Irrespective of why you choose to renovate your own home,
the most important underlying factor must always be the enhancement of its capital value.

                                                             ~~~O~~~

The writer of this article is a CPA of Australia. He has worked in one of the Big-3 international Accounting firms and has developed and renovated numerous residential properties in Australia.

As I write this article, home owners and real estate investors are facing the most challenging times in the history of home ownership in Australia.

Real estate prices are trending at historic highs in Sydney and Melbourne, two cities which I consider premier and the most cosmopolitan in this country. National wage growth is practically stagnant while household debt to income ratio is riding precariously thin. And despite a string of rock-solid economic credentials – inflation of less than 2% per annum, unemployment rate averaging at a respectable 5.5% for the last four years and annual GDP growth of around 3%, interest rates are at 60-year lows of 1.5% and is forecast for at least another cut in 2017.

Notwithstanding the fact we like to change prime ministers like we change BBQ sets every couple of years, the political system is stable and robust as it should a developed nation like ours. Australia is also a $1.6 trillion economy which is inextricably linked with the dynamism of China, the new upstart that is increasingly determined to flex both her soft and hard political muscles in the Asia Pacific region.

The fallout from these factors is a generation of aspiring homeowners destined to become life-long renters in a vast, land-abundant country they call home. For this group of young people, the Australian dream of home ownership is being shut out with each failed attempt at weekend auctions dominated by cashed up investors and baby boomers.

For those already in the property market, doing nothing might seem like a safe option to avoid costly mistakes that might come with real estate investment. But in an economic climate where Australia is poised to reap the rewards of being in one of the fastest growing regions in the world, sitting idly on a pool of untapped equity built-up in your own home might prove to be the costliest mistake of all.

Our outdoor BBQ & entertaining area under construction

I am currently embarking on major renovations to my own home and have read countless home renovation articles advocating a host of reasons for an upgrade – to gain a higher sale price, to restore style and character, to install green and eco-friendly design and appliances, to increase functionality and comfort, to makes more space for children not wanting to move out, to remodel a kitchen or bathroom that need a serious makeover and the list goes on and on. For me, all these reasons must imperatively point towards a sole, all-encompassing factor – to enhance the capital value of your home.

Home decor gurus and interior designers often advocate renovations to enhance lifestyle and instill cutting-edge design. A good renovation is one where capital enhancement is a consequence of good design and functionality.

So here are my top 5 reasons for renovating your own home:

1. Enhance the value of your home

2. Capital gains are tax-free

3. Borrowing costs are at a 60-year low

4. Australians are passionate home renovators

5. Enhance your lifestyle

1. Enhance the value of your home

I believe this is the most challenging of the five reasons for renovating. The idea of what might enhance my home could be very different from that of another home owner. The key is understanding the demographics of the suburb and its eventual buyers, be they professionals, families, transient occupants, empty nesters and so on.

For example, my own research over a period of time shows the average home in my suburb has 3.83 bedrooms, 2.62 bathroom and 1.94 car spaces. Hence, I bought a 3-bedroom, 2-bathroom house that has all the “right ingredients” of being able to be upgraded to a 4-bedroom and 3-bathroom house with 2 car spaces. The key is turning unusable space into higher value use to create immediate value. This could involve transforming a dated formal dining area or a unused corner into an additional bedroom, large laundries into bathrooms or a sun room adjoining a bedroom into an ensuite.

Our elevated outdoor deck under construction

By far the most impact is achieved by well-designed bathrooms with good tapware and a modern open kitchen which so often defines the heart of a home. Seamless entertaining areas that blur the lines between indoor and outdoor spaces will always hold its appeal.

2. Capital gains are tax-free

It may be argued capital gains are a consequence of good renovation rather than a reason to renovate.

But with real estate prices at record highs, upgrading your own home for the specific purpose of creating new equity / capital gains might seem like a logical strategy.The new equity created from renovating a principal place of residence is also free of capital gains tax in the event of an eventual sale.

Renovating, as opposed to selling also ensures you don’t sacrifice hefty stamp duty paid on acquisition and expensive incidental costs such as agent, solicitors and marketing fees associated with a sale.

Capital gains created from a well-executed renovation can cut years and hundreds of thousands of dollars off your mortgage repayment.

Squaring off an unusable corner for a new bedroom

3. Borrowing costs are at a 60-year low

Although lending guidelines have tightened considerably in recent times, the Reserve Bank of Australia’s official cash rate has remained at a 60-year low of 1.5% per annum.

The majority of home loans with major lending institutions come with an offset account where additional funds in this account is offset against the loan amount owing when calculating interest costs. While negative-gearing is one way to minimize tax payable on investment properties, recording an annual tax loss is only suitable for certain types of investors and certainly not the most ideal.

Low borrowing costs on an owner-occupied home coupled with excess funds parked in an offset account minimize will mortgage payments which are not tax deductible.

Staying in your own home whilst it is being renovated might cause some temporary inconvenience but this will save you thousands of dollars from renting a property elsewhere.

4. Australians are passionate home renovators

There is a reason organisations such as Bunnings and a host of building products businesses are recording strong growth each year.

Australia has a proud tradition of recognizing excellence in tradesmanship and a strong vocational system in producing good quality tradesmen for the building and construction industry. This has contributed to an industry of honest and professional builders who can transform your renovation concept into reality. Home builders often market themselves as builders of dream homes.

600mm x 1200mm tiles with floor heating in our home

DIY enthusiasts need to ensure their handiwork is at least on par with the professionals. Nothing is more glaring that low quality finish that not only fails to fetch market value, it might well devalue the house and involve valuable funds to rectify. But whether we do it ourselves or engage a builder, building that new outdoor deck with a swimming pool or a second storey seem to be one of our favourite past times.

5. Enhance your lifestyle

For me, this is the weakest of reasons to renovate your home despite all the glossy magazines and reality TV shows on renovations about enhancing a property for lifestyle purposes.

The single biggest mistake a would-be homeowner can make is buying the wrong type of property in a wrong location.

Granted that well-executed renovations in so-called “lifestyle” suburbs such as Balmain, Potts Point and Paddington in Sydney or Brunswick, Brighton and St. Kilda in Melbourne often yield significant equity.

It is also important to distinguish between mere cosmetic renovations from extensive structural ones where the latter are obviously designed to yield much higher returns. General guidelines apply where structural renovations in locations greater than 25 kilometres from Sydney and Melbourne CBDs may not yield desired returns due to lower property prices. Conversely, a simple cosmetic renovation in a lifestyle suburb might deliver handsome gains. Though there are no hard and fast rules, following certain tried and tested guidelines from expert renovators can certainly minimize costly mistakes.

The thing to remember is handsome profits are not made from a well-executed renovation sold to a buyer willing to fork out significantly more dollars than what the market dictates.

Rather, capital value is created from in-depth planning and sound research the moment a good property is purchased even before the first renovation brick is laid.

Japanese bamboo basins, black taps and ceasarstone for our ensuite bathroom

So dear readers, what do you think are the most compelling reasons to renovate your home?

I am not an interior designer and don’t pretend to be one.

I am an accountant and accountants are generally known to be boring, number-crunching nerds devoid of good aesthetics and creativity, except perhaps, for creative accounting. But I do believe there exist in each of us, however large or small, a sense of appreciation for goodness and beauty that defines who we are. Aesthetically, I find darker colours like charcoal, grey and black exude its mystique when combined with natural textures such as wood and timber motifs.

Beauty is, of course, subjective and it begins with our own perception of what it actually is. In the context of interior design and home decor, I like the notion of minimalist, where less is more and how neutral colours play a role in defining a particular space. Thankfully, Mysaucepan shares this same view so we are on the same page and there is one less argument. But when it comes to choosing colours and textures for say kitchen cabinetry, floor and wall coverings, our opinions differ vastly and this is where the fight, or fun and games if you like, begin. Like most home renovators, the constraint of a budget also determines, and in many instances, limits our choice for materials and home appliances.

I am standing on a 600mm x 1200mm charcoal shade porcelain tile for our kitchen and living areas

Being an accountant, I am ever so conscious to not overcapitalize our proposed renovation. I have my own due diligence methods on how to buy real estate and have completed townhouse developments in Melbourne. But Sydney’s property market is a totally different ball game and I have invested in upgrading my knowledge as a graduate student of “Australia’s renovation queen” Cherie Barber. Subconsciously, I have secretly (not anymore now) adopted her as my mentor and confidant.

Mysaucepan and I generally agree on white ceasarstone kitchen benchtops and she is also proposing a matt white polyurethane finish for the kitchen cabinetry as well. I like the idea of a predominantly white kitchen but cautioned that we are surrounded by nature and greenery. Therefore, I reason that our ceasarstone benchtop would really come alive when juxtaposed against more earthy elements such as a dark slate floor and warm wood paneling.

In my mind, good home aesthetics come from finding unique objects or focal points and connecting these points with a common theme. It might sound easy but given a budget, time and logistical constraints, it is tempting to waver from the theme and just buy it “off the shelf” because it is the easy thing to do.

Creating something special requires patience, time and most importantly, an unwavering determination to find different elements that perpetuate a chosen theme and in our case, black against wood motifs. It took me three weeks to finally track down wall-mounted bathroom vanities in the correct shape, size, colour and finished texture that would complement the benchtop colour, the style of hand basin, taps, towel rails and floor and wall tiles.

And I am determined to do this all over again for every piece of fitting because collectively, they will perpetuate the significance of our theme. It is back-breaking but I know the end result will be worth the effort.

~~~~~~~~O~~~~~~~~

Illustration of proposed material (clockwise from top):

• Blanco maple (white) silestone (sample from Nobby’s Kitchen)
• Materia 04 Black Crusted (sample from Di Lorenzo tiles)
• Polytec Ravine Sepia Oak (sample from The Good Guys)
• Textured wood finish porcelain tile (sample from Royal Tiles)
• Materia 01 Honed (sample from Di Lorenzo tiles)
• Centre tile (and my favourite one too!): PGJ RH (sample from Royal Tiles)
• I am standing on Slate Grey porcelain tile (sample from Royal Tiles)

Useful links from this blog post:

• Royal Tiles
• Di Lorenzo Tiles
• Nobby’s Kitchen
• The Good Guys

So dear readers, can you share with us your tips on creating something special for a home renovation?

As I took the steps leading down to the backyard for the very first time, I sensed a good feeling.

It is a feeling that comes when all you hear is the gentle rustling of giant gum trees and the choir of cockatoos, kookaburras, minors and crickets. And as I would later discover, the shy feral rabbits nibbling away in the garden would soon become the conduits I was so fervently seeking. For they do a better job than me in bringing a smile to her face every morning, cajouling Mysaucepan into this tranquility she finds so foreign compared to city living.

They say one needs to be “in tune” with oneself to feel alive. I know I am in tune with myself when I am surrounded by the greenery of nature … white creamy magnolias and birds of paradise blooming in the sparkling sunshine. I was born in the year of the wood dragon after all, so I am supposed to like these kind of things, aren’t I?

Perhaps it is the fragrance of white jasmine curling its way up the wall next to the red entrance door last spring. Or the backyard we enjoyed so many BBQs last summer. For the very first time, I feel the rays of the autumn sun bursting through these windows onto my back as I pen this post from my bedroom. I love cold weather anyway so perhaps there is little wonder I look forward to winter every year. But this year, the warmth of the winter sun will be radiating through our northern-eastern lounge room every morning. Perhaps it is all of these things and much more that have drawn me to this house.

Much more because I am about to embark on major renovations and additions. I foresee a stressful time, especially for Mysaucepan. It is challenging enough when we have major, and I mean Really. Major. Dog. Fights. over an issue as small as the shape and size of the bathroom tiles for our new ensuite let alone colours. And by colours, I mean different shades of white, turquoise and magenta. I have heard horror stories about home renovations breaking up marriages and why shouldn’t they when we cannot even agree on whether it’s going to be white polyurathane for her or earthy wood panelling for me, blond spotted gum floorboards for her or giant black slate tiles for me.

My dear sister-in-law once told me … “There can only be one captain on the ship and that captain is your brother. He makes all the key decisions for our family.”

For Mysaucepan and I, we could not even agree on where to live in Sydney let alone “dragging me here to the sticks”, as she would call it. How could it be, I say, when we are merely ten minutes from Chatswood? But over the last eight months, as I observe her from a distance pruning the rose bush, agapanthus and hydrangeas on Sunday mornings, I can sense that perhaps she is, albeit slowly, making the transition from seeing this place merely as a house to being our new home. But for whichever tile, colour or texture that we so violently argue and fight over, I know in my heart that I love her dearly.

This new blog will become a journal for our lives over the next few months and beyond.

But unlike our food blog ChopinandMysaucepan, 11 trigalana place will document and share our home renovation trials and tribulations, choice of building materials, our favourite tradies, interior design, gardening and the family lifestyle around the north shore and northern beaches of Sydney. There will be loads of before-and-after pics of our renovations for DIY and home renovation enthusiasts. I know we will most likely throw in the odd home recipe for good measure because Mysaucepan and I are both avid home cooks. We can hardly wait to share our escapes from our new kitchen with all of you!

However, my mission for the next few months is to ensure I get to toast a glass of champagne with you from our brand new backyard deck by Christmas 2016. It’s a tall order considering I have yet to engage a builder let alone decide on the myriad of building materials … colours, shapes, sizes and all with so many suppliers though I am firmly holding an approved Development Application (DA) in my hand.

Please join us in our home renovation journey because it is my hope that Mysaucepan will soon discover the method in my madness and eventually be fully “in tune” with this serenity I call home. Alas, I cannot consider this home unless she see it as her home too. Until such time, I have my work cut out but I know it will be all worthwhile when we finally wipe the dust off our new kitchen benchtop and call this place our home.

Best,

Chopinand