Renovation has become one of the most popular ways for the one million baby boomers set to retire in the next decade to try and boost the value of their main asset; the family home.
Renovation has a three-fold advantage for baby boomers; investment in the family home does not attract capital gains tax when it is sold, people get to enjoy a better lifestyle, and they could take the opportunity to turn part of their home into a future revenue stream by creating a self-contained living area for rent.
Archicentre is seeing an increasing number of people following this strategy by exploring their options through the Archicentre design concept service, which provides an overall assessment of the construction and financial feasibility of their proposed renovation project. This is a prudent low-cost first step as “renovating for retirement” requires careful planning, with the renovation design being clearly matched to the long-term aim of producing revenue, either in the form of rent or capital gain.
Apart from the design, accurate paperwork for tendering and project management is needed to ensure the project comes in on budget to maximise the investment potential. Homeowners need to recognise that renovating for profit to build a retirement nest egg is similar to running a business; costs and profits need to be managed accurately and constantly monitored.
Often, many retirees who set out to renovate for retirement run into problems by purchasing a home for renovation without having it professionally inspected, only to find that they have purchased a lemon with faults that require thousands of dollars to repair before they start.
Another problem which can occur is if the purchased property is not suitable for renovation, either structurally or by its design. This can become more complicated if the property is zoned under local government heritage-planning schemes, making it difficult and costly to gain planning and building permits. However, providing people do their homework, a well designed and managed renovation project that is completed on budget can create a major boost to a retiree’s assets.
The opportunity to develop a separate independent living area as part of the renovation that can be rented out is a strategy that can provide the retirees with extra income from their home when they are at a stage of downsizing or presents a value added aspect when selling the property.
Such a strategy requires careful planning to design the extra toilet, bathroom, kitchen and laundry facilities, which can be carefully planned into a renovation. The design and compact nature of these features have been refined in the past decade as part of the apartment revolution. New compact innovative products such as basins, shower recesses, cupboards, kitchen benches and a new range of whitegoods for smaller rooms and housing designs are all playing an increasing role in renovations.
As a starting point, people should take professional advice from their accountant as a first step in undertaking the renovation for retirement strategy to ensure their taxation and investment situation is appropriate. It makes little sense to start a renovation to boost your retirement funds if you lose money on the project.
Design renovations to suit your bank balance:
The starting point for any successful renovation is developing the design to suit both your lifestyle needs and your bank balance. It is no good heading off into a renovation without having your costs tied down. Archicentre has a free quarterly cost guide on its website which can be accessed at www.archicentre.com.au
It is important to develop a design concept as a starting point to work out your ideas and costing at the preliminary stage. A design concept is a great way to kick start a building project. In this stage, an architect produces a creative design that explores a range of renovation possibilities. A design concept might include sketches, suggestions, cost estimates and also address the effects of local planning guidelines and building regulations. Most architects work with any particular building style and show care and sensitivity to circumstances, lifestyle and budget.
A well-considered design concept should include:
- A sketch of the existing floorplan and a carefully considered design concept, perhaps with some alternative ideas.
- An opinion of the probable cost of the building work.
- Recommendations on the best way to get your project built.
- Most importantly, a plan to cater for short-, medium- and long-term needs, with a staged plan to suit your cash flow.
The key to a successful “renovate to retirement” project is planning and affordability.
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