As loans start getting a little harder to come by and the banks erect increasing serviceability barriers, many property investors are reflecting on other ways to keep their portfolio’s cash flowing.
And let’s not forget vendors looking to sell their homes in a slower market, suddenly having to get a bit more creative in a bid to increase the chance of a quick and profitable transaction.
One of the obvious ways you can raise the stakes of a successful property deal or shore up yields as an investor, whilst at the same time manufacturing additional equity, is through renovations to an existing asset.
Not only will this provide an opportunity to increase your asking rent and thereby your income (good for future serviceability), it will also see you gain extra depreciation benefits at tax time and of course, further leveraging power with lenders.
Unfortunately, the nature of the property and construction sector is such that where opportunity presents, so the profiteers follow.
Now I’m all for making a profit. But not when unscrupulous means are employed to have people throw unnecessarily large wads of cashflow at overpriced goods and services.
So I was interested to come across research from ServiceSeeking.com.au, which revealed how much renovations should cost, on average, depending on where your investment property is located.
No surprises for Sydney!
The record breaking residential property juggernaut that is inner city Sydney continues to reign as the most expensive place in which to do anything. Including home improvements it would seem.
According to the research, based on over 52,000 quotes obtained from local tradespeople, Harbour City homeowners are paying an average $64.09 per hour for renovations, reflecting a cost increase of 8.11 per cent in twelve months.
On the other hand, Brisbane and Melbourne are apparently the cheapest locations to get your hands dirty with some DIY, at $57.58 and $58.91 respectively. These figures represent an increase of just 0.10 per cent and 0.63 per cent since the same time last year.
As with everything else to do with the ups and downs of our property markets, ServiceSeeking.com.au CEO Jeremy Levitt told TheNewDaily that trade prices are driven by supply and demand.
“NSW had a tradie surge because we’re still seeing high property prices. While they’ve dropped a little bit, it is still pretty strong so there is still a bubble even though it’s cooling.”
On the flipside Victoria, where it’s relatively easy to source a builder, sparky, plumber and painter, has always been one of the cheapest places in which to undertake a reno project for profit.
Another reason Sydneysiders are paying more for property improvements is that it’s impossible to secure a residence within cooee of the CBD for less than a cool million…unless it’s a renovator’s delight!
And by renovator’s delight, I mean virtually condemnable. A weekend article in The Daily Telegraph revealed that only 35 houses are for sale in this price range within 10 kilometres of the city centre.
Most of them are boarded up, collapsing and require up to $400,000 in repairs to make them livable again.
Keep an eye on costs
You can see the full list of average costs to employ various trades across Sydney, Melbourne, Brisbane and Perth here.
The take home message for investors in particular though, is to make sure you conduct thorough research into the types of works that will increase your property’s worth, and before picking up a hammer…
- Consult industry experts (agents and/or property managers) to gauge what will sell to your intended market.
- Draw up a schedule of works and cost it accordingly by obtaining quotes from local tradespeople.
- Have a clear contingency, timeline and budget in place based on your carefully undertaken calculations.
If you’re contemplating a renovation project, why not speak with the team here at Trilogy Funding? We can assist in freeing up your existing equity or structuring any necessary finance to successfully transform your property.
Click here now to arrange a chat with one of our experienced mortgage brokers and find out how we can put you ahead of the property game.