At Reside Real Estate, we understand that finding the perfect home can be a daunting task. Should you buy a home that’s already renovated and move straight in, or should you take on the challenge of renovating your own home? While the latter option may seem like a cost-effective choice, it’s not without its risks. In this blog, we will explore the risks and rewards of renovating your own home versus buying an already renovated home and moving straight in.
uncertain cost of construction
One of the biggest risks of renovating a home is the uncertain cost and timelines of construction. Renovations can easily go over budget, and unforeseen issues can arise during the renovation process. The cost of materials and labor can also increase unexpectedly, making it difficult to plan for a specific budget. This uncertainty can be financially stressful and can make the renovation process longer than anticipated.
Rising interest rates on both the property and the construction finance
Another risk to consider is rising interest rates on both the property (assuming you have a mortgage) and the construction finance. This can impact the total cost of the renovation, making it more expensive than anticipated. It’s important to consider this risk when planning for a renovation, as it can have a significant impact on your finances.
Lenders not accepting variable price (or cost plus) building contracts
Many builders have gone bankrupt trying to honour fixed price building contracts – and not just smaller builders. Recent press about large volume builders collapsing like Probuild, Condev Construction, Pivotal Homes, Waterford Homes, Privium, Home Innovation Builders, Mahercorp and Norris Construction Group have sent alarm bells ringing for the entire construction industry. The Porter Davis collapse left around 1500 families with unfinished homes and around 400 staff members now unemployed.
If your builder is insolvent or you suspect the builder may be insolvent, read the Victorian Building Authority PDF via the link here.
Duration of construction can easily blowout
The duration of the construction process can also be a risk when renovating a home. Renovations can easily blow out, and this can be stressful for homeowners. Living in a construction zone can be inconvenient, and it’s important to consider the time and effort required to complete a renovation.
Construction material supply is very tight and uncertain
In recent times, construction material supply has been very tight and uncertain due to various factors like the pandemic and natural disasters. This can lead to delays and increased costs during the renovation process.
Builders are hard to find – or busy
Finding the right builders can also be a challenge when renovating a home. It can be difficult to find reliable and experienced workers who can complete the renovation to a high standard. This can lead to delays and additional costs during the renovation process.
Cost overruns are common
Finally, cost overruns are common when renovating a home. As previously mentioned, unexpected issues can arise during the renovation process, and the cost of materials and labor can increase unexpectedly. It’s important to budget for these potential cost overruns and have a contingency plan in place.
Benefits of renovating your home
Despite all of the current difficulties owners face when deciding to renovate their own home or buy a renovated home, there are some great reasons to renovate if you can balance the risks.
Remain in a location you love
If your home is in a great location for your lifestyle you may want to consider factors like what you would be giving up if you moved. You may have a great relationship with your neighbours, the kids can walk to school or the train station and have easy access to amenities.
You may be able to build a new home with every box ticked in the location you love
If you can get everything you need in a new or renovated home on the current site and you intend to reside there for many years even if you over-capitalize, this may be a good option. Just keep in mind that from the planning stage to the point that you actually move in can take a couple of years and you may need to move into a rental property during the construction process.
BENEFITS OF BUYING A FULLY RENOVATED HOME OR A HOME THAT REQUIRES COSMETIC UPDATES
Buying a home that is fully renovated removes the risks of cost blowouts. The price you pay is a fixed cost. The stamp duty you pay on the final purchase price is a fixed cost. You have a fixed timeframe to move into your new home as the settlement date is agreed on the contract of sale so this can bring your lifestyle forward by a couple of years.
See the State Revenue Office Duty Calculator here.
If the home you purchase needs some cosmetic updates, you can usually choose to do the updates at any time after you move in and it is far less intrusive than a full renovation.
If you do want to move, should you sell first or buy first?
This is one of the questions I get asked the most. After a couple of decades helping people with this very problem, I have distilled the solution into a four step process that helps people buy and sell or sell and buy while reducing the risk. It is a safer way to transition and it will give you an action plan. Feel free to contact me if this is of some interest to you.
In conclusion, renovating a home can be a challenging and risky process. While it may seem like a cost-effective choice, it’s important to consider the risks involved. Buying an already renovated home and moving straight in can be a more straightforward and stress-free option for homeowners. At Reside Real Estate, we understand the importance of finding the perfect home, and we’re here to help you make an informed decision that’s right for you.
