to make them your own. But they also come with risk – the potential for a massive cost blowout.

Luckily there are ways to avoid biting off more than you can chew financially when purchasing a fixer upper.

Some problems only become apparent once you rip them apart.

STRUCTURAL ISSUES

The first thing to remember, says renovation queen Cherie Barber, is that much like humans, properties start to break down as they get older.

“You’ve got to be careful that a property doesn’t have major structural issues,” she says.

Structural issues can come in the form of severe termite damage, foundation problems and defects caused by incorrect building or renovation methods.

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Hipages trade Martin Nguyen from Kubra Building Services says getting a pest and building report done before purchasing a property is crucial.

“If there’s a problem with the roof leaking or rust in the roof or the foundations or termites, one of those items can blow out someone’s whole budget,” he says.

Renovation queen Cherie Barber.

Barber agrees that a Pest and Building report is essential – but she says you shouldn’t stop there.

“There’s a whole series of inspections you should do before you buy any house or any renovation project,” she says.

On top of a Pest and Building inspection, Barber suggests buyers get a plumbing inspection that includes a CCTV inspection of the pipes as well as an asbestos inspection and an electrical inspection.

Unfortunately, some problems can’t be seen until you start ripping the property apart, she says.

hipages tradie Martin Nguyen from Kubra Building Services. Picture: hipages/ Brett Stevens

HERITAGE COSTS

Heritage listed properties also tend to add unexpected costs in the form of extra reports and delays, says Barber. She recently completed an internal renovation on a studio apartment in the Sydney suburb of Balmain that was in a heritage listed building.

The heritage listing significantly altered the planning process.

“It pushed me into full development application territory which was a one year lead time, but it also pushed me from class one residential building regulations into class two building regulations, which no longer meant I was a renovator,” she says. “I was now in the same category as a high rise developer, 100 apartments.”

TV renovation shows have led to unrealistic ideas of price.

Generally you should be able to get an occupation certificate within four weeks of a non-heritage listed renovation, she says.

“It’s seven months now, and I’m still waiting for my occupation certificate,” she says. “The heritage restrictions added something like $22,200 in additional reports.”

The delay also comes with holding costs that most buyers would struggle to pay if they needed to rent elsewhere while waiting to move in, she adds.

Barber says other properties to be wary of include those that have been renovated or extended on without council approval, properties that have had the plumbing or electrical wiring done by unlicensed DIY-ers and homes built on a slope – especially ones below street level.

It’s a good idea to budget for unexpected costs.

COST OF A RENOVATION

Nguyen says the popularity of TV shows like the block has led to some pretty unrealistic expectations around how much a cosmetic renovation actually costs. Assuming the structure of a “blank canvas” three bedroom home is sound and you want to modernise the kitchen and bathroom as well as redo the flooring, buyers should expect to pay anywhere between $50,000 to $150,000 depending on the fixtures and finishes they choose, he says. He suggests buyers check out hipages’ cost guide for an idea of what they are likely to pay before arranging quotes with a few different trades.

He recommends keeping a contingency fund aside to deal with any unexpected issues.

“I would say 80 per cent of the time, there are going to be unexpected costs,” he says.

Financial adviser Helen Baker. Picture: supplied

RENOVATION BUDGET TIPS

Financial adviser and author of Money for Life Helen Baker says before you even start looking for properties, it’s important to have a clear understanding of your strategy and whether you’re buying for the long term or to flip it. She shares some important budgeting tips below.

* Know the costs – Have a clear understanding of what you’re up against in terms of how old the property is, what sort of things you will need to fix and how much each item will cost you so you can accurately calculate an expenses forecast

* Have a contingency – Factor a healthy buffer into your forecast, keeping in mind that renovations tend to go over budget due to unforeseen issues or extra costs

* Add interest – It’s most likely you are funding your renovation through your home loan so make sure you check you can afford the interest repayments. Also remember to factor in any interest rate increases over the long term

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Originally published as What to look for and avoid in a renovation project