The prime goal of any renovation is to increase the value of your equity, even in a flat market. The latest CoreLogic RP Data show that the property boom in key markets like Sydney and Melbourne is slowing down (as of 1 February 2016), so the goal for anyone investing in real estate at the moment is to increase capital growth. Once the bank re-values your newly renovated property, the paper profits that come from a renovation can be used to help fund any negative cash flow. In the same vein, undertaking considered renovations will prevent maintenance in the future, giving you years of hassle-free annuity income.
If the renovations are carried out for the right budget and without over-capitalising, you can make tens of thousands of dollars in equity in the first year alone. It can be as simple as new paint and new carpet, or it can be as complex as a complete restoration, with an extra story, new kitchen or bathrooms.
However, just because you can afford to renovate doesn’t make it the right decision. Renovations, particularly complete restorations, are a big undertaking. Living in a house under construction takes its toll, as do the costs of various materials, tradespeople and council approval.
In summary, consider the following pros and cons before committing your time and money:
| PROS | CONS |
| Can increase resale value if done well | Spend too much money, and you won’t get a positive return on your investment (i.e. you’ll lose money!) |
| Delivers the home you’ve always dreamed of | You have to move out of the home while work is being completed, or live in dust! |
| Minimises maintenance cost over time | |
| Avoids the cost of relocating because you’ve outgrown your property (or just got sick of it) |