Buying Property For Dummies Read online

As soon as you give the whole place a new coat of paint, it may well start looking fresh enough to live in for a few years without further major expense.

  In colder southern states, one of the quickest ways to improve the feel of an old and dilapidated home is to install a good heating system. My husband and I eventually installed hydronic heating in our home during our final renovation and wished we had done it years ago, instead of shivering in poorly heated rooms.

  Progressing from livable to lovable

  As soon as you’re in the position to spend some money renovating your home, you can start thinking about ways in which you can improve it structurally.

  Before you start dreaming about your stainless steel kitchen or the study perched in a tower on top of your house, be aware of the very real possibility of overcapitalising — which occurs when you spend more money on your home than it is worth.

  A general rule is to spend no more than 50 per cent of your home’s value on a renovation. This rule presumes that property rises in value by around 10 per cent a year, so if, for instance, you spend $225,000 renovating your $450,000 home, you can expect to break even on your outlay within four or five years.

  The 50 per cent rule doesn’t take into account the probability that your home increases in value as a result of the renovation, but overestimating the effect of a renovation on the value of a property is too easy. Even a very good renovation is likely to add no more than 20 per cent to the value of a home; this is partly because the biggest component of a property’s value is its land value rather than the building, and partly because buyers don’t value renovations quite as highly as do sellers.

  Some renovations can add more value to a home than others:

  Adding a bathroom: Having an extra bathroom, especially an ensuite, may add 50 per cent of its cost to your home’s value. Two bathrooms have become a must-have for most families and even for couples.

  Making outdoors entertaining: An inviting area outside with paving and landscaping can return twice its cost to the value of your home. What you’re in effect doing is creating an extra room at a fraction of the cost. Make sure the area has shade from hot sun and shelter from the rain, and add an attractive table and chair setting.

  Maximising light: Bringing more natural light into a home by adding windows and skylights definitely adds value to your home well beyond the outlay. People love light and bright homes.

  Opening up the house: Creating an open-plan living area at the rear of the home that flows on to your outdoor entertaining area can be an expensive but undeniably appealing improvement to any home. Without skimping on style and quality of material, try to find lower-cost ways of opening up rooms to the garden. You may be able to turn a bedroom at the rear of the house into a living area by installing French doors, for instance.

  Painting: Freshly painted walls, ceilings, doors and window frames add far more than their cost to the value of your home.

  Refurbishing kitchens and bathrooms: Clean and attractive kitchens and bathrooms usually return their cost to the value of your home. Don’t spend too much, though, on luxury and high-end fittings and appliances. Aim to spend no more than 10 per cent of the purchase price of your home on all wet areas.

  Planning the Job

  Renovating a property can range from giving a few cupboards a fresh coat of paint to building a whole new extension. In between these two projects are myriad jobs that involve both skilled and unskilled work, including some that can only be carried out by a qualified tradesperson.

  For structural work and work that costs more than a certain amount (the value varies between states and territories), you need to get hold of various permits (called building licences in the Australian Capital Territory and Western Australia) from your local planning authority, which means getting plans drawn up, either by an architect, a designer or a draftsperson.

  Obtaining the necessary permits

  You may think that your home is your castle and you can do whatever you want with it (a main reason for wanting to own your own home in the first place). Local government authorities don’t agree. Yes, you can hammer as many nails as you like into the walls, and paint feature walls in alternating purple and orange, if that’s your idea of a colour scheme, but whenever you want to make any changes to the structure of your home, you have to go to your local council and get permission.

  The rules that apply to permits and approvals vary not just from state to state, but also from local council to local council. Check with your own council on how their system works, and find out as early as possible in the process. Getting permit applications through can take time, sometimes months, and you don’t want your job held up because you’re waiting for your approval to come through. Your local council’s website almost certainly has information on council’s requirements.

  Building permits

  Ordinarily, any jobs that involve some kind of structural work require a building permit, also known as a ‘building licence’, ‘construction certificate’, ‘building consent’ or ‘building approval’. A building permit demonstrates that the planned work adheres to the Building Code of Australia and is structurally safe and sound. The Building Code of Australia sets out the standards for all new building work (including renovations) in Australia.

  If you’re renovating as an owner–builder, you need to apply for the permit yourself. If you’re using a builder or architect to project-manage your renovation, they make the applications on your behalf. You normally need to provide detailed plans and drawings, so if you have designed the renovation yourself, a qualified draftsperson must draw it up in a form that is acceptable to your local council. Look for draftspersons in the Yellow Pages or local newspaper. (I also discuss draftspersons in Chapter 9.)

  Other information and documents you may need to provide in order to obtain a building permit include the following:

  Copy of your title: The title proves that you’re the owner of the property.

  Land survey: The survey determines the exact location of your property’s boundaries, the size of the land and any easements that may affect where you can construct an extension or new building.

  Soil and footings report: A geotechnical engineer carries out this report to determine what kind of footing or slabs are required for extensions and second-storey additions.

  Structural engineer’s report: This report recommends whether footings or a concrete slab system is required, based on the findings of the soil and footings report. Required for extensions and second-storey additions.

  Proof of insurance: Always have these documents ready.

  Some local councils have their own in-house building surveyors, but many now delegate the job to private building surveyors. Your local council may be able to give you a reference to a local surveyor. Otherwise, you can find a building surveyor through the Australian Institute of Building Surveyors. The Institute’s website (www.aibs.com.au) has links to offices for each of the states and territories.

  Planning permits and development approvals

  For bigger jobs you may also need a planning permit or development approval. A planning permit isn’t always required — in many case, you don’t need one if the total land you hold title to is above a certain size, for instance. If you do need a planning permit, you need to get it before a building permit can be issued.

  If your home is in an area that has heritage restrictions or has some other kind of Special Building Overlay (SBO), such as for land that is subject to flooding, you may need to apply for a special permit (refer to Chapter 6 for more information on heritage-listed properties).

  Your plans may be affected, depending on whether the proposal fits in with the local neighbourhood character, does not contravene restrictions on building heights and has an approved setback from the street. (I discuss council’s requirements further in Chapter 9.)

  Problems getting your application through council

  Some renovation applications are more straightforward than others. Anything that im
pacts on a neighbour’s use of his or her land is more difficult to get through council. Rules are designed to ensure that your neighbour isn’t imposed upon too much by your grand plans to renovate your dream home.

  If your renovation includes anything complicated, you’re better off working with an architect or building designer who is familiar with the way the rules work in your local government area. These professionals have a good idea of whether what you want to do is even possible, or whether your plans can be presented in a way that can convince your local planning authority that they’re going to work.

  Planning authorities do refuse planning applications. If that happens, you have the right to appeal. At that point, you may find going to a professional town planning firm that can produce a professional document and even go to court on your behalf to argue your case, if necessary, worthwhile. In some cases, though, you need to go back to the drawing board to find a different way of achieving your renovation that is going to be more in line with what your local council is happy with.

  Getting the work done

  You can carry out renovations in a variety of ways. The method you choose often depends on how big the job is, your own particular skills and the amount of time you have available.

  In the following sections, I describe the four main ways in which home renovations can be undertaken. Basically, you can:

  Do all or most of the work yourself.

  Hire a builder to project-manage and take responsibility for the work.

  Hire an architect or designer to organise and administer the whole project, including the contractors.

  Manage the project yourself but get contractors in to do most or all of the work.

  Doing It Yourself

  A spate of television programs on renovations has convinced many people that they can turn their ugly duckling of a house into a swan in just a couple of weekends. While you can do plenty of jobs yourself to improve the look of your home, be aware that most renovating jobs are not nearly as easy as they may look on television.

  If your renovation is going to cost more than a certain amount, you officially become an owner–builder (see the section ‘Becoming an owner–builder’ later in this chapter for details; amounts vary from state to state). Being an owner–builder makes you legally responsible for the work you carry out. In many states, you need to get a permit to become an owner–builder; you may also be required to do a short owner–builder course. (See Chapter 9 for further information on the requirements for owner–builders.)

  Deciding whether you’re up to the job

  Keep in mind that you need skills and good equipment in order to do much more than the most basic jobs of painting and tiling. And if you think that doing the work yourself saves you money, don’t forget that tradespeople and builders get discounts on the materials and fittings they buy in bulk. Remember also that if you take time off from your day job to carry out the renovation, you need to cost your own loss of income against the money you may save by not paying for someone else’s labour.

  I discuss the responsibilities of the owner–builder in the context of building a new home in Chapter 9, and some of the recommendations in that chapter are relevant here. You also need to ask yourself the following questions if you’re considering embarking on a DIY renovation project.

  Do I have the skills?

  Even though you don’t need to be qualified to carry out many renovation jobs, such as tiling, painting, or building cupboards or shelves, each of these tasks requires expertise to create a professional-looking result. You can acquire those skills by doing a short course, but don’t underestimate the time and effort involved. You may just waste the cost of your materials and your time if you end up with what is clearly a home-done job. While you may be able to live with the result, you may need to get a professional in to patch up your handiwork when you come around to selling your home. You’re also liable to fix up any defects if you sell the home for up to ten years of doing the work.

  Do I have the time and patience?

  Renovating, even if you just need to paint some cupboards or put up some shelving, takes time and patience. Are you prepared to sacrifice your weekends and every other spare daylight hour sanding and scraping and hammering? You also need to think about whether you have the kind of personality that can persist with difficult and often fiddly jobs. For some people, the stress on themselves and their families can make doing-it-yourself a false economy.

  Am I prepared to take on the legal responsibilities?

  If you’re doing anything more than a very basic job, you’re responsible for getting an owner–builder permit, getting planning and building approval from council, and ensuring a safe workplace for any tradespeople.

  Do I need to take out insurance?

  If the renovation is worth more than a certain amount (the amount varies from state to state), you need home warranty insurance (known in some states as home indemnity insurance) when you come to sell your home (home warranty insurance is discussed later in this chapter). Many states require you to take out public indemnity insurance to cover possible injury of tradespeople and others working on your renovation. Be aware also that your existing home insurance may not cover your construction work until it is completed. In that case, you may want to take out construction risk insurance sometimes called a builders all-risk policy, which covers the main risks during the construction process — including damage by storm, fire or vandalism.

  What about health and safety issues?

  Working with tools and certain materials and substances can be hazardous to your health. You need protective clothing and equipment for yourself and any contractors. You also need to ensure that other people who enter your home are protected from hazards. If the property has evidence of lead-based paint or asbestos, you must get professionals in to deal with it.

  Check the following websites for your state or territory WorkCover authority, where you can find information on the minimum safety standards required for your worksite:

  Australian Capital Territory, www.ors.act.gov.au/WorkCover

  New South Wales, www.workcover.nsw.gov.au

  Northern Territory, www.worksafe.nt.gov.au

  Queensland, www.workcoverqld.com.au

  South Australia, www.workcover.com

  Tasmania, www.workcover.tas.gov.au

  Victoria, www.workcover.vic.gov.au

  Western Australia, www.workcover.wa.gov.au

  Do lenders lend me money for a DIY renovation?

  If you need to borrow money to pay for a renovation, be aware that lenders can be reluctant to lend to an owner–builder. Your renovation is their asset, too, and they need to be convinced that you are going to complete the renovation in a professional way that adds rather than detracts from your property’s value.

  Becoming an owner–builder

  Each state and territory has different rules about what you need to do as an owner–builder. Here are the rules as they stand at time of publication of this book. However, the rules change often, so check with your local building or planning authority before you start any renovation work.

  Australian Capital Territory

  An owner–builder must obtain a licence for any work that requires building or development approval — that is, any work that involves changing the external appearance or structure of a home. In order to obtain the licence, the owner–builder needs to have successfully completed an owner–builder course or examination within the last five years. Owner–builders are responsible under the Construction Occupations (Licensing) Act 2004 for up to ten years for any building work they do. The licence and application fee is $203.

  New South Wales

  Owner–builders need to obtain a permit for any work on a dwelling that requires development approval and where the market value of the labour and materials is greater than $5,000. For work that has a value of more than $12,000, you must also show evidence that you have completed an approved owner–builder course or can satisfy equivalent quali
fications. Approved course providers are listed on the NSW Office of Fair Trading website (www.fairtrading.nsw.gov.au). The application fee is $151.

  Northern Territory

  Owner–builders need to obtain an owner–builder’s certificate for renovations and extensions valued at more than $12,000. To apply for an owner–builder certificate, you must provide the Building Practitioners Board with a completed declaration stating that you have read and understood the Owner–Builder Manual, and also provide a copy of a Land Title Office search and a completed owner–builder certificate application form. The application fee is $200. The owner–builder must also obtain an Owner–Builder Home Building Certification Fund policy of insurance before commencing prescribed building work, protecting any future owners of the property against financial loss for a period of ten years.