I’ve seen this story play out a hundred times in the last couple of years: First home is great, then come the children and the walls start moving in like that scene from Star Wars. The house just isn’t big enough anymore and it’s time for a change. The kitchen needs work, you need another bathroom, and if you moved that wall a bit you could create another room – voila, a home that’s fit for purpose for your growing family.
Renovations cost twice as much as you think, and they take 4 times as long to complete – it’s true, try it out! When I tell people this, they never believe me. I’m almost always right, but I really rather I wasn’t. Renovations cost way too much – It’s all the work that comes up after the work has already started that’s the issue. Financially speaking, renovations are unpredictable and that’s why the banks often have very onerous conditions around funding them.
A few times per week I get this call though: ‘We need to borrow some money to renovate’. ‘Great’, I say. ‘How much?’ The next part of the conversation goes almost the same every single time. So, I go make a cup of tea and pick up again when they start talking about how much it’s going to cost. ‘We figure it will cost around $150k’. At this point is when I always think (and sometimes say, with an Aussie accent) ‘You’re dreamin’ mate!’
So after the initial concept plans are drawn up, the builders are called to quote the job, funnily enough, it’s twice the price. The very next week the property hunt starts again, and on and on they go! Sound familiar?Don’t get me wrong, renovations are almost a right of passage for the kiwi homeowner, but when’s it better to just pull the pin on that bad boy, call up the agent, and get it on the market?
Here are some questions to ask:
- How many years will the renovations buy you in your current home?
- Are you renovating to ‘add value’, or to make it ‘fit for purpose’?
- Can you buy a property that already exists the way you want it, which is ready to go right now? Have you based this calculation on what you think it will cost to renovate or, twice what you think it would cost (do the later!)?
- What would happen if there was a budget blow-out halfway through the build – could you cope?
Now you may be picking up I’m not a fan of renovations. I’ve seen far too many people go down this path and get into trouble – financially, in their business, in their relationships and with their bank. It’s ironic that being financially conservative ultimately puts you in this position too.
In fact, you wouldn’t actually be in this position if it weren’t for two inconvenient truths about yourself.
1 – you should have bought a bigger home to start with or…
2 – you should be happy with what you have.
That’s a bit harsh so sorry! When you were looking at properties though way back when you purchased, you likely had an option to purchase something a bit bigger/better than what you actually needed at the time, but you didn’t do it. You wanted a ‘safer’ option that was more affordable. Well, now you know, conservatism is frickin expensive!
If your kids have a room each and they don’t have to share, awesome. If the roof doesn’t leak and you’re not dying by living in there, terrific. We all have our first world problems, but forcing a 3 bedroom, single level home into becoming a double floor, 4 bedroom home with a pool is not likely the most efficient thing you can do with your time.
Go on, call your local agent!