Renovating your home can be a very costly exercise if you get the sums wrong. Telecommunications mogul Neil Royle, who has a Bachelor of Architecture, says homeowners thinking of renovating should also consider the prospect that demolishing their existing home for a new home may be the best outcome.
“Home owners generally don’t understand the true value of their home’s structure which may lead to poor financial outcomes by way of over capitalising on renovations,” Mr Royle explains, “Some existing home structures that are many decades old may be so decreased in value they are worthless”.
“It’s important for homeowners to do the valuation sums before committing to renovations,” Neil explains, “Firstly, they need to value the existing home’s structure”.
Neil suggests finding the value of your home’s existing structure by looking at recent sale prices of similar homes in your area and comparing these numbers to same sized vacant land sales in your area. The difference between the two figures will give you some idea of the actual value of your home’s structure.
“The closer the recent vacant land sale values are to the recent house values the more I would be inclined to think about demolishing the existing home structure and building a new home,” says Mr Royle, “Homes that are many decades old may have actually decreased in value to the point of being worthless”.
It’s important for homeowners to do the valuation sums before committing to renovations, the best place to start is with your local architect or building designer. You can also use a handy construction cost calculator to get an idea of what to expect.