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.
It’s amazing the difference a new coat of paint can make to a property. If the previous owners didn’t have the time or inclination to spruce up the house in order to get the best sale price possible, chances are by the time you’re done with it you’ll have saved yourself thousands.
Cosmetic elements include everything that is relatively easy to change around the home. Painting interiors and exteriors, changing light fittings, polishing floorboards or laying new tiles or carpet, changing curtains and blinds, replacing handles on doors and cupboards, landscaping the gardens and resurfacing the driveway can make a major difference to the overall look and feel of your home and help increase your equity.
If all of these things have already been done to the house you’re looking at buying, it’s likely you’ll be paying top dollar. There are huge savings to be had by buying a structurally solid home with older interiors and finishes in need of a facelift. Location is also key, so make sure your shabby property is in a relatively well presented suburb.
If you have a vision, you can get to work doing most of these cosmetic changes yourself or bring in the professionals. Be sure that you’re confident with the jobs you decide to do yourself or you could end up paying more to get them fixed down the track.
Laying your own floorboards, for example, could save you plenty of money in labour costs, but if they’re not laid correctly and end up looking amateurish, you’ll have to pay to get them re-laid or jeopardise the look and value of your house.
There are some jobs that you just shouldn’t do yourself. Unless you have a trade, don’t even think about doing your own electrical work (it’s illegal, by the way). Other jobs such as painting are quite simple once you’ve done your homework, purchased all the right equipment and maybe taken advantage of a free weekend workshop at your local hardware store.
The appearance of the house is not your only concern when looking for a renovator. You should also pay attention to the function of the house.
Renovating a bathroom or an old kitchen is almost a must for aspiring renovators as cosmetic changes to these rooms can often deliver the biggest bang for your buck. If you can work with the existing floorplan and plumbing, you can save thousands of dollars by making upgrades that give maximum impact for minimum spend.
Repaint or replace discoloured sinks or baths using specialist products, or find quality used goods on second-hand sites. Change the cabinet fronts on doors and drawers and don’t be afraid to consider vinyl when it comes to flooring and benchtops. Vinyl products have come a long way and can do an incredible job emulating the look of granite and timber.
Seeing potential in a home’s street appeal is also a great way to add value. A coat of paint, a new balustrade, a coloured front door, a re-gravelled driveway and some well-placed pots and plants can make the world of difference.
Just remember, when it comes to making cosmetic improvements to your property you don’t want to spend too little or too much. Too little will almost always look cheap and might prove to be false economy if things need constant repair and replacement.
Too much will blow your budget and may result in overcapitalising on your home (spending more money on improvements than what the home would be worth).
A property that has "good bones" can minimise the cost of your renovation. You want a fixer-upper that still has solid foundations, roofing and walls. Check for evidence of pest infection, crumbling plaster or concrete, and cracks in walls.
It is absolutely vital to put your x-ray glasses on and find out what hidden or structural costs might be attached to the home you’re interested in buying.
Ideally, you want to be able to see the result of any money you end up spending on your home rather than fixing costly elements that should be a given. Big ticket items to look out for include restumping, repairs to retaining walls, replacing the roof and building new rooms.
A building inspection in an absolute must when it comes to buying a home and helping to uncover any structural issues. Mould, wood rot, pest damage and illegal building can be difficult to recognise.
A licensed building inspector with full indemnity insurance should be able to assess the ground levels, paving, floors, walls and roof and discover if there is any building movement or water ingress. Bowed walls, cracks and floors that are not level are all signs there are serious structural problems with a property that will likely cost thousands of dollars to fix.
If that’s the case, and you are still interested in buying the property, this can give you huge negotiating power. Not many people would want to go ahead with purchasing a property requiring structural work, so it’s likely you could get a good price. But be warned.
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.
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