Renovations and upgrades can significantly increase the value of your home. The trick is not to overspend if you want to make a profit.


1. Set a strict budget
Before you get too excited about how much a renovation will add to the value of your house, work out how much you can afford to spend. You’ll only pocket that gain when you finish your renovation and actually sell your home. Between now and then, you have to meet higher loan repayments if you redraw on your mortgage or take out a new loan to fund the planned extension.

2. Don’t overcapitalise
Overcapitalising is when you pay more for the house (purchase price plus renovation costs) than what you can sell it for in the end. To avoid overcapitalising you need to know what the market wants, and how much they’re willing to pay for it.

Predicting the value of your property after renovations is a tricky business. Get a couple of agents to come and value your house. Ask them what you can do to improve the price and what it could be worth after the planned renovations. As a guide, you can find out median property prices and what recent sales fetched at www.homepriceguide.com.au. 

3. Add real value
Renovations such as building a family room, installing a new kitchen, putting in an ensuite or creating an extra bedroom can be real value-adders. These types of additions often add more to the value of a property than what they cost as they’re generally the sort of features today’s buyers are looking for in a house. But a pool, for example, can end up costing a lot more than the value it brings.

Think about who you’re targeting and what they want. First home buyers are usually satisfied with basic cosmetic improvements; families are after safety and maximum space; while professional couples or empty nesters prefer low-maintenance and small backyards. Decide which renovations are worth doing and will reward you with a higher sale price.

4. The right firm for the job
Once you know what you want to do, you must decide if you need an architect or only a builder. As a general guide, builders will only build to plans you supply, while architects will draw up plans for your renovation and then oversee the building work as well. When you are choosing a company, try to get at least three written quotes. Give each company the same information to make sure you’re comparing apples with apples. Getting a price that includes the work and all of the materials to be used is absolutely essential.

5. Understand the contract
Make sure you read the contract with your builder and understand it from start to end. It must state exactly what the builder’s going to do, the total contract price (including what factors can affect it) and when work will start and finish. Also make sure you check that the builder is appropriately insured to cover mistakes and incomplete work. Don’t pay too much as a deposit. If the work costs up to $20,000, then the maximum deposit you should be asked to pay is 10 per cent of the cost. If it’s more than $20,000, five per cent is the maximum amount.