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When renovating a rental home, you don't want to spend more on a project that doesn’t deliver any returns – to your home or to your wallet. That's why it always pays to know which renovations add to home value and which don’t.
So how much does renovation add to home value? This depends on a number of factors, such as the location of your property, interior appeal and the condition of essential fixtures. No renter wants to move into a home only to fix things up that should have already been fixed.
Stop thinking like a homeowner and start planning like a salesperson.
Remember who these renovations are for.
A common misconception is that upgrading your home with expensive designer fittings such as a granite countertop or Italian floorboards will hike up the value of the house.
But 8 times out of 10, the deal-breaker will instead be the lack of crucial features of the house, leaving you out thousands of dollars.
Re-prioritise and renovate smart. Re-do the essentials before splurging on anything else and always weigh the pros and cons of simply repairing your property or improving it.
In this blog, we explore how much home upgrades payback (maybe even add a few more zeros to the asking price) and which renovations are best left off your list.
Top 6 Renovations That Add Value To Your Home
1) Loft conversion
Research conducted by Resi and Rightmove listings show that converting your loft into an additional living space increases your home value by 20 to 25%.
The purpose of the new living space significantly affects how much loft renovation adds to home value.
Abby Loft conversion experts state that the maximum value is gained by creating ‘the perfect self-contained sleeping space’ which is a bedroom with an ensuite.
However, if this doesn’t fit into your budget, a cost-effective option is to convert it into a home office, which will add 10% to the overall home value.
The starting price for a basic loft conversion is roughly $20,000. Building an en-suite as a replacement will cost you around $5,000 to $35,000, or even more depending on the level of luxury chosen.
The value addition from a loft conversion may vary from $80,000 to $150,000 depending on its new features..
2) Kitchen Upgrades
The kitchen is one of the central spaces in a home, in which most of the family spends their time. A well-fitted, easy-to-use kitchen equipped with modern essentials will rank your property quite high on the list.
Does a kitchen remodel actually increase your home value?
To get the biggest returns that your home can achieve, it is important to weigh the cost versus benefit ratio.
The size of the kitchen plays a huge role in the overall value addition. Building experts at Houseace state that remodelling costs may range from $18,000 for a small kitchen under 8 square metres and $60,000 for a large kitchen over 20 square metres.
But even a budget kitchen upgrade may be profitable if the added features compliment the rest of the highlights of the house.
The scale of renovation, the cost of building materials and the professional services hired further affect the ultimate value added to your home. According to Sydney Renovations Hire, a standard kitchen upgrade may cost you $35,000 and add an average of $20,000 to your home value. This gives you an ROI of 57%.
A full kitchen remodel may cost you a staggering $65,000 but add $40,000 to your home value, giving you an ROI of 62%.
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Here are 4 affordable kitchen renovations that add value to your home:
- If you reface and update the hardware of your cabinets, you’ll be forking out only 20 percent of the price of your new cabinets.
- A statement kitchen countertop that fits into your budget is always a winner. The starting price for a square slab of timber, engineered stone or bamboo is $500 while a square metre of laminate comes at a more wallet-friendly option of $150.
- Home owners generally spend a lot of time at the kitchen sink and so a brand new upgrade will definitely be appreciated. The average cost for an above counter basin will be $400. However if you're on a budget, a basic sink for $150 will do the trick as well.
- A kitchen with good lighting will draw the eye and set the tone for the look and feel of the place. From ceiling lights to recessed lights, a wide range of ambience options will easily transform any kitchen and cost you only 5 percent of your kitchen remodel budget.
3) Garden upgrades
A study by the AA proved that merely having a garden lifts a home’s value by 5 to 17 per cent depending on the property’s location. But a study done by Acorn Gardening revealed the numbers can be boosted even more with a few simple upgrades.
How much garden renovation adds to home value depends on which crucial need is addressed and which features are created for comfort and convenience.
A few garden upgrades that promise to pay off:
- A large, good quality shed or enclosed garage will add around $20,000 to the home value. Renters will love having a quaint little storage space for items that do not belong in the house.
- A patio may add around 12.4% to your home value and is estimated to have a 100% ROI when selling. A stunning patio increases curb appeal and offer a cosy alfresco space to sit back and relax.
- Adding a fence will not only give tenants a sense of privacy and security but will give shape and purpose to your property, making it much more attractive. This will increase the home value by 10 to 20%.
- If done right, landscaping can add an easy 24% to your home value and shoot up the demand for your property. Trimming the edges of your lawn neatly and adding a few colourful plants will do wonders for your home.
4) Bathroom upgrade
Does a bathroom remodel increase home value?
Similar to a kitchen, a bathroom’s upgraded amenities and overall appeal does wonders to the value of a home. A 2021 study by Remodeling magazine shows that the lesser expense invested on a remodel, the higher the return.
But how much does a bathroom renovation actually add to home value?
According to Collings, bathroom renovations have a recovery rate of 75%. A remodel that costs $20,000 may add a whopping $15,000 to the value of your property.
A mid-range bathroom remodel may cost you roughly $15,000 to $30,000, depending on the type of materials used and the size of the bathroom.
In comparison, an upscale bathroom remodel may cost you over $30,000, if done with premium materials and professional help.
5) Energy-saving improvements
Research shows that homes with high energy efficiency ratings are in greater demand, at higher price points.
A study by Science Direct found that there was a 2.4% price premium for homes with an energy rating of 6 stars, and a 9.4% price premium for a 7-star home.
This would have meant a value addition of roughly $18,000 to $72,000 to a home with a median house price of $773,000 in late 2019.
Here are the top 5 upgrades that promise a high energy rated home:
- Insulation: How much this renovation adds to home value depends on which home feature is insulated. According to Choice, a well-insulated roof can save up to 45% on heating and cooling. Wall insulation adds a further 20% to savings. For maximum energy saving, make sure that the roof and ceiling insulation has an R- value of 5.1 and the wall insulation an R-value of 2 8.
- Shading: A well-shaded home can block up to 90% of the sun's heat. Shade all windows that face north, east and west during summer or install pergolas, blinds or shutters.
- Draught sealing: Your power bill can be reduced by 25% if you prevent air leakage. Install fans and vents that close automatically and seal doorways with a draught stopper at the bottom of the frame.
- Appliances: If you're selling a furnished home, high rated everyday appliances will prevent water and energy wastage which the new owners will love. These include the Bosch Serie 6 Freestanding Dishwasher (4 out of 6 stars for energy efficiency) and the Asko Pro Wash 8kg Front Load Washing Machine (5 out of 5 stars).
- Solar panels: According to Ausbrite, homes with solar panels could sell up to 20% faster than homes without. Research done by the Real Estate Survey of Australia confirmed that over 85% of people found solar panels to add value to their homes.
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So how much do solar panels increase home value?
Each kilowatt of solar installed may boost your home value up by $6,000. A 5-kilowatt solar installation may boost the value of your home by $29,000.
Statistics show that solar panels generally add up to 3 to 4% to your home value. This means that if your home is worth $300,000, this number may be increased anywhere between $9,000 to $12,000. How much solar panels add to home value depends on the size of the installation. The more panels you add, the greater your home value will be.
6) Roof replacement
A new roof will always be appreciated by tenants and may add an average of $17,000 to your home value. According to Water Master, a roof renovation may boost your home value to anywhere between 15% to 40%!
But how much a roof renovation adds to home value really depends on what materials you’ll be using. Metal, although costly, lasts the longest for around 40 years. If you're on a budget, asphalt shingles may work for you.
Will asphalt shingle increase home value?
Asphalt shingle is not a common roofing material in Australia. However, this may work in your favour. Hampton-style homes are growing in popularity across Australia but one of its distinctive features is absent in most homes: an asphalt shingles roof.
Adding this feature to your property, will make it stand out from the rest, boosting resale value.
There are many types or asphalt shingle, however the cheapest by far is the Marathon Plus asphalt shingle, at $20 to $30 per square metre. It lasts for 20 to 30 years, making it a decent and cost-effective option.
Does a metal roof increase home value?
With low maintenance, better insulation for power bills and lower insurance premiums, a metal roof can add up to thousands of dollars to your resale value.
Installing a new metal roof may cost you around $50 to $70 per square metre. But if you're replacing an old roof and making repairs, it'll cost around $6,000 to $10,000 to replace a metal roof with Colorbond roofing.
Although it may be a bit costly, a metal roof may prove to be a sustainable option that pays off in the long run. It can last twice as long as asphalt and is energy efficient, helping save up to 40% on energy costs.
The roofing material boasts of long-life performance and is more suitable to the Australian climate: two factors that tenants are ready to pay for.
4 Cheap Renovations That Add Value To Your Home
If these upgrades don’t fit into your budget, there are a number of ways you can boost home value and rental yield yourself by doing the bare minimum. These upgrades take up little time and effort but can make a drastic difference to your home’s overall appeal.
Roll up your sleeves and get to work; you’ll love how much these little renovations add to home value!
- Paint -
A fresh coat of paint can instantly make your home look brand new. Make sure to use neutral colours (such as beige, green or other earth hues) to appeal to a larger pool of buyers. A fresh coat of paint usually increases a property's value by 5%. Make sure to use a professional painting contractor to do it for you if you’re not experienced with interior painting or exterior painting. There are lots of important and nuanced steps to take when it comes to making your newly painted walls last for longer. Plus you will save yourself time and trouble from the process of trial and error.
- Install new floors -
If your home’s carpeting or linoleum still looks unkempt after a deep clean, replace it with laminate flooring. This is less costly and gives a polished look similar to hardwood. The various flooring options means no two solutions give the same result, but industry data suggests new flooring increases a property's value by 2-5%.
- Spruce up your ceiling -
Polishing up your ceiling is another cheap renovation that adds value to your home. Popcorn ceilings come with asbestos risks. Mask up and scrape away the texture with a cleaning solution or call in a professional.
- Update fixtures and hardware -
Outdated faucets, doorknobs and lighting may give off the wrong impression of the house. Hunt around for some affordable yet stylish replacements that will give your home a modern look.
4 Renovations That Don't Add Value To Your Home
Surprisingly, most of the home fittings you’d think would be deal breakers, may actually stop you from selling your home or renting out your property successfully:
1) Swimming pools
In most cases, having an in-house pool may not be the instant highlight you hoped it would be.
Although pools may be an exciting home feature for young tenants, an older couple for example may not be keen on taking on such a responsibility.
A pool needs constant cleaning and maintenance, and tenants may also have to deal with operating costs and spend time and energy supervising renovations.
Due to the excavation costs, an inground concrete pool may cost between $35,000 to $100,000 to install. In addition, maintenance costs may be around $1,000 to $2,000 per year.
A piece by Open Agent.com also found that how much a pool adds to home value also depends on the size of the block. A plunge pool may take up most of the block in Sydney and Melbourne.
Either way, a pool is one of the renovations that don’t add value to your home. The home value may be boosted slightly, but not by an amount that makes it worth the cost. In fact, families with children maybe quick to back off due to the safety hazards and maintenance hassle.
2) Extensive landscaping
Remember to make neutral choices when renovating your home to accommodate the needs of more clients. Rather than turning a profit, certain renovations don’t add value to your home if they’re not catered to your entire client pool or may cost more for maintenance.
Artificial grass and excessive landscaping reduces 5% from home value - families with kids who want to play in the garden won’t want to pay more to replace it.
A scruffy garden will knock 1 to 2% off, while outdoor water features may be seen as more hassle than tassle and drop home value anywhere between $2,500 to $10,000.
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3) Wall-to-wall carpeting
Despite this fixture instantly making a statement in the room, renters may be more concerned about the chemicals used in its manufacturing process and the allergens that may be trapped in it. If your home lacks any other alternative highlights, this design mistake may cost you a rental deal.
4) An expanded owner’s suite
A luxury remodel of the master suite with a bathroom and walk-in closet can be a big selling point. But if it converts your 3 bedroom home into 2 bedrooms, your home will only have the same value as the other 2-bedroom houses in your neighbourhood.
It doesn’t matter how luxurious the owner suite is, the more bedrooms and living spaces a home has, the higher its value.
All in all, your home’s value could be significantly boosted with the right renovations. If you’re willing to pocket out a bit more on what’s necessary, the return will definitely be worth it, but you can make just as much of a huge difference on a tight budget as well. So sit back, plan out your upgrades and enjoy just how much renovation adds to home value!
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Disclaimer: The views, information, or opinions expressed in this blog post are for general information purposes only and should not be relied upon. We have not taken into account specific situations, facts or circumstances, and no part of this blog post constitutes personal financial, legal, or tax advice to you. You should seek tax advice from your accountant, specific to your situation.