So, you’ve decided that your current home doesn’t meet your needs and it’s time to do something about it, maybe a full construction or large renovation.
The next big decision is whether your best course of action is to renovate and increase the size of your home, or consider demolishing the house entirely and build something completely new withy a full construction – a project home, or architect designed property.
Step One – what do you really want?
This might sound obvious, but it’s surprising how confusing the situation can become when you take all of the options into account.
Do you like your current home enough to modernize or increase its size?
Is your home suitable for renovation?
If you intend to renovate or extend, can you find the right materials?
Is your planned extension a realistic proposition, or not financially viable?
Step Two – pros and cons of construction or renovation
There are no simple right or wrong answers, although there are some cost factors that should be considered. Generally speaking, it costs more to add to or extend to an existing structure, because the renovations will have to be tailor made for your specific home.
In contrast, a project home is purpose-designed to be relatively straight forward to build and an existing plan for essential components such as water pipes, electrics, insulation and structural support. That’s why a new home costs less to build per square metre than a renovation of an existing property.
The other consideration is to choose an architect to design a home for to your specific needs. Naturally, this will cost more than a project home, but you’ll end up with a unique home created around what you really want.
Step Three – can I afford it?
Obviously, there’s no hard and fast costs because there are so many variations involved, depending on what kind of renovation you choose. Some ballpark figures, according to Archicentre, the average renovation project in NSW (2010) were valued between $75,00 and $150,000. Adding an 80 sq. metre ground floor extension, which inclusions, ranged from $164,526 to $310,896.
Finally, always start your project with a firm budget and always seek competitive tenders from builders or any other suppliers – if you don’t you could be paying 50 – 100% more than necessary.
Step Four – find financial options
Assuming your renovation includes structural changes, you’ll need council approvals and permits to carry out the work. For this, you’ll need a construction loan, which is typically released as progressive amounts at stages throughout the build.
Small renovations are simpler, where the options include using your credit card or a personal loan.
If your home has increased in value since you purchased it, you can use the equity to increase your loan, based on the overall increase in value of the property. You can also add to your existing mortgage to cover the renovation cost. Beyond your bank there are now companies that specialise in loans to cover renovation costs.
Step Five – will I add value?
It’s very important to consider whether your renovation will add value to the property when you come to sell. If you don’t plan to sell for 10 years, or well into the future, you’re unlikely to over capitalise.
On the one hand, if you plan to sell within the next year or so, it’s essential to consider whether your renovations will appeal to the next prospective owners. Popular features for buyers include extra bedrooms, new kitchen and bathroom and landscaping.
Also consider just how much extra your house will really be worth as a result of your planned changes. Look at other properties for sale in your area and compare their features with your home. If you are planning to spend $200,000 for a construction on features that might add just $100,000 in value, you should re-think your renovation strategy.