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Renovating for Profit – Can It Be Done?

Renovating for Profit – Can It Be Done?

With the increase in television shows like The Block and Renovation Rescue, one could believe that renovating for profit can be done quickly and easily on just about any property, anywhere for maximum profit. WRONG! Renovating for profit takes a great deal more research and careful planing than that. So what do you need to consider before you buy that property? Let’s take a look.

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Renovating for Profit – Words of Caution

Research, Research, RESEARCH!

Before running head first into buying a property to renovate, have you considered who your potential buyer will be? Have you thought about what their requirements will be? There is little point purchasing a 2 bedroom cottage, that will involve a major structural renovation to turn it into the 4 bedroom family home your buyer will be in the market for. Alternatively, if your target market is first home buyers or empty nesters, less bedrooms will work just fine. Take some time to build a profile of your ideal purchaser, think about the area you are renovating in, think about the size of the property, and the length of time and budget involved in flipping this renovation for the best profit possible.

Know What You Are Buying

Have you considered what kind of renovation you would like to do? Are you in the market for a full structural renovation, or would you prefer a quick flip with just some cosmetic changes? Structural renovation can increase the profit, but of course you will increase your expenditure and your time frame considerably. Cosmetic renovations, may include new kitchens or bathrooms, a new coat of paint, and a general jazz up of the home, which can be completed quickly and economically, however are unlikely to net you the profit from a well thought out structural reno. Be sure to invest in a good pre-purchase pest and house inspection, to fully understand what is involved in bringing your investment up to scratch. Enlist the services of a good builder to advise you PRIOR to spending your money on the property. Most builders will be happy to help, even if for a small fee.

Have A Contingency Budget

You’ve purchased your property, made plans for your renovation, right to the very tip of your budget, and that’s when the builder calls to let  you know the plumber has found all the clay pipes have cracks in them and they need to be replaced. While a hypothetical situation, you would be surprised how often a contingency budget will need to be accessed. Pre-purchase inspections and builders advice, can only go so far, they cannot see through walls or under slabs to be sure what you are buying. A contingency budget will ensure you are prepared for any situation.

Enlist The Services Of A Builder You Trust

The property is now yours, it’s time to do the renovations, this is the time you really need a great relationship with your builder. A good builder will be able to advise you throughout the renovation at what really needs to be done, and what can simply do with small cosmetic changes to make the most out of your investment. Investment buyers are big business to builders, they often represent repeat business for a construction company, understand that this is your power and negotiate yourself the best deals possible. Find a builder who is happy to have you help out on the job. Some demolition can be done by even the freshest of novices, how about the painting and the landscaping? Much can be done by yourself to keep costs low, great builders will not only advise but encourage this.

Find A Great Sales Agent

The renovation is complete, now it’s time to mount the best campaign to ensure you reach the maximum potential. Stage your home, factor this cost into your renovation budget, the rewards will come in the form of a quicker sale for a higher price, as buying is an emotional decision. If you walk into a fully styled home, and can imagine yourself and your family living there, you will pay a little more for privileged of this becoming your home.

Reap The Rewards

With a whole lot of research and great advice, your renovation for profit can be just that. Be cautious with your money, invest wisely and avoid the profit draining away. It only takes a few bad decisions for your profit to be lost, but a few good ones can really bring the financial reward.

Have you renovated for profit? Would you consider painting a home yourself? What other jobs would you like to try?

Nicole xxx

Linking up with Essentially Jess for #IBOT

 

20 Comments 1829 Views

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20 Comments

  1. Great advice. Sadly with building and land costs the way they are in Australia., it’s not as easy to make a dollar as it once was in this game.

    Visiting from #IBOT

    Carolyn

    1. Thank you for dropping by Carolyn. The cost of land is really high, and close to city centers, renovating is a far more profitable choice, it may just mean it’s a more long term investment though.

  2. Renovating for profit is a tough gig. Where I live the house prices are so inflated, to make any profit after a reno would be miraculous. The only land around is from people sub dividing their acreages….but I love this area and don’t want to move. I would love a slab of land to build on though xx

    1. We had grand ideas of building new when we moved into town, though they were quickly abandoned once we realised the cost involved. Now I wouldn’t change the choices we made, though this is definitely a long term investment!

  3. This is great advice. We bought our new house to live in and enjoy and are renovating it for that but we may only be here short term so I’ve had resale value on my mind the whole time too. Our renovation is probably a good study in what NOT to do and our biggest budget blow out was the electrics and unexpected rewiring of the whole house – we hadn’t factored any of that in and it’s been an expensive nightmare! I think this experience has put me off renovating for profit in the near future but something I’d like to do one day.

    1. That is a story we hear all too often Vicki, it’s those little unseen things that can quickly cost the most! I hope it doesn’t put you off renovating for too long xx

  4. I’ve heard a few comments on the radio and similar that young people should just buy a crappy house and renovate like they did “back in the day”. Not having really looked into it (because I don’t want to renovate at all) but I have the gut feeling it is so NOT as cost effective as it might have been a generation ago!

    1. Mostly no, it can be a great choice, but only when done well. We’ve seen even professional renovator loose lots of money by rushing into making decisions.

  5. There are so many variables, renovating for a profit. You don’t want to overcapitalize and often most renovations do go over budget. I know the same amount of people that have done well from it to those who have lost money.

    1. So true Bec, it can easily go either way!

  6. Yep, we are just outside of Sydney and there are no bargains to be had as people get squeezed out of the suburbs. Plus, the bathroom reno we budgeted $20K for is going to cost over $30K, so trades are bloody expensive and so in demand up here that you have to chase them for any kind of response.

    1. Sydney sure is a tough real estate game to play, not sure I’m made of the stuff needed to tackle that one. I have a real issue with tradies that don’t return calls, they give us all such a bad name!

  7. I’ve never looked into it, because we’ve never been in the position to renovate. I’m not the renovate to sell kind of person though. I don’t have the patience.

    1. It isn’t easy, I find I get very emotionally attached, which isn’t helpful!

  8. Great advice. We’ve been renovating for over 10 years with lots of ups and downs, and learned so much in the process. Get multiple quotes and do your research and sell when the market is right.

    1. Multiple quotes are really important, just not too many. We have learned over the years, not to quote on jobs where clients have acquired 3 quotes already. They are looking for something we cannot provide. 3 is the perfect number to get a really good guide on where you are.

  9. We’ve only renovated for profit once way back in 2007 I think it was. I was worried about over capitalising, but Dave knew what he was doing. We made a tidy profit, but it did help that I bought it for a steal in the late 90s.

    1. It sure is handy having a tradie for a hubby! Mine is really good at taking the emotion out of the process, which is really helpful. xx

  10. My favourite reno show is Property Ladder with Sarah Beeny because she’s so realistic about what it actually takes to make a profit. And most of the people on her show don’t want to hear that. If you’re renovating for profit, every decision is a business one, not an emotional one – that can be very hard to remember.

    1. I haven’t seen that one Alix, I must try and find it. Recently we have been enjoying the American flip or flop type shows as they seem to give a more realistic idea of costs and issues as they come up.

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