A Home Renovation Tax Credit similar to that introduced by the Canadian government in January this year, could be just the type of measure called for by IMF Chief Economist Olivier Blanchard and should be part of the Rudd’s May Budget stimulus package.

blanchardUnder the measure, anyone who spends money on eligible home renovation items would be able to claim a temporary 15% income tax credit. By spending a minimum of $1,000 up to a ceiling of $10,000, Australian renovators could receive up to $1,350 in tax relief, just like their Canadian counterparts.

I believe this is just the type of stimulus measure called for by IMF Chief Economist Olivier Blanchard. Mr Blanchard told The 7.30 Report’s Kerry O’Brien on Thursday night that temporary tax cuts that brought forward the timing of demand were better than randomly distributed funds that consumers tended to save rather than spend.

He cited the temporary subsidies to French and German consumers who turn in a clunker and buy a new car as an example. A Home Renovation Tax Credit would do just as well.

In a guest article for The Economist earlier this year, Blanchard also suggested governments focus on measures that “undo the effects of the wait-and-see attitudes of consumers and firms on the demand side. Get them to spend more, and have the state do some of the spending itself. Offer incentives to buy now rather than later.”

What should be eligible?

The eligible items should include alterations to a home or its yard that are enduring in nature, not ordinary maintenance items. Examples might be renovating a kitchen or bathroom, installing new carpet or timber floors, building an addition, deck, fence or retaining wall for example.harper-1

Such an initiative would have a significant effect on the economy. Part of the reason is because the Australian renovation market is larger both in value and the number of individual building jobs than the new home building market.

Why it will have an impact

According to industry forecasters BIS Shrapnel, the yearly value of the new home industry is about $ 24 billion and involves the construction of about 100,000 detached homes. In contrast the yearly value of the renovation market is about $26 billion and involves about 160,000 ground and upper floor additions and over 1.2 million kitchen and bathroom renovations.

The First Home Buyer Grant is used to help fund the construction of a new home versus the purchase of an existing home, on only about 20 % of the occasions - which does stimulate construction jobs growth. However in contrast, all of the Home Renovation Tax Credit would stimulate jobs growth.

As the Canadian Prime Minister said when he launched their initiative as part of his government’s Economic Action Plan: “Every time Canadians invest in home renovations, they are helping to create construction and building-supplies jobs in their own communities. By providing an incentive for Canadians to invest in their homes, we are also encouraging them to invest in local jobs.”

How it could also help reduce emissions

In addition to stimulating jobs, an Australian Home Renovation Tax could also help drive a reduction in emissions from building. Authors Geoffrey London and Simon Anderson write in the introduction to their recent book Take7 that “the legacy of our built environment is crucial to the future, as 80% of the buildings existing in 2050 exist now.”

They reveal a project designed by architects Roderick Simpson and Christopher Kelly. They argue that while renovation costs more money than demolishing and building from scratch, it only creates a third of the greenhouse gases.

I believe that because of these factors, more effort should be directed at driving renovation growth. It will give Australians a bigger bang for their collective bucks - as well as their own bucks back in their pocket.

What adds value?

If the tax credit becomes a reality I recommend that renovators consider what alterations will add most value. Re-doing kitchens and bathrooms are popular but need to be done cannily to break even in the short term. And with the average cost of a new kitchen ranging up to about $30,000, according to research done by building advisory body Archicentre, a new ensuite might be more sensible. You should be able to do a good renovation of an ensuite for about $9,000 or $10,000.

On the other hand, while a completely new kitchen might blow the budget, re-furbishing one with new bench-tops may be affordable. This is a great, cost-effective way to breath life into a tired kitchen.

I know of a couple who recently updated their 15-year old kitchen by covering their five metres of bench-space with an engineered granite that fuses transparent tempered glass and semi-precious man-made stone fragments. They spent about $3,500 on the bench-tops and another $700 having the same material installed on the kickboards, at a total cost of $4,200. The effect on the open-plan living and dining areas that adjoin the kitchen was astounding.

You should really explore other value-adding alterations that may maximise the $10,000 ceiling as well as energy efficiency. New energy efficient windows might be a good choice because they’ll help lower energy bills today as well as increasing the selling price of your home tomorrow.

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To the layperson, a 30mm shortfall in the length of a roof sheet may not seem like much. To an expert, it’s a key ingredient in causing moisture damage that could cost thousands.

Homeowner Steve Jackson renovated his 60s Castlecrag home in Sydney about 2 years ago. At the time, his builder installed a totally new roof. Soon afterwards Steve noticed that moisture was dropping down between the fascia and the back of the gutter, onto to the paving around the pool below. He also noticed that there was mould growing on the underside of the soffit - in the lining about 400mm in from the fascia

He called the builder back three times to try and find the problem. The builder told him there must be a leak in the iron. “There’s no leak!”, said Steve.

Finally, he called in another builder to investigate who found that the builder had ignored two very simple but important things. Firstly, the shallower a roof is, the more critical the overhang of the roof into the gutter. As Steve’s roof was a very shallow pitch - about 12 degrees - the roof sheet needed to overhang the gutter by about a 50mm to 60mm. Steve’s had only a 20mm overhang.

In addition, the builder’s blanket is supposed to be carried over the last batten and down into the gutter because it has to carry the condensation that forms in the roof space down into the gutter. Doing this properly though means that about 100mm from the end of the builder’s blanket the fibreglass must be removed so there’s no wick, just foil.

The new builder fixed the problem by installing a flashing 50mm down into the back of the gutter and 120mm up under the builder’s blanket. Michael, the builder, was amazed at how wet it was already.

“It was like someone had a hose running under there,” he says. “The builder’s blanket was wringing wet which meant that the last batten, the top of the facscia and the ends of the rafters were sopping. If that had continued they would have rotted - decomposition was already occurring, fungus already growing on things, and even now it may not dry out totally.”

Michael says that with the heat under the roof it’s a perfect environment for mould and rot. “It’s a dark, hot, wet environment,” he says. “Unfortunately this isn’t uncommon, because a lot of guys don’t care too much how they do it. Left untreated you’d be taking the roof right off to fix it - which would cost thousands.”

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While rock-star marketer Seth Godin doesn’t usually give renovating advice, a recent post gave some interesting tips for creative selling.seth

In a recent post called On being proactive, Godin wrote: “In my experience, much of marketing is a game of waiting for the other guy to go first. Well, if nothing is happening, you go first.” He gave a few suggestions but one relates to real estate and some “provocative ideas for home builders”.

“If you want to sell a new house, why not offer prospective buyers help in selling their old houses? Send your idle crews to their house to paint it or do other important cosmetic fixes. Fill the old house with the furniture you use in your models, etc,” he wrote.

“Take it a step further. If your home building service is totally slack, why not get to work upgrading and selling older homes or even foreclosed ones?

Some of the ideas were drawn from this article in the Chicago Tribune, which in turn quoted Kerry Mulcrone, a Minneapolis-based new-home sales trainer.
At the recent National Association of Home Builders’ convention in Las Vegas, Mulcrone reminded a packed seminar session that builders are in the same boat as their buyers; therefore, they need to be their buyers’ partners.

So how could this relate specifically to renovating? Try these (but they all need a bit of out of the box thinking):

  1. Re-use - approach someone about to renovate and offer to remove and take away their windows, kitchen and even building materials if you can use them on your renovation (and they’re in ok condition).
  2. Demolish and re-sell - demolishing an old house usually costs quite a few thousand dollars. Does the demolisher go gung ho and destroy everything? or does he take care and save the materials to re-sell via a recycling yard. If it’s the latter, is the owner getting a cut? Why not offer to demolish and then sell the re-usable materials on eBAY and split the profit with the owner?
  3. If you’re a builder or tradesman, post flyers offering this service: “About to sell your home? Know that sprucing it up adds thousands to the sale price but don’t have the money to get this done? Call us in. We’ll spruce it up and take x% of the sale price.” (Alternatively, if you’re a homeowner wanting to renovate and then sell, why not approach a builder with the same proposition?)
  4. Get your builder to give you the bill of quantities (or pay to get it done yourself - I suggest this in Chapter 5 of my book). Then pay for the materials yourself on credit card and with the points shout yourself a trip overseas. By the end, you’ll need it!
  5. OK I cheated. #5 has very little to do with trading but here it is anyway. Develop a design with materials in mind by getting a design concept first and then researching all the ways it could be built fast and cost effectively. (This is less self evident than it seems by the way. While designing for your needs and site conditions is important, the choice of materials and the construction method will have a massive impact on cost. Find out more in Part 2. Subscribe here to receive it via email.
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Or if I say it another way, The (renovating) World According to Me.

heb_world_according_to_garp

When I sat down to write The Renovator’s Survival Guide I was intent on helping people avoid some of the simple mistakes I know it’s so easy to make. I felt that if the book were going to appeal to people just like me, then it had to be informative of course, but it also had to be quick and easy to read, well signposted for easy dipping into, and preferably littered with other people’s stories to get those insights across powerfully (and with a bit of a laugh).

Judging from the responses I’ve had from people who’ve actually read it, I’m satisfied that I achieved what I set out to do. For example, my mum told me the other evening that a retired architect-friend of hers had read it and commented that it was “very fair” to both builders and architects as well as being full of good information. A number of the journalists who interviewed me when the book was released were surprised at how entertaining the book actually was - as well as being jam-packed with info. (Which is pretty much what Archicentre Managing Director Robert Caulfield said when he endorsed it, as well as builder Luke Van Dyck and ex-banking executive Ann Sherry.)

front-cover-quote

back-cover-quotes1

Of course, there are always people who love to comment on things without reading or seeing the things they’re actually commenting on. And no matter how black and white you think you’ve made things, some people will always interpret what you’re saying to mean something totally different. So even though I think the book is a snap to read, (and has a cheat sheet at the end with the top tips all in one place) I thought I’d help some of those people out, with The (renovating) World According to Me

  1. Not all builders are bad - and there are lots of good ones.
  2. A good builder isn’t a silver bullet. As Luke says: “As a professional builder myself, I know first hand that a client who’s thoroughly prepared can make the difference between a job that goes well and one that doesn’t.”
  3. A bad builder can be a nightmare. While finding a good builder isn’t the only thing you need to do, it’s right up there in the top 10.
  4. Preparation is the key. Aside from your homework on builders this is all about the budget, plans, tendering and contracts. See 5.
  5. Detailed plans are a must. You need a more detailed set of plans for construction than you do for the council - take out the room for interpretation to get more accurate quotes and minimise variations.
  6. Specify everything upfront. Which kind of relates to item 5 - why wait to choose tiles, taps and other items once construction has begun? They’ll just leave more room for quote error and slow you and the builder up later.
  7. Get interested in the non-glamour products - linings and waterproofing for example. Got any idea what it costs to do your bathroom? Who wants to re-do it because particleboard was laid under the tiles - a recipe for disaster if waterproofing fails. That’s just an example of course! Don’t just focus on the surface.
  8. Just because you’ve hung a picture or two doesn’t mean you’re a building expert. Hire one to check the building quality at all the key stages!
  9. Renovating is not synonomous with lifting a hammer yourself - there’s no shame in being a DIFMer instead of a DIYer. Play to your strengths. If it’s making money to pay for expert tradesmen, go for your life. If it’s being the tradesman, that’s ok too.
  10. Luck is not a management strategy. So get prepared!
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Tips for info-hunters

by Amanda on March 31, 2009

Australian Property Investor magazine continues its Reno Guide series. This month, it’s Part 5 - dealing with the outside room.  The Reno Kings’ Geoff Doidge and Archicentre’s Robert Caulfield are quoted and I gave some advice based on my years marketing bricks and pavers  -  I know a few things about patios, decks and courtyards! Here are a couple of snippets about decks.

Years ago garden designer Jim Fogarty gave me this key design tip for small spaces - use levels to make the space seem bigger. This is what I did at my house - the house of horrors that’s the subject of my book - and we’re talking a VERY small space, 5m by 5m, that also had to incorporate a car space! We made a decked area that’s level with the living area inside, so you get that nice seamless inside to outside feel once the bifold doors are open, with a paved space below.

While it’s decked we did pay attention to water management though. Under my deck is actually a contoured concete slab, so that the water is taken right away from the house. That’s very important to avoid making a haven for termites and other insects. After my years in paving I’m also a big believer in having your pavers installed on a rigid concrete base - better than sand as it prevents weeds coming up between the cracks and is less prone to movement.

If you’re having a tiled deck however, you should pay attention to the materials the tiles go onto. Balcony failure is one of the most common building defects, because so often waterproofing can fail, and you won’t know anything about it until water comes into rooms below. Tiles installed on a fibre cement substrate rather than particleboard are far less likely to crack and pop off. Good waterproofing installers and products are of course where you should begin!

You can read the rest of the article as well as profiles, features AND Property Bootcamp in the April issue of API.

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Answering questions: what adds value?

by Amanda on March 30, 2009

James (a reader) asked me recently: “What adds more value, joinery or blinds? I’m trying to add additional wardrobe space to an inner city apartment in Melbourne because it is so cramped. But budget-wise, with permits, building surveyor etc, I’m trying to decide what are the most important ones to do.”

joineryThis morning I went looking for copies of the umpteen articles I’ve read about apartment design trends - the ones that talk about the growing trend in built-in storage and having everything concealed - even kitchens. Of course I can’t find them once I want them!! However, my guess is that what will add more value for your apartment will be the joinery - as long as it’s done in neutral colours.

I say that of course without seeing your apartment - so I’m going to add a proviso. If the building isn’t designed with the principles of passive solar design in mind, then depending on the orientation of the building, blinds may be the first priority. For example if your building has lots of unshaded glass facing west then blinds will be one way to assist in preventing the sun heating up the apartment during the day. They’ll also help prevent heat loss during winter.

The other thing I wondered about with your question, was the mention of building surveyors and permits. Are you planning to do more than just joinery? Because if it’s only that, you shouldn’t even need a permit. You may want to check out my earlier post on what you need permits for.

I hope that helps!

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David (the reader mentioned below) also asked me this other question recently: Also what work do you have to be licensed for? What are the implications if I do wiring for example and I don’t have a compliance certificate?

Well, the first answer to this question is that you shouldn’t be doing the wiring yourself - unless you’re a licensed electrician. You can usually find out what you can and can’t do without being registered or licensed from the state-based departments of fair trading. (They’re all listed by the way on my freersgdetails_icon2 community site.)

I happen to know though that David lives in Victoria (he joined here after an Archicentre seminar I spoke at recently). So in Victoria, the body you need to check in with is the Building Commission. (Because David’s question sounds a little like being an owner-builder, I’ve put in the link here for that part of the Building Commission. But this is a great site - one of the best for information, so trawl around the rest.)

In Victoria, their Home Building Act - and remember these are state-based pieces of legislation too - says that the trade contractors who’ll need to be registered (for work over $5,000) and insurance (for work over $12,000) include:

  • Carpenters
  • Bricklayers
  • Concreters
  • Roof tilers
  • Swimming pool installers
  • Cabinet makers and kitchen contractors
  • Restumpers
  • Bathroom renovators
  • House relocators

And, that in addition, plumbers, gas fitters and electricians need to be licensed with their respective licensing bodies. The owner-builder must provide the registration details of contractors engaged in the building work at the end of the project as part of their application for a Certificate of Final Inspection or Occupancy Permit.

So what can happen to you if you don’t do this? Well you will need to check this out in each state, however at the minimum, you could have your occupancy permit refused. That COULD be pretty serious. For more detail on penalties that could apply, call the Building Commission, or Consumer Affairs Victoria on 1300 55 81 81 (or your relevant state body if you’re in another state).

Does this help? Let me know if it doesn’t.

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David (a reader) asked me recently: “Is there an easy, concise way to find out exactly what you need permits for - structural is highly likely but what about just changing windows, installing new kitchens and bathrooms, wiring new lights etc?”

Well, the answer is yes, and no. There’s no one central place to find this out, but your council will tell you. What you’re looking for when you check with your local council is their list of exempt development items. You’ll typically find it these days on their website, and it will be outlined in a document like a Development Control Plan. (I outline these things in a little more detail by the way in my chapter on The three DA demons.)

For example, here’s what my council’s DCP says about the exempt development category internal alterations. These internal alterations to previously completed buildings are exempt, including:

  • replacement of doors;wall, ceiling or floor linings;
  • deteriorated frame members with equivalent or improved quality materials;
  • renovations of bathrooms and kitchens;
  • inclusion of built-in fixtures such as vanities cupboards and wardrobes; and
  • installation of shelving, displays, benches, partitions that do not provide any structural support to the building.

They also list development standards and requirements. They say that exempt development is where:

  • The work does not provide any additional floor area or additional residential accommodation;
  • The work does not change room configurations, reduce window arrangements for light and ventilation needs, reduce doorways for egress purposes or involve enclosure of open areas;
  • The work does not compromise fire safety or affect accessibility to a fire exit;
  • Bathroom and kitchen fixtures and fittings are triple AAA rated; and
  • Maximum floor area of alterations not to exceed 100m2;.

They also recommend that you “contact a structural engineer, architect or building surveyor before commencing alterations to ensure you comply with the Building Code of Australia and will not affect the structural sufficiency and stability of the building”.

Does this help??? Let me know if it doesn’t!

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Answering questions: how to banish mould

by Amanda on March 14, 2009

rsgdetails_iconLast week Barbra (a reader) wrote in to ask me this: “I need to know how to get rid of the mould in my old terrace house.” Here’s what I can suggest:

In the section of my book called Building and Battling, in the chapter called Look out for trouble, I said that mould (and other symptoms like stained or swollen skirtings and fungus growth) can indicate that there’s been what’s called water ingress. I’m not sure where in Barbra’s terrace the mould actually is but if it’s in a bathroom then it could well be because of a waterproofing failure behind the scenes. If it’s on walls that aren’t in wet areas then it could be because there’s rising damp.

Rising damp is the action of moisture travelling vertically through porous building materials like bricks for example, that are in contact with the ground. The natural drying action of the upper wall draws moisture upwards to a level of about 1 - 1.5 metres above the floor level. If this is happening, it probably means that either the damp proof course has failed or a bridge has been created from outside gardens for example, which has allowed the moisture to travel over the damp proof course.

Sometimes people try and fix this by repainting or replastering. This is really a bandaid approach though and can make the problem worse by forcing the dampness to a higher level. Longer term fixes often involve using an injection of chemicals - damp course fluid - into the affected wall to provide a new damp proof course.

You can get specialist companies to come in and fix this for you, but there are also DIY solutions. One of these is Techdry. This Australian company says that they researched and developed their damp coursing fluid in partnership with Victoria University of Technology. There are detailed instructions available from them, but essentially, what you’ll do is drill a horizontal series of holes along the brickwork, at or below floor level, insert tubes in each hole and then fill them with the fluid. You then let the fluid soak in and permeate the bricks and surrounding mortar, over a 3 to 15 hour period. Later you take out the tubes, and then leave the walls to fully dry out before painting or plastering over them.

Another solution is Lectros Technology. Proponents say that this system uses electrical osmosis to permanently eliminate dampness.

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Ok. I admit it. It takes a little more than 4 minutes to learn how to renovate for profit. If time is short though (and you don’t have my book yet - why not I ask??) then you could watch this A Current Affair report on what to do to make money renovating and of course, the problems to avoid.

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