David, had a few beers last night with my mate and put your scenario to him and he made the following points (ill try & remember)
- If your renovating for a valuation the biggest risk you face is overcapitilising. He said valuers are very objective, and will certainly note the specification of the renovation but not to the extent as say a prospective purchaser who becomes emotional.
He said that the most fundamental fact about valuing is that they can only value a property based on recent comparable sales in the area. He said in your case this would be Very important, because unless there were units which sold with a high spec renovation - there would be NOTHING to compare it to. It doesn't matter how much you spend (25k, 50k, 100k, 200k) on it you will only get as good a valuation as something COMPARABLE!
He said valuers CAN NOT take into account that you have renovated above and beyond what the market has paid, he said only try and break the market roof if you are selling - because that's the only time you can affect the 'market value'.
I'm sorry to harp but he said make sure there is a clear understanding that, at the end of the day, you need to understand what has sold in the area and at best replicate what has been done.
He also said, that if you are aiming to maximise the potential value of the property, especially in a suburb like Toorak, the renovation should be the spec of what people buying in Toorak expect. He said if you are needing to renovate regardless, look at what properties are for sale and what is being bought. If the IKEA kitchen is common then put that in, but if people in Toorak expect more, then you need to put in something better. He said that in a buyers market - this spec might not reflect the current valuation but in the long term its important your unit is par to what is around.
He especially pointed out - that in a buyers market that you will most likely not add any real value, perhaps recover some of the building costs but the only way you could be sure is to get recent sales data which includes valuers specification of the renovation - or get lots of real estate agents that know the market and have sold similar properties to inform you.
He said that it's not a waste of money to do the renovation - but if you are looking for short term game you seriously need to consider your timing. Not to mention if you are renting out the place, the affect of tenants messing up your good work.
Sorry if this is disjointed there were many beers between paragraphs
Hope this helps.
Did I miss anything?