Written by John Williams
Finding a suitable property to renovate is difficult enough these days, but that is only the beginning of your journey. Once you have identified a potential candidate, there are three questions that should be at the forefront of your mind: a) is it worth buying?, b) what’s its potential?, and c) can I afford it?
Let’s start with the first and probably the most crucial question because if you get this wrong, it will have unavoidable – and expensive – consequences on the other two.
Is it worth buying?
To answer this question, your first port of call should be a professional builder, who you can trust. Todd Broswick is the founder and owner of Broswick Builders, a multi-award winning residential building company that has a proven track record of high-quality workmanship, including being recipients of the Auckland Supreme Renovation Award 2019, and the Auckland Craftsmanship Award 2017 at the Registered Master Builder's House of the Year Awards. We asked Broswick for his advice on what to look for at an open home and how to navigate the tricky path to buying a do-up.
Moisture is the biggest culprit to look out for, says Broswick. If a house is rotten or leaky, his advice is to walk away. Luckily, signs of damp are fairly easy to pick up at an open home. Check in the corners of all the rooms for mouldy carpet, check for condensation on the windows, plus mould on the ceiling. Most of these tell-tale signs can be hidden or cleaned up, to a point, but use all your senses to get a feel of the house, not just your eyes. If a house is damp, the smell is a huge giveaway.
Bathrooms and kitchens are really obvious places where the build-up of moisture is commonplace, so look for evidence here, advises Broswick.
Also, look for signs of rotting window surrounds and windowsills. Replacing windows is a costly exercise – especially sash windows in period villas. Do they open and close easily? Are they straight?
In older homes, which are obvious do-ups, don’t be afraid to be proactive in your investigations, by looking under carpet or lino that’s already lifted or stained. And look for evidence of staining on the walls.
If the house has a basement, give this area a thorough examination for evidence of moisture, as this is where the rising damp with be coming from. If it’s an old villa or bungalow, get under the house with a torch or light from your phone, and check to see if it’s dry. It should be, even in winter.
Whilst you’re under the house, check the condition of the piles. Also, take a level to check whether the house is true – vertically and horizontally. Inspect each room, as the piles may need replacing in different parts of the house.
Broswick advises making a list of the condition of the big-ticket items in the house – the roof, the piles, insulation, windows, electrical wiring, plumbing, etc. If these need repairing or replacing, they can add tens of thousands of dollars each to your budget. Taking an average villa as an example, he estimates that a new roof will set you back between $20-30,000 – and that doesn’t include replacement of any rotten beams or rafters. Typically, a small villa will have 70-100 piles and, at $200-$300 each, that quickly adds up, too. Then, the whole house will need levelling, which can buckle the windows – especially if it’s a two-storey house. Inside, re-wiring the electrics will cost about $30,000, and if the place needs re-plumbing, budget for $1000 a fixture.
Roof: Look for obvious damage to the roof. Rust is usually a tell-tale sign that the roof will need attention. It’s hard to tell from a distance, but also look for any obvious signs of damage or disrepair to the chimney.
Gutters and downpipes: Look around the whole gutter line. Note whether it’s all in one piece and that there is no vegetation growing in it. Then check that all the downpipes are hooked up to the gutter and into the stormwater drains below. If there is evidence of overflowing or rainwater overflow, then this may have had an adverse affect inside the roof or rooms below, or on the foundations under the house.
Drainage: Look to see if there are any obvious boggy patches, or whether there are areas of standing water. This isn’t so obvious in summer. Also, use your nose to smell for any signs of sewerage or stagnant water.
Height to boundary: Look at how close the neighbours are to the house, and how close to the street front the house is located, as these factors will affect what you can and can’t do if you are planning to add to the house or extend out into the backyard. A new structure needs to be at least two metres out from the site boundary.
If your prospective doer-upper passes all the tests above, then it’s time to get serious and bring in your builder. A builder will go over all the areas that you have already covered, but with it with a professional’s eye, taking accurate readings and measurements for things like moisture, etc. They will get under the house to assess the condition of the piles, and up into the roof space to accurately assess the condition of the roof, plus any insulation. Your builder will also be able cross-check the LIM report and property file to ensure that what’s on record matches what’s actually on site.
Architect or builder first?
“Six of one, really. Depends on where the client starts with a project, or who they know,” says Broswick. “We work in tandem with architects, whether we’ve brought someone on board who we recommend, or if we’ve been brought on board by an architect. Either way, you need both.”
In loose terms, an architect will imagine what’s possible and help you with all the planning and consenting. A builder will make it happen.
If you are planning on replacing new with old, and are not extending the footprint, or moving rooms around, then you can get by with using a competent builder and your imagination. Anything else will need an architect (or architectural designer) and/or a planner.
Is DIY a false economy?
If you’re keen and competent, there are some areas of the renovation process that you can take on yourself that will save you money – usually the cosmetic stuff like plastering and painting, or insulating the roof cavity or under the floor. However, be aware that taking on these jobs can turn out to be a false economy. You will take longer than a professional, you probably won’t do as good a job, you won’t get all the materials at trade prices, you may have to buy specialist tools, and you won’t have any comeback at the end of the job if it hasn’t been done correctly.
Also, many of those jobs will require sign-off for insurance purposes – electricity, water, gas, etc – and will need more than one person to get them done. And, finally, do you really want to spend your evenings and weekends up a ladder, under the house, or in the roof cavity?
“In terms of difficulty and unknowns, villas are right at the top of the scale, followed by bungalows,” says Broswick. “Brick-and-tile units are a lot simpler to work with, although you are very limited on what you can do with the exterior, and you can’t normally extend the floor plan.
“Internally, they are nearly all the same – or at least very similar. They are smaller, too, which makes them more manageable from a cost point of view, and also for the DIY’ers. They are relatively affordable to buy and a good starter project for your renovation journey,” says Broswick.
If you’re buying into a good street in a good suburb, don’t cheap out with your renovation plans. That’s one of the worse things you can do, says Broswick. “Best to do it once and do it right – and also match the level of finishes with the value of the house. Don’t overspend on the initial cost of the house if you are not able to follow through on the fit-out.”
If you’re looking at a particular suburb or street, take a look at what’s selling or sold recently in order to get a feel for the standard of finish that’s required from a re-sale point of view.
“Always, always budget,” stresses Broswick. “Building is complex and expensive, and people always underestimate how much it’s going to cost to renovate. Getting plans drawn up is one thing, costing those plans is another. I would always recommend bringing in a quantity surveyor (QS) before sending in the plans to the council for approval. This will cost anywhere between $4000 and $6000, depending on the size and scope of the house, but it is money well spent, especially on a large renovation.
“A QS will give you piece of mind… and an accurate, independent assessment of the overall cost. Alternatively, talk to a builder who has experience in dealing with the type of house and work you need to be carried out.”
How to pick a good builder
There are lots of good builders out there. Equally, there are more than a fair share of cowboys, too. Do your research – Broswick cannot emphasise this enough. “Definitely go through their past work and references, and definitely go for a Registered Master Builder. Also, interview two or three builders – don’t just go with the first one, even though they may come highly recommended. Also, ask if you can go and visit past projects. It’s not a good sign if they can’t show you any jobs they’ve completed in the past, or homeowners don’t want people coming around. There’s usually a reason.”
Websites are all well and good, but always try to see a builder’s work first-hand. And talk to their clients to find out what they were like to work with, as well as looking at the finished house.
What’s its potential?
To answer this complex question, we spoke with Joseph Chalmers, Principal of RAD Workshop, a boutique, Grey Lynn-based architectural firm, who specialise in residential design.
For most of us, a property is the largest investment we will make in our lifetime. An architect’s job is to extract the most value out of that investment, says Chalmers. “Architects are always trying to enhance the liveability of a home. An architecturally designed home not only needs to look and feel good, it also has to be functionally intuitive ¬– and this starts with first impressions from the street,” says Chalmers.
So, when you rock up to an open home, some of the first questions you should be asking yourself is, before you even step in side is, does it have street appeal? Is there a front yard, a car park, or a garage? Also check the site levels surrounding the house. If the house is elevated above ground level it can be difficult creating a strong connection with outdoor areas, or costly building elevated decks with barriers. What are the internal and external transitions like, and how is the entrance into the house staged? Consider each of these features and the experience they offer.
What are your first thoughts as you step inside? Is there somewhere to place your keys, coat and shoes, or are you immediately in the middle of the living room? How does the kitchen, dining and lounge space feel? Is it light filled, or orientated to the north? Are there possibilities to make it open-plan, or open out to a rear yard or entertaining space? These are all design aspects that most clients are searching for, says Chalmers.
There are so many questions and aspects that need to be considered, so make a detailed list beforehand and take a notepad along with you to the open home. To check out the orientation of the house, and where the sun rises and sets in summer and winter, there’s a great App, called SunSeeker. It’s $10, but we believe it’s indispensible if you are looking to purchase a new home.
Open-plan or Status Quo?
“Removing complete walls to open up and link spaces can be costly, so consider the existing external and internal wall layout and how surrounding building elements may be affected,” says Chalmers. “For example, do the ceiling heights match? Also, what are the existing floor finishes, because when you remove a wall that’s sitting over a old timber floor, it will expose unfinished timber beneath, resulting in the need to sand and polish this portion of timber floor, which then leads to a need to consider re-sanding the surrounding spaces to ensure a consistent finish.” Every change you make to an existing house will usually have a consequence that needs to be thought out and a solution found, he adds.
When asked whether you should start with an architect or a builder, Chalmers says that both are specialists in their fields. Having early involvement from both is ideal. An Architect is going to provide insight into the potential planning and consenting complexities, spatial configurations and liveability; a builder is going to provide insight into the construction complexity, he says.
“One of the big unknowns – and one of the areas that most people underestimate – are the costs of external consultants and experts, specifically around consenting and solving technical problems,” cautions Chalmers. “Numbers can vary widely, depending on the complexity and scope of the work and the location of the house. A more complex project that pushes the design limits of heritage and special character zones can require up to ten support consultants – surveyors, planners, heritage planners, civil engineers, geotechnical engineers, arborists, etc – none of whom are cheap. On the other hand,” he says, “smaller scopes of work may only require one or two consultants.”
Then there are issues with existing services, which can often be overlooked, notes Chalmers. For example, no stormwater connection onsite, roof downpipes going to nowhere that require a new soakage hole, or internal services, such as existing electrical wiring and original switch board handling new connections. These all need to be mapped out and considered prior to purchase, if possible.
Working within the existing footprint is generally more cost effective than adding an extension or building above or below the house. Try to make the most of the floor plan as it is, by developing a design that enhances efficiency, advises Chalmers. Then, even if an extension is still required, it may not need to be so large. All comes down to budget
What will it cost?
Budgeting is the biggest concern most people have, and where most people go wrong. So, what’s Joseph’s advice on settling on a tangible/realistic budget, and how do you stick to it? Also, how do you go about specifying a house so that you don’t over-or under-capitalise?
“Costs are often tip-toed around,” says Chalmers. “My advice is to talk budget straight away with both your architect and builder, and establish a brief for consideration. A skilled designer should know if the brief matches the budget, and after the concept design stage is complete and agreed upon, a scope of work can be outlined and then priced.”
Chalmers says that he often works with a quantity surveyor, who is able to provide an impartial, detailed price overview at every stage. The more detailed information delivered to a quantity surveyor, the more accurate there pricing will be, he says.
If this is going to be a forever home, but you’re currently on a budget, consider working to staged plan, ie, Stage one, two, three, etc. This is definitely an option that Chalmers says you should consider. He approaches every design with the master plan as the focus. Once this has been established, then the design can be broken down into stages, if needed. However, if you have the budget, it is more cost effective to complete a build in one stage, he says.
Can I afford it?
Securing the finance to turn a do-up into your dream home, or to add value to it so you can move up to the next rung on the property ladder, is the next hurdle to overcome. Out of the thousands of decisions, you will no doubt have to make regarding your renovation project, how you go about arranging the finance for your renovation is one of the most important – one that will have a lasting effect on your lifestyle well after the final coat of paint has dried and you’ve moved your family in.
Our friends at Loan Market, take us through some of the common questions people ask around financing a renovation. She says that the following are hard questions to answer because every client will have different needs, requirements, vision and experience – but it’s a good starting point:
- I have seen a house that I’m interested in buying, but it needs renovating. What are my first steps from a finance point of view?
The first thing to do is to secure pre-approved finance and understand exactly how much money you can borrow (see next question). Next, we work backwards with that figure, splitting it into X dollars for the purchase price, and Y dollars for the renovation budget, including contingencies for overruns, etc.
When you're purchasing a property with a vision of doing it up, one of the main concerns is, has it got good bones? Is it structurally sound, or is this going to be a money pit? Some people like to live in it for a while before they do anything, while others engage the services of a builder or architect before purchasing to make sure their vision can come to life on that property.
Personally, I would recommend engaging the services of a trusted builder before you buy a house that you plan on renovating, to find out exactly what needs to be done and how much it will cost.
- How do I know how much money I will be allowed to borrow – including the money I need for the renovations?
This is not a black and white answer, more rainbow coloured. It will come down to the bank and their servicing/affordability criteria. What’s the scope of work on the property, as mentioned above? Is it structural or non-structural? LVR (loan to value ratio) is key. Do you need to borrow against the proposed value, or can the lending be done within the current value? Your first port of call should be to your Mortgage Adviser, who can then advise on the best way to move forward. I always recommend to my clients to leverage as much as they can against the property as possible, and use any additional funds they have for the renovation.
- What’s the best way to structure my lending? Interest only, principal and interest, rolling credit – a mixture of everything?
While building or renovating, the lending can be drawn down on interest only. In some instances, the lender may allow you to capitalise the interest payments. Depending on LVR, the lender may also allow a revolving credit arrangement, if the renovations are being done within the current LVR and not ‘on completion’ value. If possible, the revolving credit option is definitely the best structure, as it gives you complete control and flexibility, as opposed to progressive drawdowns that require bank approval.
- Cash vs loan. Do I need to, or am I able to hold back cash for the renovation?
Using your own money will come without the additional hoops you need to jump through if going through the bank. Something to remember, if you do apply for lending, and you have your own cash they will want you to use that first. However, this can have benefits too; using your own cash first can create extra value when confirmed by registered valuation, which can then be borrowed against in a more flexible manner if you’re within 80 percent LVR of the current, updated value.
- LVR – how does that work with a renovation?
The type of build contract you go for will depend on the maximum LVR the lender is comfortable going to. Generally, you’ll be looking at a maximum of 80 percent LVR. Where possible, maintaining your lending within 80 percent of the existing value of the property will make your borrowing a lot easier, plus give you more control.
- Can I borrow on what the property will be worth, not what it’s worth presently?
Yes, you can. Your lender will base the loan on the lesser of these two figures – purchase costs plus build costs, or ‘on completion’ value. A lender will require a registered valuation of both the ‘as is’ and ‘on completion’ values of the property.
- What documents and reports will the lender require?
Here’s an example of what’s needed for a fixed-price build, subject to, but not limited to, the following:
- What about subdivisions? Buying a property, then subdividing and selling a portion of the land, then using that money to pay for the renovation, or re-pay the loan?
Before going down this path, I recommend engaging the services of a company that specialises in subdivision planning. It might sound like a good way to make a quick buck and have the sale of the subdivided land pay for your build, but there are sometimes hidden costs that go into a subdivision that you might not be aware of. It’s always good to get an expert involved before purchasing such a property. They will be able to tell you after reviewing the utilities, stormwater/covenants and land size if it is a financially viable option.
- How do I build in (financial) contingencies for cost blow-outs and/or time delays?
Your loan with the bank factors in 10-20 percent cost overruns. However, sometimes this is not enough. The main thing you can do to ensure you keep a check on your build is to work closely with your builder. Ask questions before you start. What isn’t included that you need to allow for? Renovating is an ever-changing and complex equation. Keep a close eye on it every week.
- Is there anything else I need to consider from a financial point of view?
- Consider employing the services of a quantity surveyor. If it’s a big renovation project, they can often end up saving you money in the long run.
- Don’t get caught up in the ‘nice to haves’ and making changes on a whim.
- Speak to your mortgage adviser before you go about making any drastic changes, to ensure your lender will come to the party and provide additional funding (if required). – Remember, your builder is a great source of knowledge. Utilise their expertise and get them involved in the early planning stages.