RENOVATING FOR PROFIT: 6 TIPS TO HELP YOU SUCCEED!
If your goal is to buy, renovate and sell for a profit, you really need to make sure the renovations are going to be low cost, quality and quick to finish. Long and expensive renovations don’t always add value and can often make a loss – so budget wiseley – here are our top 6 tips to help you get started.
- HAVE YOUR FUNDS READY:
One of the most common setback renovator’s face is to go into the purchase of property without thinking through where the funds to complete the renovations are going to come from. Before venturing out to purchase the ‘fixer-upper’, consider how much you may actually need to complete a renovation – then add 20% for unknowns and contingencies. If you already own property, you may be able to access this equity if you don’t have the funds upfront.
- MAKE A FINANCIAL PLAN AND STICK TO IT.
Another risk with renovating for profit is over capitalization. Many first time renovators just guess the amount that would be needed to fix up the property and don’t take the time to plan it out. Imagine a situation where you have to spend $10,000, or even $20,000 above your estimation on renovations. The odds are that you might never make this money back when you sell the property.
Another common misconception by renovators is getting all psyched with the idea that “expensive is quality.” While this may me true, there is always a high probability that the installation or products you had to do that cost $1,500 would look just as good and get the same resale value as the installation that would have cost you $800.
- GET PROFICIENT GUIDANCE ABOUT RENOVATION COSTS.
This is important if you are going to be contracting some of the works to the professionals.
Having your initial estimates can help, but expecting it to be perfect is just asking for trouble later in the project. Ensure you get professional advice about the cost of renovations and cost of materials needed.
Having a professional estimate is far better as it allows you have an accurate foresight of how much you would be spending and how much you intend to make off the sale of the property.
Have a range of service providers and tradies on hand so that when you find the property you can obtain some quotes before you make an offer!
- SEARCH FOR A PROPERTY THAT IS STRUCTURALLY & FUNDAMENTALLY STABLE
This seems logical and simple; would you rather buy a house in a wetland or flood plain over one in an upland? Or a caving-in timber roof instead of a solid steel roof?
By keeping in mind your end goal of making a significant return on your investment, you have to search for a property that requires the least major works. Non-structural improvements such as new kitchen and bathrooms, new windows and floor covers, or a garden makeover are easy to finish and may bring in a significant increase in value if planned out right.
On the flip side, major renovations such as a complete new roof, poor structural integrity, or termite infestations can cost far more to repair and do not always bring about as much of an increase in value when selling.
- Don’t be afraid to get your hands dirty
Often one of the biggest costs in renovating it the cost of labour and the mark-up they have to change or their supplies in order to turn a profit in their own business. So it makes sense that one of the easiest ways to save money in simply doing it yourself! Hire out the tough jobs to the pros and do the easy jobs yourself, such as painting – the average house can cost upwards of $3,000-$4,000 or more for a painter to do professionally. Doing this yourself will likely only cost you $500-$1,000 in paint and supplies!
- MAKE YOUR BENEFIT WHEN YOU PURCHASE
To be a successful real estate investor or developer, you need to buy the property at the right time and right price. Those in the know always say you make your money when you buy, not when you sell – this means that you’ve paid bottom dollar for the property and had to spend minimal funds to get it up to scratch.
One of the quickest ways to lose money in real estate is over paying – so you want to avoid that at all cost. Ensure you are well informed of the cost you have to incur on the property and how much you intend to gain from it. Don’t get emotionally attached to any one property – if you can’t get it below market value – move on to the next – there will always be another property and since you’re selling it anyway does it really matter which property it is? Remember this is a business transaction, not a personal one!
If you find a property that is 20% or more below the market worth, you might be looking at a potentially good deal!
Ready to get started?
‘Flipping’ a house – or renovating for profit may not be as easy as it sounds. More often than not, you need advice, direction, and guidance in doing this if you want to succeed. Make sure you talk to the right people, find the right house and have the funds ready to go!