Each week during the spring property season, Money's team of experts will come up with strategies for getting the best result before and after the hammer falls.
Do you renovate or not before selling? At a time when growing interest from self-managed super funds is boosting demand for residential investment properties, the question of how to treat these properties when selling them is one that applies to a growing number of investors.
Vendors' advocate and real estate industry veteran Bruce Bell has a rule.
"If you can spend a dollar to make three, it's worthwhile," he says. "To spend a dollar to make a dollar is not worthwhile." Bell recounts the story of a recent client whom he's advising on the sale of a one-bedroom South Yarra apartment.
"The client has owned it as an investment for 20-odd years and the tenant who had just vacated had been there for a number of years," he says. "The flat was looking pretty tired. You could live in it and could have relet it without doing much. But to sell it, I said to him: 'I think we should have it repainted. We should have the carpets replaced' and I suggested a few other improvements."
Furnishing the apartment to style it for sale was going to cost another $1000 a month.
"All up, he invested about $10,000 and my view is that will probably result in a better price by at least $20,000 to $30,000," Bell says.
"If I hadn't thought it would bring us another $20,000 to $30,000, I wouldn't have told him to do it."
It will always, however, be a decision that depends on individual properties, a point made by Wes Gault, a serial renovator who buys houses and lives in them while doing them up.
"If we're buying a property and proposing to renovate, we want to know if it's worth doing," says Gault. In a neat division of labour, he does the exteriors and his wife Jane does the interior work on properties they buy.
"We've had a few properties we've looked at and thought we'd love to renovate, but we don't buy because we're not going to add value," says Gault, a project manager by day.
He recalls a riverside house they looked at in Kew, which was ripe for renovations. It wasn't worth doing, however, as any subsequent buyer was mostly likely to knock the property down and rebuild.
"It wasn't that small, but it was too small for the block," Gault says. "All the houses around it were much bigger, grander houses. It would have been delightful to live in [and renovate], but a waste of money because [the next owner] would have bowled it over. That's why we've tended to do heritage places. People don't knock them down, they keep going."
There are limits on what sort of work he will touch. His preferred project is a much older house that has 20-year-old renovations he can undo. And any work has to make the property better to live in, not worse, Gault warns.
"If you're going to change rooms and move walls, you've got to be very aware you're going to improve functionality rather than diminish the functionality."
Successful renovating also means being able to judge taste.
"You've got to have taste you think other people would appreciate," Gault says. "If you do up and haven't got taste others will appreciate, you could be wasting your money."
And this, Bell agrees, is the fundamental objective of the renovation any seller embarks upon.
"People don't buy property they don't like," he says. "So what you want to do is make your property likeable."
10-year rule of thumb brings real returns
Wes Gault has just sold a four-bedroom home in Hawthorn for $2.41 million. He and his wife, Jane, had renovated the double-fronted brick home extensively and it gave just the return that Gault, a serial renovator, says he expected.
"The rule of thumb is every 10 years your property should double in value," he says.
They bought the Lyndhurst Crescent house just over 10 years ago for about $800,000. He estimates they have spent between $300,000 and $400,000 on the house. They demolished the back shed and converted most of the backyard into a glass-covered living area, to create a living style they were used to.
"We'd lived in Queensland 10 years prior to that," Gault says. "We were used to bright, airy houses and Victorians tended not to be like that."
They got a bonus from changing the back of the property. "It optimised the view into the distance, which we didn't know was there when we bought the house."
Having sold their home of the past 10 years, the couple are moving into another property they have renovated, a four-bedroom 1930s apartment in nearby Malvern. They have done much less work on that property since buying it two years ago, only having stripped off the wallpaper and repainted.
Gault doesn't say how long he and his wife will stay in that apartment.
"We've never lived in an owners' corporation before," he says. "I'm not sure we'll like it."