Where’s My Money? Season 6, Episode 6
Season 6 of the multi-award-winning podcast Where’s My Money? has arrived to keep bringing you the financial content that helps you be better with your money.
enable.me partners with rova to bring this podcast to life and stimulate the conversation about finances with everyday Kiwis. Where’s My Money? follows the story of Reagan – a man chasing the Kiwi Dream but feeling stuck living month-to-month – and his discussions with the experts about what he may be doing wrong and how to fix it.
One man. One million dollars of debt. One podcast to find a way out.
You’ve purchased a new property. Maybe you’ve moved into your first home. Or you’ve made a carefully calculated investment. It may be a ‘fixer-upper,’ or simply have a few things you have in mind to improve, but it’s yours. You can do what you like with it. For many, this leads to a DIY-first mindset and keeping costs low while doing smaller renovations.
But that’s not always the best way to tackle a home improvement project – whether you’ve purchased the house to be your long-term home, or as an investment property.
In this episode, the third in the Where’s My Money? Ultimate Home Buyer’s Guide series, host Reagan White discusses home renovations with Jason Bonham of The Block NZ fame and enable.me financial coach Shelley Palman.
They talk about the emotions that are brought up during the house purchase process, and how to keep the emotions that don’t serve you best out of it.
Sure, every property could be seen as an investment. Whether you’re looking to flip it to sell in the short-term, or handing it on to a new buyer in the long-term, you are likely to want to end up with more cash in hand than you started with.
It pays to be cautious and not get ‘emotional’ about property investment, but that doesn’t mean you should be emotionless. Jason and Shelley cover the considerations you can make to ensure you’re creating a home that’s nice to live in – and one that can make you money, too.
Consider the small things that add enjoyment to the space
When someone mentions ‘house renovations’ around the sizzling hot plate at the neighbourhood barbeque, it often elicits groans. A mental image of money flying out the door to be whisked away by the wind and never seen again.
Jason is an experienced interior designer and judged five seasons of The Block NZ – known for being strict and direct about his opinions. He brought this energy to the podcast with a no-holds-barred approach to cost-effective renovation advice for the listeners.
First off, he says it’s important to pause, to know what the space feels like and what it needs, before you jump straight to improving upon it.
“You take on this property, and you see all the things that are wrong with it potentially or you can see all the potential that the property has in terms of adding Capital Value,” Jason says.
“But at the same time, I think it’s best to sort of just pull back a little bit, stay in the space for a little while, and then really understand what the space needs to do and get a better understanding of the home and how it functions and how you live within it first and foremost.”
From here, you have a deeper understanding of what may need improvements. The kind of improvements that aren’t necessarily big-ticket items or expensive, but that clearly make the space better, more liveable, and in turn raise the perceived value of the house.
He gives an example of where he lives in Sydney, that there’s no hose attachment on his deck, which adds friction and annoyance to his lifestyle. There’s a place for those small, fairly inexpensive improvements that add much more value than the dollar-and-cents cost you pay.
Another example Jason gives is: “Light up the garden. You know, I think it’s always a nice thing that at nighttime – you spend so much time at home at night – is to have that really nice vista into a garden that extends the visual to make the property feel bigger.”
“By illuminating a garden at night and having nice viewpoints or vantages from the different areas of the house is a really nice way to build on that plot and create a nicer impact from day to night.”
The perceived value is more important than the dollars spent
Different post codes demand different functionality when buyers are looking to purchase there. In some areas the priorities are more functional and about liveability – in others, they are more cosmetic and about the Smeg oven in the kitchen.
“You’re going to cut your cloth accordingly depending on the area that you’re going to be in to maximise the amount of profit,” Jason shares.
“Keep it as contemporary as possible to appeal [to] the most amount of buyers that are going to be coming through the door, and they want to come through and they want to know right: ‘Okay, what do I need to change? Okay, very little, cool. This is a great property to buy.’”
Many of the points Jason makes are not ‘glamourous’ but are founded in experience and knowledge of the property market.
Avoid being ‘trendy’ and dating your chattels, as future buyers look at that and think ‘I’ll need to update that’.
Be realistic in your budget (for example, $5,000 won’t get you a massive improvement, but might work for an internal paint DIY update, or a refresh of the curtains).
And get advice from an expert eye about whether the improvements you are making will effectively improve the value of your home in the market.
Avoid over-capitalising on your asset
enable.me financial coach Shelley Palman (who recently wrapped up her own home renovations) joins the conversation to share her experience and insights about building renovations into your household’s budget – without breaking the bank or committing the sin of over-capitalising on your house and making it cost more than it’s worth.
There are a lot of cost considerations that eat away at your budget when you buy a house: insurance, rates, maintenances, utilities. They may leave less of a gap for renovations than you might have put aside in your ideal mind’s eye.
Reagan shares that from his personal experience, “that first year can come as a bit of a shock, particularly when it’s your first house,” in terms of the costs that are involved in owning the asset.
If you’re looking at doing renovations, Shelley says to always come back to your financial goals and what is important to you. Especially if you’re needing to go into debt – or additional debt – to get through them.
And it’s important to make sure they align with your life and desires.
Shelley says, “you know, can we do a couple of little tweaks in the short term that we can actually save up for and make that a savings target?”
“And I think from a motivation point of view, that’s actually, that is motivating because you’re like, ‘we love socialising, like having friends over where the kids can kind of roam around and we’ve got this open plan bench now’” so the renovation makes that easier and the home more enjoyable.
The home is where your heart Is
Shelley continues, “Environment is so, so important,” but when the cost of major renovations can add to the financial obligations of a mortgage, that’s where having a solid financial plan and a financial coach in your corner can make a difference.
“We’ve got to be super careful about this, and that’s where we start to kind of get that financial plan into place where we go ‘if you take on another $200K, that’s going to add another X number of years onto this mortgage [payoff] trajectory’ and then you get to make the decision of ‘is that palatable to me?’,” Shelley says.
It’s a common question that enable.me financial coaches often hear from clients and, as a deeply personal consideration, it’s important to understand what a renovation will actually mean to you – both on a financial level, but a personal level as well. This is where understanding the subjective value of these major decisions becomes crucial.
“Those are the decisions that, every day as a financial coach, we help our clients to understand. Do you want to do this, or not?” Shelley continues, explaining how it’s the balancing of these various factors that determines whether the decision will add value, “[and decide] ‘It’s worth more to us as a family to have this… than going away on holiday. We’re prepared to sacrifice for that, to get this renovation done.’”
Reagan closes out the episode with a reminder of ensuring your decisions align with what you really want, and that you often don’t need to break the bank to obtain them.
“Sometimes, the simplest upgrades still make the biggest difference.”
Get the house renovation tips from Jason – and insights from Shelley about how to budget for them – below:
Watch Where’s My Money? episode 6 to benefit from the full discussion:
Disclaimer: The Where’s My Money? podcast and the information shared by host Reagan White and his guests does not constitute individual financial advice. If you’re interested in receiving financial advice, you can book a consultation with an enable.me coach. Costs apply.
