The right renovation budget
Investment coach Ilse Wolfe offers advice on the perennial question ‘How much is too much’ to spend on renovating.
1 May 2023
Most Cashflow Hacking investors will renovate on a substantially lower budget than the average Kiwi – and for good reason, Ilse Wolfe says.
This is because to get the best rent and value uplift returns, it’s important to balance durability with cost. Wolfe’s Cashflow Hacking List is a six-step approach to turbocharge any BRRRR project.
“We’re not talking about Tesla chargers in the garage,” Wolfe says. “Generally speaking, my investors complete a full renovation for $60,000 to $80,000, and they shouldn’t expect any change from $50,000.”
Here are some ballpark prices for each of Wolfe’s principles to get you thinking.
The price of adding an internal bedroom can be as low as $8,000, depending on what kind of house you buy. “If you buy well, this should only take a couple of weeks.”
But this is the best case scenario, and complexity increases the price from there. For instance, if you need structural wall changes. “Every time you add complexity, you increase potential for building consent.”
More costly again, a garage-to-bedroom conversion is commonly $60,000 without a dollar spent on the rest of the house.
If you keep the layout the same – or very similar – you can get a brand-new kitchen or bathroom on a relatively small budget. “I still stand by a $6,000 kitchen,” Wolfe says. “A lot of people look at me like I’m nuts, but it’s been proven for years.”
Although Wolfe says it’s a good idea to assume up to $15,000 in your budget because there could be additional costs around plumbing, for example. “Our teams consistently complete full bathroom upgrades for around $10,000.”
One way to keep costs down in both rooms is to do your own bathware shopping and hand items to your tradesmen to install.
A professional painter can cost between $6,000 to $20,000 and take up to three weeks to complete a job. Walls come in “ranks” of difficulty, and labour varies widely in price. Most of the time is spent on preparation, including plaster skimming, which can account for $2,000 to $4,000.
This is why it’s a good idea to get multiple quotes and pick the most reasonable. Each painter will have their own approach to refreshing an existing property’s interior.
Flooring is priced per square metre. The larger your floor plan, the higher the cost. “On top of this, the cost of flooring has escalated,” Wolfe says.
These days you’re likely to be looking at $5,000 to $8,000 for a complete re-fit of carpet and vinyl. “One way to make flooring last longer is to add vinyl to high-traffic areas – like in hallways and living areas.”
These small items (e.g. door knobs, switches, lights) are cheap and quickly add value. But labour costs can very quickly head into the thousands. For instance, new ceiling lights may cost $500 in total, but depending on the house size, it can take an electrician several days to install. At around $100 an hour, the price of labour can easily cost $1,000 to $3,000.
But Wolfe does have a few costcutting tips for those on a budget.
“For lighting, replace light fittings exactly where they are located,” she says. “In terms of door knobs, or cabinet handles, keeping the same distance between the holes can save a lot in extra labour. One investor I worked with saved $1,500 on labour by screwing in the door hardware himself.”
All things considered, $65,000 is expected for investors aiming for a full Cashflow Hack, including additional internal bedroom, for maximum value and rent gain. Remember, it’s about improving rental properties through cost effectiveness and durability, not high-end luxuries. But it’s necessary to have a 15 per cent contingency buffer, just in case.