If you are struggling to afford the high price of a property in Australia’s capital cities, it can be tempting to save money up front by purchasing a “fixer-upper”.
These are homes that need to be repaired, redecorated, or redesigned, but come at a sharply discounted price, often allowing you to buy in a better area.
Over the past decade, buying a run-down or dated home and doing it up has become something of a fascination for Australians, as shown by the runaway success of home renovation shows such as The Block and House Rules.
But despite our love of these programs, most people still hesitate to take the plunge themselves, either because they don’t want the hassle or because they worry that the costs will outweigh the upfront savings.
This leads us to a very important question if you are considering a fixer-upper.
Well, this is a bit like asking - how long is a piece of string?
According to the latest Housing Industry Association (HIA) Renovations Roundup Report, approximately 50% of all renovations in Australia are valued between $40,000 and $200,000.
That leaves 50% that are outside this range!
Most of the cost is labour, and the next biggest expense is materials.
Renovation costs vary enormously between projects, depending upon a host of factors like size of the home, how much of the home you want to renovate, what exact changes you want to make, and more.
The best way to work out the cost of your fixer-upper renovations is to add up the individual parts you plan to renovate to come up with a renovation budget.
According to trade services marketplace ServiceSeeking, the average cost of common home renovation jobs is as follows.
|Home Renovation Task||Typical Quoted Prices|
|Interior house painting||$6,000|
If you are planning to significantly redesign the home, you may need design services including an architect, certifier, engineer and others. The bulk of the design expense, however, will be the architect.
Residential architects charge a range of prices for their services. Some architects charge as little as $60 per hour, although a more typical price is $125-$175. This is one area where quality may be more important than price because the design is ultimately going to determine how much you succeed in improving the property. The number of hours you will require depends upon the complexity of the job and the scope of the works. As a bonus, most architects will give you an estimate of how much the planned works are likely to cost and help you get quotes from a few builders.
According to the HIA, among the renovations conducted in 2016/2017 (the most recent numbers available): 53% were repairs/maintenance, 14% were kitchens, 10% were bathrooms and 8% were external.
Let’s look at the cost of renovating each of these rooms individually.
According to home design website Houzz, as well as being the most common room to renovate, kitchens were also the most expensive. Larger kitchens, defined as those of 10sqm or larger, had a median spend of $20,000. For smaller ones, it was $12,000. Repeat and first-time homebuyers were more likely to renovate their kitchens than long-term homeowners, so many people are obviously buying fixer-uppers with the plan of updating the kitchen.
Nothing says luxury like a brand new bathroom. For larger bathrooms of 5sqm or more, the median spend was $13,000, while for smaller ones it was a more affordable $8,000.
Now the costs per square metre start to fall dramatically as we come to rooms with no plumbing and little inbuilt furniture. For a living room of 20sqm or more, it costs about $3,500 on average, while it was $3,000 for smaller rooms.
For a large laundry of 5sqm or more, the median cost is $3,000, while for smaller laundries it is about $2,000.
Bedrooms are the cheapest rooms to renovate, costing only about $1,000 on average, regardless of size. Presumably, most people renovate a bedroom with a fresh coat of paint and some new carpet or wardrobe so the cost isn’t exorbitant.
If you are renovating a lot of rooms in your fixer-upper or doing building work, you are going to be up for a large sum and may need to look at financing your renovation.
Thankfully, there is a special type of loan designed specifically for building or renovating a home. It is called a construction home loan, sometimes referred to as a renovation loan.
Construction loans differ from regular home loans because you are approved for the whole amount but then draw it down in stages instead of all at once.
As each stage of your renovation is completed, the lender arranges an inspection and then pays the builder for that work.
This means that you don’t have to hand all your money over the builder at the start, with the credit risk that involves. It also protects the lender at the same time.
Loans.com.au offers super-low interest rate construction loans which are perfect for people undertaking renovations.
View our construction loans for more details about how to apply for a construction loan and how our construction loan works.
Ultimately, only you can decide if it’s worth buying a fixer-upper. According to Houzz, approximately 48% of people who renovated their homes felt they had added more value to the home than the cost of the renovations. That means that most people did not feel that they had made, or saved, money through renovation. Having said that, renovation isn’t just about making money, it is about what the home is worth to you.
Renovating a home gives you the opportunity to tailor it to your desires and tastes and that is hard to put a dollar value on.