7 Renovation Myths
#1 A renovation will always make money
Unfortunately, this is not always true. Renovating with an emotional desire to have everything perfect with the latest and greatest inclusions will quickly erode profit margins – meaning your renovation can cost more than the increase in equity or your final sales price.
Every successful renovation is dependent on more than one factor going well. The property must be purchased at or below market value, you must stick to a strict renovation budget and you need to sell at the highest possible price in a consistent or rising property market.
#2 Renovations cost more than building new
There is some truth to this as part of the cost comes from ripping out, cleaning up and disposing of parts of the original building before renovation work can commence. These extra costs can quickly add up, however building a new property requires plans and Council approvals, building foundations, new plumbing, roofing and frames etc. – which generally costs more.
#3 Renovations are hard work
All work can be outsourced if desired, but this will add costs to your renovation.
#4 Renovation expenses are tax deductible
Tax deductions cannot be claimed for work on your primary place of residence (PPR). Renovation expenses can be claimed for renovations on investment properties or by registered companies who professionally renovate and ‘trade’ properties. The tax implications of renovating are not simple. Always seek professional advice from an accountant before commencing work.
#5 Capital Gains Tax does not apply to renovating your PPR
Purchasing a property with the intent to renovate and flip or completing multiple renovations, even if you move into the house, can attract the attention of the Tax Department. They will view this activity as property trading and therefore Capital Gains Tax will apply.
#6 Renovations break up relationships
Some people really enjoy the process of renovating, however the workload for some people and day-to-day stress associated with the building process can challenge the strength of a relationship.
#7 You can remain in the home during a renovation
Understandably, dust and mess are all part of the renovation process, which may affect the health of the occupants – particularly allergy sufferers. The necessity to move out will be determined by the builder and owners, either before or during the process. It is depends on the extent of the build, whether power and water will be interrupted and how prepared the occupants are to put up with less than perfect living conditions.
Published: 11 December, 2015.