As Kiwi as a BBQ in the rain, wearing your gumboots inside and sausage sizzles at Mitre 10, renovating a doer-upper is almost pre-ordained in our Kiwi DNA. But is it worth it?
Property is always a great investment in NZ. Since 2012, house prices have risen 70%. While that’s not great news if you’re thinking about buying your first home, it’s excellent when you realise that your $300,000 home could be worth $510,000 in six years! Is it worth buying a house and doing it up? Will you get the financial gains you want?
First steps: The Bright line test
The government has extended the Bright Line test. This policy that means property purchased and resold within two years that hasn’t been used as a primary residence for the owners -may attract tax on the capital gain. If you are living in the property or if you are intending to own the house for more than two years, it’s not an issue.
Can you afford this?
Buying a home is expensive. Renovating can be expensive too, on top of an existing mortgage. How will you fund the renovations? Will you top up your mortgage, or is it already factored in? What if interest rates increase- have you got sufficient room to breathe in your budget?
Getting some work done around the house?
Don't put up with your bank micro-managing your finances while you do. A Home Improvements loan through Harmoney could give you the money you need straight away, without the need for quotes from tradies first.
Do you DIY?
DIY is a great way to save money on tradespeople. Many tasks, such as painting and landscaping don’t need a lot of skill but patience and an ability to actually finish a project. That said, qualified painters will produce a better quality finish than most Jack-of-all-trades and in half the time. So which tasks should you attempt, and which should you definitely leave to the professionals?
Plumbing is not something that you want to attempt unless you know what you’re doing. While unblocking a pipe or replacing a washer is a simple task, installation of a new bathroom or kitchen needs to be left to the professionals. Water will always find a way to escape and if your installation is even the tiniest bit insecure, the water damage will start immediately. Over time, water leaks can be catastrophic and create the need for huge repairs. Get in the pros.
Similarly, electrical work needs to be completed by a registered electrician. Not only will they know the rules and laws (how far do gas cylinders need to be installed from a source of electricity?) but they will carry out repairs and installations safely. All electrical work must be signed off with a code of compliance.
If you will be able to finish it in a certain timeframe, and there’s no strict end date to the project, then it’s OK. DIY does have a tendency to expand to fit the available maximum time. So as long as the family is e happy to live in a half-built bombsite with no running water, no problems!
Will the cost of repairs and improvements result in an increase in value?
Sometimes, small changes can make a big impact in terms of final house price. Other times, not so much. For instance, anything that requires the council to issue a building permit has to be thoroughly considered before embarking upon. Any extension to the home, additions, large sheds, retaining walls or decks may be subject to a building permit which adds time and money to the project.
If you intend to subdivide, the legal and infrastructure costs can easily reach $50,000 before the foundations are even laid.
So what repairs are worth doing?
Painting is a simple and comparatively cheap way to give your house an instant facelift and tidy up a worn property. Keep the colours neutral and you’ve added value to your home already. Another quick and cheap value-adder is doing up the entryway. A lick of paint on the front fence, replace that battered mailbox, a thorough gardening in the front yard, a new/ refreshed front door and you have impressed potential buyers before they even enter the house.
Kitchens can turn into an expensive and fiddly renovation, which is why potential buyers like to see brand new modern kitchens in their future home- saves them the hassle. These can be prone to budget blow-outs so make sure you know what you’re doing to avoid any hidden surprises.
Insulation, if not already in place, will soon become essential when purchasing a home. From 2019, landlords must legally provide insulated homes, so anyone wanting to buy a rental property will expect this is already complete. A heating source such a heat pump or fire is also an investment that is worth it, especially a simple back to back inverter unit, which is cheaper now than ever before.
Installation of a deck is not worth it. Decking is expensive, and the construction may require sign-off by the council. You’re better off tidying up the backyard and cleaning the patio using a water blaster. A deck will not make you as much money as you spend in constructing it.
Also, be consistent. There is not much to be gained from just doing up a few rooms- do the whole lot. One or two rooms not completed will negatively affect the whole look of the place. So if you’re going to do up a home, commit to it and do the whole thing!
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