If you are considering doing some home renovations, renovating for profit doesn’t have to mean you spend a fortune. In fact, some of the most simple and cosmetic renovations can achieve the biggest impressions and improvements to the look and feel of your property.
Renovating a home is an investment strategy that appeals to lots of people. Spending some money, time and energy on doing a place up and selling it off for a profit is a great way to boost your profits from property when done correctly.
Renovating For Long Term Equity Gain
You can also improve your profits by doing cosmetic renovations and upkeep on a property that you keep long term. Smart renovating can lead to capital growth and strategic improvements can be a good precautionary measure against maintenance issues on a property you intend to keep for a while and rent out.
If you have a buy and hold type property, unless there are major issues, it can be easy to ignore some ongoing maintenance tasks. Regular contact with your property manager should keep you informed of larger maintenance issues as they arise. But let me tell you that your property manager and you don’t always have the same standards when it comes to what is acceptable. We’ve certainly experienced this ourselves!
We were receiving our property inspection reports which seemed to be getting progressively worse. We decided to personally visit the property and found the dirt and state of the walls and paint work was disgusting. After studying Jane Slack-Smith’s Ultimate Guide To Renovations, we decided the next time the property was in-between tenants, we would go in and give the place a quick cosmetic reno.
You can watch the video to see our fabulous results.
Beware!! Renovating for Profit On A Budget Does Not Work……
Unless….. you follow these three guidelines:
1. Stay to Budget By HAVING a Budget!
Remember that renovating strategically isn’t about painting a wall and calling it a day. It’s about a careful consideration of adding real value to a property in the market, and that takes some homework as well as sweat equity.
Take a checklist around the entire project and mark where you intend to spend money. You can start today by downloading this Sample Renovation Checklist and Renovation Summary Guide immediately. You can see how detailed your costings need to be. Divide your list into ‘wants’ and ‘needs’. Every likely cost should to be added to a spreadsheet plus an amount for ‘variance’.
You should then consider how much you think your improvements will add to the market value of your property to determine if the whole exercise will actually result in a profit. Additional fees and expenses such as agents fees, marketing and stamp duty all need to be taken into account.
Plenty of people have an appetite for doing a place up and selling for a profit. But not doing enough prior planning or keeping track of the numbers is one of the reasons why renovation costs can blow out and a disappointing profit margin can be the result.
Any time you are spending money on a property you want to be sure you’ve done a good feasibility on the entire project!
2. DIY Home Renovations
There is a saying ‘money makes the world go around’. I will be the first one to suggest you save money on your home renovation wherever you can. But unless you are a skilled tradesperson, it’s likely there will be at least some tasks required that don’t fall within your expertise. The best thing you could do is to employ a tradesperson to do the work for you.
DIY renovating can certainly save you dollars. It can also cost you big time if things don’t go to plan. You might take weeks to complete a task that a tradesperson can get done in a matter of hours or days. A task completed quickly and done to expert standards will mean you can move forward quickly. This can become extremely important if your objective is to get the property tenanted or sold.
Every week the project goes uncompleted, you could be paying additional interest if you are borrowing money to do the renovation in the first place. As you create your feasibility, you may be surprised to find DIY renovation costs are higher than you expect.
3. Renovate for Profit – Where To Start
The key lies in understanding which improvements will return you the highest possible profits. As you can see in our recent renovation, paint is inexpensive and can instantly create a fresh, new look. Despite my earlier suggestion to avoid DIY, painting is relatively easy to do yourself and you can save lots of money. Even if you do need to pay someone to do more difficult areas or outside work you will most likely get back more than you spend.
The other big money spinners are kitchen renovations and bathroom renovations. These rooms will definitely start to chew up your budget though. So again, lots of planning and cost analysis is important before you even begin. Carefully consider the demographics of potential buyers or renters to be sure you meet their needs. Get several quotes before you commit to the task. https://www.hgquickquote.com.au/ is a great place for finding qualified service professionals to quote on your home renovations.
If you buy a property and plan to renovate for a profit, it might be in a cash chunk from a sale or from a rise in equity in your buy and hold property. Either way, check your tax obligations and entitlements here.
Any More Home Renovations?
We have a townhouse in a suburb just 6kms from Perth City that our children currently rent from us (that’s another story!). When they re-locate in six months time, we plan to use the process within The Ultimate Guide to Renovations (TUGR) again to create a more extensive cosmetic renovation. This renovating course has been incredibly comprehensive and so motivating. Following TUGR guidelines will mean we can significantly raise the rent and increase our equity. That’s what I call renovating for a profit! I can’t wait to get started!…