Today I want to talk about a boring topic made interesting. So I’m going to be talking about money today and the cost of renovating. The reason I got thinking about this is because I went to see a client today, and he’s brought a property in Holland Park West.
Now it’s an investment property, so it was never going to be an amazing fancy renovation, but his expectation for the spend on the renovation was around $30,000 or $40,000. So for that, he expected he was going to do the exterior, the kitchen, the bathroom, flooring, painting outside and painting inside.
So I went there with my builder who is going to do the work for him, and we quickly worked out that the whole renovation, even as a basic renovation, nothing fancy at all, given the state of the house and the size of the house, was going to cost him closer to $60,000 or $65,000.
So imagine if he’d just started that renovation and thought, “Right, I’m going to get the painters in. Right, I’m going to do this.” just bang, bang, bang and put some basic figures together and then realised oh, this has got this problem, this has got that problem, pipes that we need to replace, this has got an electrical problem.
So anyway, we were able to ascertain that the renovation was going to cost a lot more than he had anticipated. In fact, almost double the lower figure of what he had thought. So, knowing that has meant that we (myself and my builder) are able to advise my client on what they should be doing to this property as opposed to what they thought they should be able to do.
I’ve worked on a lot of properties like this mainly with investors with a smaller budget. I know it’s not a smaller budget, but in the scheme of things, it is a small budget. So, my advice for this guy today, and in general, is always to refocus your money. Don’t spread your money too thin.
So I’m talking to him about just doing your number one area – the kitchen in this case – the kitchen and living, then the outside, then the bathroom and obviously painting all the other rooms and doing the floors and what have you throughout.
But I just wanted to point out, I know it’s a boring topic, money is great when we make it, but when you’re talking about working out the numbers, that’s not the fun bit. It’s definitely not the fun bit for me. It may not be the fun bit for you; I don’t know. A lot of people do find fun in numbers, which is good that there are people like that out there. It is important!
It’s really important to know the numbers before you start because if you start that renovation and then you spend your $30,000, then you run out and you’ve got a half renovated house. So it’s much better to upfront know your numbers. Talk to someone like me, talk to a builder like my builder. Talk to someone who knows the real costs.
This is not talking about, “We’re going to paint the inside of the house. Right – there’s $6000. We’re going to sand the floors – there’s another $5000. We’re going to do carpet, and there’s another $2500”, whatever those numbers might be. Because they might be right and they might be not.
And just to give you an example, the painting on the outside of this house, (it’s an older chamfer board style house), the painting for the exterior only including the prep, is going to be $15,000 to $18,000. That’s almost half his original budget so that could have really been a disaster for him.
My point is know what your costs are before you begin. Know what the real costs are. Don’t assume that you know. You don’t know what you don’t know sometimes. That’s why overspending happens. It’s not because they went, “Oh, we’re going to have a fancy this or a fancy that.” It’s because when they went through the renovation they probably didn’t plan it out or they probably didn’t know the real costs before they began.
That’s why using an expert like myself or a builder or someone who’s in the trade is key to your success in not overcapitalizing. And I see this all the time. The fee that I charge, people overspend that two or three times over, you know what I mean?
Anyway, it’s pretty interesting stuff. Have a great weekend. I’d love to help you with a renovation if you’re in the throes of planning one. Whether it’s a lower budget one like the one I went to today or a higher value property, it’s always important to get your numbers right before you pick up a paintbrush.