Moving house is not cheap and sometimes it could make more sense to stay where you are and efficiently capitalise on your current property.
Hear from a couple who did just that.
Karen and David knew it was over for their charming weatherboard cottage in Sydney's Inner West, when they found out Karen was expecting twin girls, just 20 months after they'd had their first child, Chloe. "The twins were a complete surprise and as they became mobile things became tricky. We got to the state where we needed more space and looking down the track we wanted to give them their own bedrooms" she said.
Stretched to the limit
Karen, already working part-time, felt stretched to the limit. After inspecting numerous houses that were either too far out or too expensive, Karen and David knew they had difficult decisions to make. "Staying close to the city was important to us, but to move into what we felt we needed meant taking on a huge mortgage, even although our lovely house was worth a great deal. On top of that we would have to pay the Stamp duties, and the cost of moving. It wasn't economically viable. Plus we wanted to stay in the same area."
They did the math and the research, and decided to build up a level instead. "It made more sense financially to stay and maximise our space more creatively and increase the value of our house. Also we could use the equity we had in our house to buy our first investment property and then build our capital to buy the really big house in the future", Karen says.
Karen has no regrets. Instead she is resolutely happy with their choice. "Already we have more space. It was just about thinking outside the square" she says.
Keeping the spending in check
If you have decided to stay where you are, you could follow these top three rules of spending on property so that you reduce the possibnility of over capitalising (where the cost of improvements outweigh the value they add).
Get a valuation
There's no point spending tens of thousands of dollars on a renovation unless the final result is going to be recouped at final sale. So find out how much the property is worth before you begin and establish what the changes may add.
Create a budget
If you're putting in a new bathroom and/or kitchen, or a new level, then make sure it comes in on budget. Blow-outs could take a long time to recoup. Consider a project manager if you think you need help.
Find discounts on everything you can. And at the same time don't cut corners with quality. A bad renovation could cost more in the long term.
This information is current as at 17/03/2015.
BT Financial Group - A Division of Westpac Banking Corporation. This document provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This information does not constitute financial advice. It has been prepared without taking account of your objectives, financial situation or needs. Because of this, before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation and needs. Information in this blog that has been provided by third parties has not been independently verified and BT Financial Group is not in any way responsible for such information.