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Renovating

By Brodie Gilbert

Renovating

Renovating is an option for homeowners who may prefer to alter parts of their current house or investment property for a range of reasons. This may be to add a room, increase property value by redoing a bathroom or kitchen, or simply to keep the property in good condition and attract more rent. There are a number of reasons why property owners may choose to renovate.

 Financing can aid with renovations by allowing the property owner the capital needed to complete the renovation. This may be done by refinancing current debts, getting a second mortgage on the property, pulling equity out of another property or a number of other avenues.

Renovating the family home

The family home is traditionally the only asset most homeowners will choose to renovate. The main reasons for this being; wet areas need a facelift, adding a second or third bathroom, knocking out internal walls to create an open plan living space, or the owners want a pool or a back-deck area for those hot summer days. The reasons are endless, and the requirements of the family drive the renovation.

Flipping

Flipping is your real-life version of The Block, on a much smaller scale and without the Mitre 10 sponsorship dollars. An investor generally finds a property that is run down but in an attractive area. They generally purchase the property for what land price would be and as long as the general structure of the house is in good condition, they renovate and upon completion sell the house, hopefully at a profit. They take the profits and continue to do the same thing again and again.

Investment

 Quite similarly to renovating the family home, investors revamp certain areas or make additions to their rental properties. The reasons for this however are a little different. The main reason is to present their property as superior to one’s around it. In the case that the tenant is already in the property, the owner may ask for increased rent or if the property is not tenanted, it may attract a larger market which generally will allow the owners to demand higher rent. There may be both income producing and tax reducing benefits to renovating investment properties. This is something that would need to be discussed with an accountant.

 Where Brokers Can Help

There are a number of ways finance brokers can help with renovations as there are a few things that should be considered. If there is enough equity in the property it may be possible to draw this out to complete the renovation. This can be done several different ways and the broker will know the most appropriate way for each client’s situation. Some property owners only look at what the property value may be once the renovation is complete. Where there is not a lot of equity this can be a problem as most lenders will only release equity based on the value of the property as it is before the renovation.This may mean the owner must fund the renovation, then get a valuer out to property on completion. 

There are other options which won’t leave the property owner out of pocket during the process and a broker will be able to provide these options. In the case the renovation requires structural changes, lenders may require plans, contracts and council approvals before releasing any funds. As with all of these options an experienced finance broker will know how to best approach each situation looking both at the immediate requirements and long-term objectives.

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