Real Estate prices continue to climb in Australian capital cities. This, coupled with a staggering number of reality TV shows, has seen an explosion in home renovations. I was speaking to a client this week who conducted a major renovation less than 5 years ago and is already considering selling because the home no longer suits their family needs. With the benefit of hindsight, they probably would have embarked on a vastly different renovation, or even removed the original house and started again.
Both improving and moving come with considerable expense and stress for the whole family. Stories of overspending with renovations are common, as well as overcapitalisation. While the family home is essentially a dwelling, a roof over heads – it is also a unique opportunity to generate wealth in a tax advantaged environment. For the majority of us, it is the most expensive asset we will ever purchase and requires a large portion of the family budget to achieve ultimate ownership, so why not make smart financial decisions as well as emotional ones?
As always with money, it is important to consider the big picture. What are you trying to achieve, now and in 5, 10 and 20 years’ time? How does this fit in with the big picture? What is the overall plan? Is the family size or space/functionality requirements likely to change in the near future?
The financial merits of spending money on existing homes or selling to move to a new home is a matter that is unique to every situation. Each alternative must be reviewed on every occasion, weighing up the pros and cons each time. But don’t stop there. Just because a renovation is a cheaper alternative now, will count for little if in 2 years’ time another child means selling anyway, because the cost of upgrading may not be repaid by capital growth in that short time frame.
At CNS Financial Solutions, we work with our clients to map out the overall picture, considering current circumstances as well as potential future variations. Once the plan is in place, steps are established to achieve the smaller goals. Most importantly, regular reviews are required to make sure the progress is being monitored and changes are factored in. After all, hindsight can be an expensive teacher!
If you would like to review your financial road map and implement plans for future financial success, call Alan King on (07) 3188 0234 or email email@example.com