Here are some ideas on managing renovating spending from Paul Eadon of Eadon Home Loans.

Strategic spending, rather than splurging, is the safest way to ensure you reap the best possible returns from your next renovation project.

I’m sure you’ve heard it all before: ’You only get out what you put in’. It’s a common phrase and one that carries great merit in most circumstances. But does it also ring true with property investment and home renovations?
You might be surprised to hear this, but no it doesn’t – or at least not always.

Simply throwing thousands of dollars at your next renovation will not guarantee you the best return. In fact, you may end up losing money when the time comes to sell.

To help you nail your next renovation project here are a few ways to ensure you get the most out of your spend.

Set a budget
The most important element to any successful renovation is setting a realistic and achievable budget from the outset of your project.

Your budget should include materials costs, labour fees and any additional expenses such as pest and building inspections.

Be sure to stow away a few extra dollars to be used as an emergency slush fund should you encounter any problems along the way.

Plan ahead and stay focused
Failing to plan is planning to fail. Embarking on a renovation without a clear list of goals and objectives is the best way to send your bills soaring. If you are renovating the family home to sell or adopting the ’buy, touch up and sell’ strategy, you will need to assess the home and determine which areas of the house require the most work.

Once you have developed a renovation ’mind map’, be sure to stick to it! Most renovators go astray in the midst of renovation as they become too emotionally involved with the project and forget the overarching goal: achieving the best possible sales price.

Spend strategically if investing
Overcapitalising is the most common mistake made by investors and is often due to reckless or miscalculated spending.

Some rooms, such as the kitchen, bedroom and bathroom, are more likely to return higher profits than others and so these should be your prime focus. Ironically, these rooms are often the easiest to overcapitalise on.

Every dollar you put into the property needs to be solely to increase your profits. To put it simply, only spend what you need. The most lavish bathroom fixtures, door handles or kitchen tops may look amazing in your family home but are not necessary for a property you intend to sell.

Finally, research your local market and get a feel for the local demographics and housing expectations. If a majority of houses in the local market do not have a backyard swimming pool, then neither should yours. Paying tens of thousands of dollars for an indoor spa bath or outdoor lap pool will not guarantee a higher sale price if the market does not call for it.

Remember, you cannot expect the buyer to compensate for your overzealous spending!

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