Property valuer Gavin Hulcombe tells us what he thinks adds value to a property and what doesn’t. Great advice if you are looking to renovate with a view to adding value ready for re-sale.
Kevin: I often wonder with property whether or not there are any improvements you can add to a property that would always add value, and which, in fact, are the ones that don’t add value. I’ve spoken to a lot of investors who believe putting in a pool is going to add a lot of value, maybe adding another bedroom might do just that.
Let’s try and find out from a valuer what he believes does actually give you extra bang for your buck when you’re doing renovations.
Gavin Hulcombe is the chairman of Herron Todd White Trading and also Queensland managing director for Herron Todd White.
Gavin, thanks for your time.
Kevin: Gavin, in your experience, are there any areas of a property that will always add value?
Gavin: I think I’m always a bit cautious about saying always, but I think there are areas where you have the best potential for adding value. I think if you start focusing on the kitchens, the bathrooms, outdoor living areas, that’s what really draws a lot of the lifestyle decisions that people make.
That’s what they see as being most important, so I think if you do it right and if you do it well and you don’t get too carried away in terms of over-capitalization, I think they’re the areas that I’d be concentrating on.
Kevin: Are there some areas that are purely there for lifestyle that probably won’t add any value? I’m citing here pools as an example.
Gavin: Of course, that’s always the first one that comes to mind. That’s a lifestyle decision not a financial decision in most cases. They look great, they’re great in the summers and those sort of things, but it is really a lifestyle decision; it’s not a financial decision.
As a general rule of thumb, you would like to get about half your money back on a pool, depending on where it is. Tennis courts can be a bit the same, albeit you don’t fit tennis courts on most suburban blocks. Yes, there are a few things like that, which are really about improving the livability rather than adding value.
Kevin: What about things like double garages or even adding a bedroom to a property?
Gavin: Look, it’s one of these things that is a bit difficult to generalize. Certainly, the second garage is really important, particularly if it’s a family area and the expectation is that you want to be able to garage two cars. Then yes, in those areas, the second garage is really important.
There are other areas where lifestyles are changing. People are saying, “Well, actually I don’t need a car.” If you’re living near city locations and everything’s within walking distance or there’s good public transport, then the second car is less important. Again, you probably just have to do your research and understand the local drivers of the market, rather than getting caught up in generalizations.
Bedrooms, they’re often expensive. Any additions like that often will cost you more on a rate per square meter than what you could buy the original property for. But I think one of the things to really take into account is the cost of selling the house and buying another house verses adding additional rooms or extensions.
On a $500,000 house, the transfer costs alone are something like 7.5% of that, so it’s a substantial cost that you lose just by selling a property and buying another one. Sometimes if you step back and say actually, if you reinvest that money into an extension or modifications, you actually end up better off rather than selling and buying again.
Kevin: I think you make a very good point there, too, and that is looking at some of the additions you can make to a property. It probably depends on its location. As an example, an outdoor living area is probably going to be more attractive in, say, a Queensland market as opposed to a Victorian market or an area where it’s a lot colder. Would that be true?
Gavin: Absolutely. And even aspect – if it’s a northeast aspect where you’re adding your living area, then that becomes very livable. If it’s direct west facing or it has no outlook, then the added value is perhaps limited.
Yes, it is the specifics, but as you say, quite rightly, if this is an area where it really does facilitate outdoor living, ala Queensland, then that’s where people want to be, and certainly, they will pay more for it there then somewhere where you’re exposed to the elements and it’s just not a very pleasant environment to sit.
Kevin: Gavin, thank you so much for your time. It’s been great talking to you.
Gavin: You’re welcome. Thank you.