Renovators need to keep up with the Joneses

Renovators who want to avoid over-capitalising should keep an eye on the neighbours, according to Grow Consulting Group

But renovations shouldn't cost more than $100,000 for a house or $50,000 for a unit.

Ayda Shabanzadeh, managing director of the Brisbane-based Grow property investment consultancy, said renovations could cause a property investor to either make or lose money. Which it would be depended on the type of property, its location and the nature of the upgrade.

"Try not to over-extend on upgrades, unless you're in a suburb where the buyers will bear it," Shabanzadeh said.

"To avoid overcapitalisation, keep an eye on the neighbours. For example, if everyone else has double lock-up car accommodation, then you'd best have the same."

She said investors with a limited budget should focus on simple changes, such as a new coat of paint and new floor coverings, followed by larger scale renovations of kitchens and bathrooms.

According to Shabanzadeh, if an investor has $10,000 to spend on renovations, he or she should consider internal painting, upgrading appliances, a small refurbishment of the kitchen and bathroom including replacing the sink and cabinet handles; and for houses, tidying the garden and updating the letter box and house numbers.

"On the other hand, if you have $20,000 to spend on renovating a house or unit, as well as the earlier recommendations, I would suggest a new front door, replacing blinds and carpets for a more modern choice, installing a new toilet and tiles in the bathroom, adding spilt-system air conditioning and insulation, and an external paint or render," she said. "For houses, consider landscaping if appropriate."

She said house owners could spend up to $100,000 on renovations, by adding a deck, replacing flooring and lighting, adding an extra room, upgrading finishes and even raising the house to add another level.

"Investors of units, however, would be ill-advised to spend more than $50,000 on renovations," she said. "This will only result in overcapitalisation, and it's unlikely the investor will recoup the costs."

She suggests investors obtain an independent valuation of their property before starting the renovation, and again on completion.

"While there are never any guarantees how much a home may appreciate in value from a renovation, a home spruce-up will present the property in its best light, potentially attracting buyers down the track who are willing to offer a premium price," she said.

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