How can you remodel your property to make a profit? We hear from two interior designers and a realtor.
Looks do matter when you are designing a home that has the potential to be sold at a higher price.
“Move-in condition!” and “Just bring your luggage!” These enthusiastic descriptors often pop up in property ads to entice home shoppers. Indeed, if a property fulfils the buyer’s needs – such as location, size or number of bedrooms – its renovation is the next most important criteria that affects how much a buyer is willing to pay for it.
Alan Leo, design director of Proverbs of Design, says that while buyers of new properties have no choice but to spend at least tens of thousands of dollars on renovating their empty nest, resale home owners have more options. “Some of my clients overhaul their new homes, regardless of whether it has usable renovation, because they want the joy of designing their own space. Others don’t mind paying a premium for a renovated home because it is hassle-free. They require only simple touch-ups such as a fresh coat of paint, minor repairs or changing of curtains.”
ERA senior marketing director David Ng agrees. “Some buyers look for ‘original condition’ houses so they can renovate it to their dream home; they also expect to pay less for the property. Some look for well-renovated homes. They may have a time constraint to move into a house, or do not wish to spend so much on renovation.”
Remodelling/renovating for better resale value
“For 80 per cent of home seekers, purchasing a property is an emotive process,” notes Eugene Yip, an interior designer and founder of Teetfa, which customises metal grilles and gates. While one man’s idea of good taste may not appeal to another, Eugene says if your home’s design can tug at the heartstrings of those with purchasing intent, you will draw a willing buyer more easily. “This is true no matter what the market condition or trend is.”
Although Eugene’s interior practice does not focus on property flipping or selling, he has personally experienced the benefits of good home design with an investment focus.
One of his properties that is co-owned with Mike Tay, fabric designer and founder of Onlewo wallpapers, is a freehold 1,250sqf walk-up apartment with a private roof terrace in Kim Tian Road. They bought it at $850,000 in 2009, and spent $105,000 – replacing the electrical and plumbing services, and reconstructing the three-bedroom apartment into a home with one master room with a walk-in wardrobe and en-suite bathroom, one large study room, and a double-sized living room, all fitted with new carpentry.
Some walls were stripped to expose the original brickwork, and old tiles were gutted out. The old wood flooring was refinished, and wallpapers – designed by Mike – were applied to the bedroom, living and study room walls. Old windows were reused with new glass panes. After two years, they rented it out for $7,500 a month and sold it with tenancy in 2012 – at a historic high of $1.95 million.
An apartment’s good design can also affect its rental price
Their second property, a freehold 1,249sqf condominium apartment – which includes a generous private enclosed space – in Robin Road was purchased at $1.39 million in 2011 and sold less than three years later at another record high of $2.03 million. Similarly, they had removed all old non-structural walls, converting the three-bedder into one master room with a walk-in wardrobe and en-suite bathroom, two study-cum-work areas, and a helper’s room.
New touches, such as a brick wall for a loft feel, full-height wood panelling as both space-dividing structures and wall finishing, plus carpentry work, pushed the renovation bill to $125,000. Spurning the usual painted walls, concrete screeding was applied on walls, the floor and the ceiling in the living and dining rooms.
Two other remodelled properties were sold at a profit of $420,000 and $810,000, respectively, within three years. While they had renovated these family homes according to their lifestyle, Eugene says his designs inevitably attracted tenants and buyers of a similar profile. “I have discovered that I do not need to design properties to cater to all segments in the market. There will always be people with a similar family structure or lifestyle. When they come as a buyer or renter, it immediately makes for a good match. Creating a fine, tasteful home always draws fine home seekers with good taste.”
In David’s experience, a picture says a thousand words when it comes to selling or marketing a home. “A clean, spacious, well-renovated home can, at the buyer’s first glance, give a very positive impression. As realtors, we should advise our sellers to dress up their homes to help buyers visualise their dream home.”
Saving on your renovation may not be a wise idea, according to the specialists.
David, who does professional photography on the side, enhances his clients’ property ads with his beautifully shot images, which have helped drawn eyeballs. “Online portals are the preferred way to reach mass buyers and a beautifully renovated home definitely helps you stand out from the crowd. A sale can take place within a day. This isn’t unique to renovated homes, but it does help.”
Renovating just before selling
Granted, many home buyers may not have Eugene and Michael’s renovation budget and astute investment acumen. Alan has served clients who chose to renovate for humbler reasons – to secure an elusive successful sale.
“These homes – a mix of HDB, private apartments and condo apartments – were usually over 20 years old and looked very run-down. A fresh paint of coat – sellers usually keep to crowd-pleasing tones like white or light shades to brighten the home – is a must, as well as fixing damaged fixtures and flooring.”
One owner, whose home was on the market for months, realised his toilets were turning off potential buyers. Fixing two toilets cost about $10,000, but it was necessary in this case, and allowed the seller to command a better price, which covered his renovation costs.
David has met sellers in mature estates like Bedok whose flats had peeling ceilings, old rickety fans on the walls and clutter everywhere. “Even they admitted that they would not pay the market price for their own house if they were the buyer!” he recounted. “The remedy was obvious. They fixed the ceiling, removed unnecessary furnishings, replaced cracked tiles and repainted the home to make it look inviting.”
Rental units can look dated over time, and require regular maintenance.
Some buyers don’t mind paying a reasonable premium if your renovation is to their liking, as their bank loan can cover the purchase price. “In this way, they also avoid taking a renovation loan, which charges more interest than a housing loan,” says Alan.
Renovating for rental
“In a tenants’ market like today’s, the landlord needs to do all he can to attract tenants,” says David. “A more beautiful home may not get him a significantly higher rent, but it’s important that his unit does not go empty without a tenant. A renovation will attract better tenants with profiles to match the higher rent.”
AFTER TWO YEARS, THE CO-OWNERS RENTED OUT THE APARTMENT FOR $7,500 A MONTH AND SOLD IT WITH TENANCY IN 2012 – AT A HISTORIC HIGH OF $1.95 MILLION.
Alan says it really depends on how bad the condition of the house is. “Usually, most landlords try not to renovate, or try to minimise their renovation, unless they have trouble getting a tenant. This could also be due to their fear of tenants not taking care of their freshly renovated property. However, there are exceptions when the owner wants to target a certain audience, such as high-ranking executives – these owners are more willing to invest in pre-rental renovation.”
For example, his client at luxury condo The Oceanfront at Sentosa spent about $15,000 on such a renovation. He revarnished the timber flooring, repainted the house, repolished the marble, repaired the timber deck and replaced the blinds. He also stripped off built-in features such as the customised cabinets, tables and headboards in the bedrooms, because his property agent shared feedback that his target tenants often preferred to use their own furniture. He successfully rented it out very soon after, as tenants were impressed by a newly renovated house.
Homeowner Dorcas Liang is another happy client. “Friends were surprised that my husband and I spent about $35,000 on revamping our five-room flat in the west. But we had rented it out for 10 years, which took a toll on the 33-year-old flat that was last renovated in the 1980s.”
Regular renovations also help to make your property more comfortable and cosy.
She had found it increasingly difficult to attract quality tenants as the flat looked dated, fixtures were falling apart and rental offers were lower than desired. The kitchen was remodelled, the flooring replaced, walls repainted, the old fashioned built-in cabinets, cornice and rock stone walls removed and the balcony was leveled up to expand the living room. Only the toilets were not redone as they were recently upgraded by HDB. “Renovation aside, we even put up framed scenic photographs lit by spotlights to evoke a sense of being at an art gallery.”
The revamp worked. Instead of low offers like $2,400, they rented it out for $3,000 a month. Dorcas even received offers to buy her flat!
Remodelling or renovating one’s home is an expensive and time-consuming affair. Thus, it makes sense to get the biggest bang for your buck – not just to satisfy you and your family’s needs, but with the mindset of attracting future buyers or tenants. “Don’t be penny wise, pound foolish. You will not regret getting on board the virtuous cycle of good design, good living or good tenancy, and good returns,” sums up Eugene.
text STELLA THNG photos COURTESY OF RESPECTIVE DESIGNERS