For vendors looking to add value to their property before putting it on the market, a pre-sale renovation can be a goldmine. But it can also turn into a minefield, with unexpected costs potentially cropping up.
Here are some tips to help your vendors avoid cost blowouts and personal burnouts while transforming their property into a buyer’s dream.
Get quotes for everything
Long before the first swing of a hammer, it’s important to prepare thoroughly financially.
According to The Block NZ’s winners Alice and Caleb Pearson, asking around for quotes is a great way to start. Some renovators suggest getting as many as three quotes for every item, “right down to stainless steel screws used in the foundation.”
As time-consuming as it may sound, shopping around can help your vendors save on materials and minimise costly surprises down the track.
Expect the unexpected from the outset
Every renovation project is different and a lot of variables can impact on the total cost, so adjusting expectations and being prepared is key. Yes, the renovation may not come in exactly on budget, and yes, it may not be finished exactly on time.
This can be due to a number of factors, including extra labour, bad weather or materials running late. And while some delays can be prevented by thinking ahead, others are simply inevitable, like uncovering asbestos or structural issues.
According to Robert Green from the Building Disputes Tribunal, problems arise when people commit to building projects to the full extent of their borrowing capacity. To cover unexpected hiccups, experienced renovator Felicity Clark recommends to always allow a contingency of about 10-15% in the budget.
Hire a project manager
From the planning phase to the execution phase, it can be easy to get carried away in the moment and lose track of what’s happening.
Creating a realistic budget is just one part of the battle; it’s also important to know the scope of the renovation project and have detailed plans before it begins.
Remember, time is money: the longer the renovation takes to complete, the higher the costs are likely to rise. To avoid this, your vendors may want to consider hiring a project manager who can help them set up a build schedule, to keep them in the loop and make sure the project stays on track.
Get in the right people
A lot of costly problems can be avoided or prevented by hiring the right people for the job, including trustworthy builders and tradies. Is there anyone that your vendors’ friends can recommend?
Once they have found the right renovation team, before signing any contracts, it’s crucial that your vendors seek independent legal advice. Property investor David Whitburn recommends homeowners to spend up-front to get their scoping accurate and insist that contracts suit both parties. For example, they may want to take out clauses limiting their ability to take claims to court, or add in others requiring mandatory weekly updates from the builders.
Get finance to cover your expenses
Once the numbers are in and the outcome is determined, it’s time for your vendors to plan how they will fund their renovation. Depending on the size of their project, they may need anything from a few thousands to hundreds of thousands of dollars.
They can choose from a range of financing options, from a revolving credit facility to equity loans and mortgage top-ups. Or, they can look at a finance solution that’s specifically designed with vendors in mind.
With our Renovation Finance option, your vendors can renovate now and pay later – namely, they won’t have to pay any of the principal for 90 days. All they need to do is simply let us know what renovations they’d like to make, and we’ll work with them to provide the funds they need to make it happen. Click here to learn more.
Stay focused on the big picture
Renovations can be intense affairs. With weeks of ups and downs and countless decisions to make, it can be easy to get caught up in the noise and the stress.
The solution? Have a well-thought-out plan in hand, keep your eye on the prize and look forward to the rewards at the end of the process.
A strategic pre-sale renovation can add that spark your property needs to shine on the market. Get in touch with our friendly team today to learn how we can help fund it.