To Demolish and Build, or Renovate & Extend?

When seeking finance, many home owners may be purchasing what they can afford in the present, with a view to make the property their dream in the future. This may be predominantly to secure a block, or the home may ‘have the bones’ to make something amazing.

It is important to consider the fact that when looking for a loan to modify / extend / build, the bank will be most concerned with the end valuation of the property. When making a decision with regards to the best path forward , there are a few tips to be aware of in order to avoid overcapitalising.

  • Know the value of the property, and don’t overpay. You can obtain a valuation from an independent valuer, or some banks provide access to an app that assists with property values. Websites such as are also useful to check previous sales history, or look for comparable sales in the area.
  • Check the heritage status of the property. If the property is on the heritage registry, it will impact what you are able to do to the property, ranging from retaining the façade, to maintaining internal features. If the plan is to demolish, a heritage registered property is not for you!
  • Understand the cost associated with extending an existing property. In general, for an architecturally designed extension, the cost will range from $2,500.00 per m2, through to $5,0000.00 per m2 – depending on the level of the finishing.
  • Understand the land to house ratio for the area. In most capital cities, this is approximately 1:1. This means if you pay $500,000.00 for a block, you should spend approximately the same on a house. Whilst we all want a beautiful house, if you want to maximise resale value it is wise to avoid setting the benchmark and being the ‘most expensive house on the street’

When comparing renovations with demolish / build, it is also important to factor in the cost of accommodation whilst the build is occurring. Whilst a build may take 9-18 months (depending on single story vs double story, and the general size and complexity of the property), planning approval will generally add 3-6 months at the front end.

If you are considering a building or renovation project, please contact the team at Flexible Capital to understand your borrowing options.

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