Home renovations: what to consider

A renovation affects areas of life satisfaction beyond finances – including family life, relationships, work, health and lifestyle. [iStockphoto]

What would a successful renovation look like – before, during and after?

As with any major financial decision, you need to understand how the renovation fits into your larger life goals. Why do you want to do it?

There is a big difference between a “nice to have” new kitchen and a “must have” modified bathroom for mobility needs.

Let’s say you choose rather than having to renovate.

Consider whether the election is for capital gain on short-term sale (up to five years). Flipping a property will incur transaction costs such as stamp duty and legal fees, so factor this into the overall cost. Can you still afford it?

Or are you looking to live in the house longer term? Will the renovation provide a pleasant lifestyle for many years? For some, it may be worth the financial belt-tightening.

It’s not just about capital gain, increased floor space, amenity or privacy.

A renovation affects areas of life satisfaction beyond finances – including family life, relationships, work, health and lifestyle.

Did you do the sums?

You can get quotes from designers or builders. Check the detail, including allowances for budget variations. Consider whether certain changes, such as solar power, good insulation and energy-efficient design, can reduce bills over time.

What risk can you bear?

If you suffered a sudden shock to your income, expenses, or health, how long could you cover all of your expenses without having to sell major assets or go without commodities?

This can depend on a range of factors, including whether you have income protection or other insurance, and whether you have a savings reserve.

One indicator of your risk is your debt ratio. Only you will know how much debt you can handle before it stresses you out so much it isn’t worth it.

If you’ve determined that your entire project is too risky at this time, you might consider doing the renovation in stages.

What expert advice can you get?

Seeking expert advice from architects, designers, landscapers, builders, or project managers before and during the renovation can help you get better value, less stress, and fewer errors in the renovation. ‘together.

It is essential that you do your due diligence on the quality, reliability and cost of the experts you hire.

Choose someone who is easy to talk to, listens, and understands your goals. The relationship with your construction and design team will be crucial.

What role do my emotions play?

Almost every episode of reality shows about renovation seems to feature an emotional breakdown and a massive budget blowout.

Emotions are an important consideration throughout your renovation. Financial decisions are never just about money.

If maintaining relationships and a healthy stress level are part of what a successful renovation looks like for you, plan ahead.

If that means moving into a rental for the renovation period, add that to budget considerations.

Renovating can be exciting and exhausting, but beware of some common renovation decision biases.

One is the sunk cost fallacy, where the time and money you’ve invested in the project so far can make it difficult to change or abandon plans.

Even paying a small deposit can lead to irrational reluctance to change course.

Then there is decision fatigue, where mental energy runs out with every decision. It becomes tempting to give in to what seems easiest at the time.

Be prepared to take extra time to consider high-stakes decisions and seek advice, especially in areas where you have no experience.

Getting the right advice at the right time for a renovation could be one of the most important financial decisions you can make.

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