Refurbish or renovate/extend? Your opinions

[Cecile]

We bought a 1950s ex-housing commission weatherboard in Norlane (Geelong) in December, a house that has been in Moondog's family since new. The house is fairly sound, we just restumped it and the roof has been re-insulated under the zincalume with Anticon R2.5. Overall it's pretty tired, bathroom and kitchen are original, standard commission layout (miniscule bathroom, would have been 6' x 6', toilet on the back porch outside the kitchen.) About 25 years ago his parents did an extension across the full width of the house in front, adding a large bedroom and smallish living room (4.5m x house width approx 8.5m) so space is not too bad. Replacement aluminium sliding windows throughout about six or so years old. The original house was a modular thing, trucked to site in two halves and bolted together so there's a double-width internal wall running from front to back along the midline. Weatherboards are tired, especially on the western face so we're considering options for replacement.

Norlane has a "reputation" but there is an enormous amount of work being done in the area. Houses are cheap...and I mean really cheap, we paid 140k for this one (even with 20k of work to make it sound it's still cheap!) People are spending a ton of money on them. What is left of the housing commission stock is mostly being pulled down and brand new, 5-star units or houses being built in their place. These dwellings would not look out of place in Northcote or other inner city suburbs. Infrastructure is being redone, eg water mains etc, train to Melbourne 800m from this house and ring road 5 minutes away. So, buy at the bottom of the market in an area no one wants and in ten years...well, remember Yarraville or Northcote, when no one wanted those houses? Already we could sell this for 180k+ as prices have gone up that much.

We don't really want to retire to Norlane (both in mid-50s) but we do want a nice comfortable house while we live here. My gut is telling me to stay within current house footprint, pretty it up, minimal structural work, new kitchen and bathroom, carport, get rid of the old asbestos garage and put up colourbond shed, reinstate the two small joined-together bedrooms to two separate rooms. It'll never be 5-star compatible, or nice and open-plan. Moondog on the other hand is talking about making it 5-star, an upstairs extension to minimise additional site coverage, or maybe a granny flat extension at the back. I can't see selling in the short term, but this house will fund our retirement and become an investment property at some point.

I wish we had a crystal ball. Interested in hearing your thoughts.

Thanks

Cecile and Moondog

[namtrak]

All very subjective, but I guess there are two ways to approach the issue.

1. From a purely fiscal sense.

Purchase Price + Interest + Cost of Reno >< Value of similar property. When do you recoup your capital? immediately, 5 years, 20 years? And then look at the relative value you have added and see if you can do it better elsewhere. For example, if after 5 years the property has grown in value by $50,000 ask yourself if you could have generated this somewhere else (shares, super etc) with less risk?

2. From a lifestyle perspective.

This is our approach to each reno we do. Whilst we are mindful of the capital expenditure, at the end of the day we are renovating our houses for us. And that seems to add the value anyway. Mind you, I dont think we would spend $500,000 developing a property where the highest value property in the area is only $200,000. But we do look to find the balance that suits us between capital development (spending money) and lifestyle (creating your own living space)

Good luck with it

[Bloss]

Namtrak makes good points, but I'm with Cecile on this one - make it comfortable and do not overcapitalise. If it was to be a retirement house thats one thing - and then going up ain't smart - but from your description just make it comfortable inside and liveable outside (so decks, garden 'rooms' etc). The less capital you spend the greater your capital gain when you sell. :2tsup: If you have heaps of dosh and want to throw it around that's fine, most people who manage to get heaps don't reckon that's real clever . . . :wink: Renovations are fine, but there is another life to be had too!