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Media Release |
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The time to make the money is not when the renovation is finished
Wednesday, 02 March 2011 16:01
The average home buyer purchases three to four houses in a lifetime, usually with a focus on renovation to make money to trade up.
Replacement stump using a piece of steel beam and blocks of red gum timber to prop up the subfloor area of a property. "This is often a point overlooked by home buyers at the emotional time of buying when many mistakes can be made through a lack of careful planning, not knowing the quality of the property they are buying, the cost of repairing faults, the limitations of the structure for renovation, the lack of knowledge of neighbourhood values and being caught up in a spiralling auction based on emotion not value". "Making the wrong decision in any one of these key areas can have substantial financial penalties down the track for home buyers or investors". "It is estimated that around 80% of all people who purchase properties play Russian roulette with their life savings outlaying hundreds of thousands of dollars without a thorough check of the property they are purchasing." Mr Hallett said a pre-purchase property inspection lets you know immediately if there are any serious building faults and is extremely valuable when you are negotiating your property purchase, making a property bid, applying for a bank loan and most importantly it helps remove expensive risks in the future.
David Hallett, Victorian State Manager of Archicentre said whilst a home may traditionally rise in price over time, it is at the time of purchase where the home buyer or investor stands to make the greatest gain.
Mr Hallett said the first step in making the most money on any property development is to buy at the right price and be certain that you are aware of the quality of the property.
In Archicentre's experience often any problems with the structural integrity of the home become evident three to six months after people have moved in and start to notice the issues varying from leaky roofs - usually after a severe rain storm; cracks appearing in plaster work - a tell tale sign of a building needing re-stumping, or in more extreme cases termite issues which can vary from minor - $10,000 repairs up to $150,000 for serious cases.
"The normal practice is to add the cost of repairs onto the mortgage, which escalates the cost with the additional interest payable over the normal 30 year mortgage, making the cost of not having a pre-purchase property inspection a very expensive mistake."
Mr Hallett said the potential loss of large amounts of funds at the stage of purchase can place a severe dent in the capital gain on any property purchase and in turn limit the potential level of upgrade a home owner can expect in the future.
"The pre-purchase property inspection also provides home buyers purchasing a property the opportunity to leverage the knowledge of the home in negotiating a price with the vendor to take into account the cost of future repairs to areas such plumbing, wiring, re-stumping or roof repair".
"DIY renovators hoping to make a killing by purchasing a rundown home for renovation without having a pre-purchase property inspection or a design concept worked out can find themselves facing an expensive dilemma when their renovation ideas are not practical for the structure or do not conform to council regulations".
"The worst case scenario is when halfway through a renovation a major issue such as termites, or structural soundness of major load bearing walls is discovered leading to costly variations of the renovation plan cutting the financial return."
Mr Hallett said anyone contemplating spending hundreds of thousands of dollars on a home as an investment should have a professional assessment of the property or make the sale of the property subject to an independent inspection.
Archicentre has released its new Cost Guide available free on its website at www.archicentre.com.au which provides a detailed guide to costs of housing repair and renovation to assist home buyers and renovators in costing their projects and avoiding unexpected cost blowouts.
Media Enquiries:
Ron Smith, Corporate Media Communications, Archicentre - Mobile: 0417 329 201