Weighing up whether to renovate or sell

It’s easy to be inspired by the super-profitable renovations and dream rebuilds we see on TV.

In real life, the picture can be a little different. The key to achieving your particular dream home is to arm yourself with the comparative costs for both selling and buying, and renovating, with a clear understanding of what’s possible on the funds you can raise – and afford to pay off. So, let’s take a look at some things you need to consider.

Weighing up whether to renovate or sell

Know your budget limits

Calculating how much you can afford to spend involves getting a current valuation of your property. Once you know your existing equity, you’ll have a clear picture of what you can afford to borrow and spend on a renovation or a new home. Both options often involve re-mortgaging, with the renovation needing an offset facility that allows you to draw on those funds.

When deciding on how much of your equity to use, you need to keep in mind the loan to value ratio (LVR) of your new loan amount. If your LVR is higher than 80% for your new loan, you may be required to pay lenders mortgage insurance on top of your already larger loan.

Comparing the costs of renovating and moving home

To get an accurate picture of whether renovating or moving would be the most economical solution for you, you will need to compare a few figures. These include the comparative costs of selling and buying something similar to your renovated property in your desired area.

Buying a new property means paying for conveyancing, stamp duty, marketing and agent and solicitor’s fees. While these costs haven’t risen a lot, the timeframe, costs of building materials and the labour needed for a renovation have. This makes it especially important to budget a renovation accurately, so you are able to compare these costs against buying a move in ready property, where everything has already been done.

The alternative scenarios you’ll need to consider include whether the home you want to create is realistically within your budget to buy or renovate, and if you could potentially end up overcapitalising.

Overcapitalisation is a consideration many would be renovators overlook but need to be aware of. This is when the cost of the renovation is more than the value added to the property. You may be happy with this if your aim is to create your forever home, but it may present financial challenges when the time comes to sell.

Again, research and accurate financial forecasts are important. You’ll need to consider the current value of your home, what it would potentially be worth when the renovation is complete and the price point of equivalent homes in your area.

Matching your renovation to your budget and timeframe

Homeowners choose the renovation route for lots of good reasons. Some may want to get a property ready to sell or to transform a loved but too small or dated home. While others may not be able to afford to buy another home that is suitable, or want to increase the rental value of an investment.

Whatever your reason for renovating, you need to remember that it probably won’t happen quickly or cheaply. This means proper planning and adding in some financial wiggle room, is vital for a realistic budget. This includes deciding on extras such as the quality of your fixtures, alternative accommodation, and employing a site manager or architect to organise trades, manage council approvals and manage the project budget.

There is a lot to weigh up before deciding between a renovation and property move. We’re happy to help you get the facts you need to make a fully informed decision and reduce any unexpected costs, so please get in touch to organise a chat.

Setting your renovation up for success

  • Set a budget

  • Consider what you can do yourself i.e., painting

  • Understand the feasibility and costs of your ideas

  • Employ trusted trades

  • Start any council approvals or apply for permits early

  • Speak to us about financing your renovation

Important: This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

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CFP® Dip FP
Authorised Representative 298494
Interprac Financial Planning Pty Ltd 

Darryl Jopling

Senior Adviser

I have worked in the financial services industry since 1982 and as a Financial Adviser since 1999.

I have worked for large Financial Planning businesses, Membership based organisations and looked after the financial planning needs of clients within an Accounting Practice before starting my own business.

I am married, have 4 older children and a grandson and I am keen golfer with mixed results like many .

I have been through many of the strategies I talk with clients about myself and with my family.

I have been through the journey of seeing my parents move into Aged care and negotiated the difficulties and pitfalls of understanding the system for them and this gives me an excellent insight into what is required to assist families at this difficult time.

In a previous roll I used to run retirement seminars looking at Centrelink and Retirement Incomes and how to make these work for you. I have helped many of my clients with Aged Care advice when their parents needed to move into Nursing Homes. For many clients I assist them with superannuation, building wealth and protecting their loved ones with insurance.

I am supported by his, Licensee, Interprac Financial Planning’s in-house resources and ongoing technical, systems and training.

I am committed to understanding your needs and identifying strategies and products to help you achieve your goals.

My guiding principle as an Adviser is to design plans which help to provide my clients with clarity of purpose and the opportunity to build a solid financial foundation.
I will take the time to listen, explain things clearly and keep you informed throughout the advice process.

My experience is complemented by professional qualifications including:

  • Certified Financial PlannerTM Professional
  • Diploma of Financial Planning

At Choice Financial Advice we work with you along the way on life’s journey.

Whether you are getting married, starting a family, embarking on the trip of a lifetime, planning to enjoy your years after work or assisting elderly parents with Aged Care and Nursing Home placements, we can help.