Last Updated on December 25, 2020 by Chandler Bing
//This blog is updated in 2021//
Smart Renovation = Smart Investment?
With the help of professional interior designers nothing is impossible. Dull and plain-looking homes can be remade to look trendy, classy and unique. Old and boring homes can be transformed into an eye-catching new spaces full of life. There are endless possibilities to achieve all sorts of finishes and outcomes depending on your own taste and vision of what you want for your new home. At the same time, the renovation can bring homeowners the possibility of increased rent yield and home value appreciation. Better interior design can certainly attract more tenants and buyers that are also ready to pay a premium for a well designed, well furnished, comfortable space to live in. Given the better design, your flat is also likely to leave a better first impression for potential buyers and is more likely to stand out from the rest ordinary, plain-looking flats. Giving you a better chance at selling or renting out your flat quicker at a better price. After all, a home is where one spends a lot of time in and is a place to rest and recharge, nobody minds spending a few more bucks in order to live in a place that they love and can feel rested in.
Perceived Value = Actual Cost X 3
In renovating terms, perceived value means the amount of capital worth that the physical property change has in the mind of the property owner or buyer. While the actual cost is the physical amount of money spent in making those changes. The amount of perceived value that you add to property depends on a number of factors, but interestingly enough, usually people’s perceived value on a renovated home is usually 3 times the actual cost! So while the initial investment in conducting the renovation may be high, bear in mind that there is much added value to your flat once the renovation is done and will allow you to turn over your house at a much higher price than you otherwise would’ve. So it is most likely worth the investment as long as you do it with care and caution.
In the mindset that the global stock market is slowing down and recession is taking place. Perhaps investing in home renovation for an appreciation of the home value and rental yield is another investment tool worth investigating. Let’s look at ways to achieve the biggest and most valuable renovation change with a limited budget.
What’s Your Purpose of Renovating?
When you have a unit and budget on hand and are about to start the renovation, you may want to dive headfirst into the project. However, before you start looking for an interior designer or contractors the first question you should think about is to ask yourself “What is my renovation motive?” In other words, what is the purpose of renovating your unit? Depending on the different motives you have in mind, the renovation options will also differ considerably and it is important to figure this out first in order to know the potential audience for the final product and in turn cater to the audience you wish to target. It will be a bad idea to renovate the unit in the style you like when you wish to sell it off as it may not match what others want for their future home. Below we explore a few major and common motives one may have when thinking about renovating their flats.
- Rental → Wish to Increase Rental Yield – When renovating for rental purposes one may work on a smaller budget as tenants come and go and may break things that needs to be replaced. Practicality is probably the largest focus while aesthetics are secondary as people renting apartments care primarily about the facilities they have access to and focusing too much on aesthetics can deter people with a tighter budget. One thing you may focus on is choosing inexpensive, low-VOC paint in a modern color, which is quick and effective in giving the flat a new modern tone. Also, another good idea is to replace and change old amenities such as faucets, shower curtains/doors, doorknobs etc., as they are not expensive but give a much-upgraded feeling to the apartment which in turn increases the value of your flat.
- ReSale → Wish to Increase Increase Resale Price – Adding a room or a bathroom is a good way to increase home selling price as it enhances the space’s functionality. In the eyes of potential buyers, the price that they are willing to pay for increases substantially for a home that can accommodate 5 people rather than 3 people. However, the practicality of conducting such renovation must be taken into place as while adding a new bedroom might accommodate more in theory buyers still want their rooms to be of a certain size and having rooms too small are undesirable as furniture cannot be placed as easily. Adding a new room or toilet are comparatively costly operations in terms of both time and capital investment and thus should be evaluated carefully before taking on the decision. Alternatively, it is a good idea to perform some touch-up and maintenance works such as replacing doorknobs or faucets or any facilities that are broken. However, it’s not recommended to undergo large renovation works as the buyer may want to do their own renovations and demolish everything upon moving in anyways. So while it is important to invest in the flat in order to attract buyers, it is also important to bear in mind that spending too much on the project might not be a good decision.
- Self-Use → Need to Adapt to Family Circumstance Changes – Planning for self-use is probably the most flexible and diverse category in terms of renovation possibilities. The whole project scope and outcome is hugely dependent on your own budget, vision, wants, and needs. Here the sky is the limit and you are free to do what you want in order to create a space you can call your own that you can rest and recharge in. However if you are not living alone it is important to communicate with other members in order to create a space that is suitable for everyone that will be living with you. For example, if you are planning to welcome new family members or have developed a need for a home office, you should carefully consider all the relevant points that will contribute to the quality of life for everyone. Such as whether noise cancellation should be installed so you can work till late at night while also not disturbing your child’s sleep? Do you need good natural lighting for the new room? Does the renovation need to accommodate your need for the next 5-10 years? It is always good to plan ahead and not renovate only according to your needs now but also the potential use for the spaces in your house for the future decade or two as renovating a flat is a huge project and a huge investment in effort, time, and money and you will live in the flat a non-insignificant portion of your life so it’s better to plan ahead so future you will not regret the decisions current you had made.
- Investment → Space is for Business Purpose – Many homeowners are starting to renovate their spaces to accommodate special market needs, such as converting an extra room to be an Airbnb room, or converting a space to be locker storage warehouse, so immediately the frequency of usage is much improved for hundred times. However, while such business opportunity and extra cash seem enticing especially if you have a spare room lying around anyways. Such act requires thorough market analysis and any relevant legal requirements. Homeowners should also remember the 8 Golden Words of “Wind, Fire, Water, Electricity, Gas, Ceiling, Floor, Wall” before conducting renovations. Lastly, a friendly reminder to not be a “copy cat” and follow the crowd when renovating for business needs; renovation needs time and oftentimes before a renovation is completed, the market may already be flooded with suppliers if everyone is thinking to do the same thing! Try to be the creative entrepreneur here and lead the market instead of being led by it!
Top 4 Renovation Focus
Based on our experiences, we have summarized here a list of Top 4 renovation actions that aims to achieve the most impact:
A Bright Kitchen
Kitchen is regarded as a home’s center of attention as the kitchen serves to unite the family members and create a sense of happiness. An improvement in the kitchen will provide you an increase of 60-120% in your investment as long as the kitchen is renovated neutrally, not too fancy or dull. It should never be modeled too extravagantly as it is best suggested to fit into the style, size, and quantity of the rest of the house and the neighborhood. The buyer will have a lower interest in a luxurious and fancy kitchen.
If you have a limited budget or plans to rent the home out, you may consider using inexpensive paint to repaint the kitchen to bring it alive. You may also change to new faucets and sinks, as well as changing to the engineered countertop for easy maintenance. Again, please consider the 8 Golden Words of “Wind, Fire, Water, Electricity, Gas, Ceiling, Floor, Wall” and ensure the kitchen is renovated according to any legal requirements (for ex: no gas stove is allowed in an open kitchen without a fire-rated door).
Adding a Bathroom
Bathroom is very important in a home with the convenience it brings. Through adding more bathrooms in your home, it may bring an increase in the value of about 80-130% of the renovation cost. Before the renovation, you should consider whether you need to install handles and anti-slippery floors for children and elders? Is there any helper who will share the bathroom usage? Should you install a shower room to replace the tub for safety reasons? Moreover, it is very important to confirm the waterproofing work, whether the water pressure is enough, cold and hot water supply is normal, and any rust off problems to be fixed, etc. during the renovation process.
Adding a Room
Adding a room could help bring more possibilities and imaginations to a home. Before the renovation, you need to ensure the new room and the old space both can retain the necessary ventilation(windows/air conditioning)and natural lighting. Also when choosing wall materials, you may consider brick walls that offer the best noise, water, and heat insulation; if you have a very limited budget, you can consider wood paneling which is much cheaper, but comes with the price of noise. Other wall material choices include full height cabinets, flexible movable wall separations with wheels, or even glass as a feature wall.
Improve Outdoor Area
Have you ever imagined having your personal outdoor space at your home? It could be a small garden, a balcony, or even a rooftop area where you can enjoy a glass of wine with friends and families? Many people who care about the quality of life takes great emphasis on outdoor space; not only does it improve the appearance and the overall aesthetic appeal of your home, having an outdoor space would ultimately increase people’s perceived value on the home. Of course, you need to ensure that the waterproof and insulation works are well completed. For landlords who are planning to rent/sell the home out, you may also consider placing some temporary furniture to help potential renters imagine how they can use the space in the future.
“The devil is in the detail”; such phrase is equally applicable to home renovations. In addition to the above 4 renovation tips, the most basic concept is paying attention to small details such as keeping paint on the walls fresh and clean, getting rid of molds, leaking roofs, walls that are wearing off, etc. These small details can show to buyers that you take good care of your home, making it a safe, clean, and healthy home.