If you’re an avid watcher of home renovation TV programs, it’s likely that at one point or another you’ve looked around a modest abode that’s come to market and thought—I’m just a hard hat and nail gun away from making some serious dough on this place.
While these shows might make it look easy to take on large-scale property transformations, the ability to make it a profitable exercise will involve cash, a well-planned budget, research, and skills.
If it’s something you’ve been thinking about, here’s a list of common mistakes you’ll want to avoid.
Rookie renovation blunders
1. Being unrealistic about the work involved
Being time poor can be a roadblock for many would-be renovators, as there can be lots of tasks involved, such as finding the right property, in the right location, and for the right price.
On top of that you may need to factor in meetings with everyone from lenders and real estate agents, to conveyancers and various tradespeople (unless of course you’re planning to tackle the renovations yourself).
Another consideration is once you know what renovations you want to carry out, you may need approval from your local council, strata manager or an accredited certifier, and that’s all before the task of renovating has even begun.
2. Not familiarising yourself with the area
Knowing the area will often play a role in determining how profitable your project will be.
Things to investigate before jumping into anything might include:
- What properties are selling for in the suburb (or suburbs) you’re looking at
- Whether there’s high or low demand for properties in those areas
- Whether you’re looking at neighbourhoods that have price growth potential
- Whether there are proposed developments nearby that could impact property prices
- Who the local real estate agents are, and if they can alert you to vendors wanting a quick sale, as you may be able to pick up something at a discounted price
- Whether there are local amenities close by, such as schools, shops and transport
- Whether nearby employment opportunities or a high crime rate could impact a sale
- What the demographics of the area are, as this could affect how you renovate.
3. Foregoing a budget with a buffer
Once you’re across the costs of buying a property, you’ll want to draw up a budget that factors in construction costs, selling or leasing costs, and holding costs.
You’ll need to be realistic about what you can afford and the scope of your renovation, while accommodating for the possibility you may go over budget or property prices may come down.
4. Putting an offer on the first thing you see
You might find a property on day one, but it’s common for buyers to go to inspections over many months to ensure they get a good deal.
On top of that, you may want to see if it's possible to negotiate a longer settlement date should you want extra time to get things in order and plan your renovation timetable.
5. Taking on too many structural renovations
If you’ve seen a property that needs major structural changes—new rooms or the removal of walls—you may want to consider whether you’re willing to take on a project of that scale, keeping in mind that’s typically when council or strata approvals will come into play.
A cost-effective cosmetic renovation may be easier, particularly for newbie renovators, while still adding value to a property. For instance, a fresh coat of paint, new cupboards, floor boards and an updated bathroom or kitchen can add value and mightn’t require the same approvals.
6. Outsourcing things you can do yourself
If you've got to pay professionals to do all the work, your odds of making a profit will reduce, which is why doing as much as you can—painting, gardening, ripping up carpet—is a good idea.
Styling inside can also be an imperative to achieving a good sale, but rather than getting an interior decorator, see if you can grab some ideas online that you can replicate yourself.
7. Underestimating the benefits of good tradespeople
If you’re unable to do everything yourself, it’s important to make sure the tradespeople you hire are professional, good at what they do and stick to timeframes, while also charging a reasonable price.
Sub-standard tradies can cost you time and money you just don’t have. So, ask for referrals, speak to friends who’ve had a good experience, and be sure to get several quotes.
Renovating can be a great way to get a faster return on your property investment, but remember there are risks involved which could see you breakeven or even incur a loss.
In the meantime, you may find the following articles of interest:
The first strategy is to always pay more than the minimum.