6 Things first-time renovators need to know

Renovation is a hot item right now.

Investors are making good money by updating old properties, manufacturing equity and increasing the rent.

It can be a risky business, though… 

What if your finances blow out?

What if you make costly mistakes along the way?

And what will you do if the project doesn’t make any profit?

If you’re a tradesman, then you’ve got a leg-up in the industry already.

But if you’ve never picked up a hammer before but you’re keen to move forward with a renovation, it makes sense to start with a small project.

Be sure to acquire the research and knowledge that will allow you mitigate your risk and give you the best chance of real success.

That means knowing how to protect yourself; how to choose the right property; and how to make sure it’s going to be profitable in the end.

These six pointers will help you on your way:

1. Feasibility: do the numbers add up?

Before you buy any property, you always need check the numbers by putting a realistic spin on the figures. 

For a fixer-upper, you have to make sure the cost of the renovation will actually add value to the property.

Have you researched the costs involved?

How do the numbers look if you factor in a 10-20% increase?

And what amount have you allocated to emergencies and over-spending?

Renovation projects almost always go over-budget, so be sure to include some extra financial padding in your feasibility.

2. Finances: can you afford it?

When renovating, gaining finance for your project can be a little more of a dance than when buying a regular property.

You’ll need to borrow enough money to cover the property purchase and renovation costs and have some buffer for issues that crop up or any delays in the schedule.

And don’t forget you won’t be receiving rent during the renovation process.

Working with an experienced broker who has expertise in renovation and construction finance is a smart move.

3. How much work do you want to do? 

The term ‘renovation’ covers a whole gamut of property alterations.

One property might need new paint, new carpet, a kitchen facelift and a little landscaping to breath new life into it.

Another might need walls taken down, alfresco areas built, a new roof and full kitchen and bathroom fit-outs.

Decide what you want to tackle, so you can refine your search and make sure you’re not taking on more than you can handle.

Also remember that structural renovations usually need council approval and building permits,  which will add time (and money) to your build.

4. Find the right suburb, and then the right property

This is where due diligence steps in.

Around eighty percent of your property investment success will come from choosing the right location and the balance from buying the right property in that location.

Research local markets to identify price points, what buyers want in a home or apartment and all the usual factors such as supply and demand and times on the market.

Once you’ve pinpointed a suburb with profit potential, target a property that fits the size of the renovation you want to undertake.

Always do pest and building inspections.

You don’t want any surprises, do you?

5. Renovate to capitalise

When you’ve found the right property, carefully choose the items you’re going to fix or add.

Updated or new kitchens and bathrooms will always be a winner.

But be careful not to overcapitalise by adding features that eat into your profit rather than adding to it.

Make sure you understand what buyers and renters are looking for and just as importantly what they’re not after.

For example, adding a pool might not increase the property value enough to even cover its own installation costs.

It might even turn buyers off – for example, if there are high numbers of young families moving in who don’t want the expense or worry.

6. Set a realistic deadline

Things will almost always go wrong during a renovation, so allow some extra time for problems to be resolved.

Factor additional time into your feasibility study, along with additional funds, so you’re not caught by surprise.

If the project will still turn a profit, then and only then should you proceed.

Depending on the size of the renovation, hiring a professional renovator or a project manager for your first attempt can help keep everything on track and within budget.

Just be sure to go in with your eyes wide open, and keep the renovation simple and neutral to appeal to the widest variety of buyers or renters, and you’ll have a greater chance of enjoying a successful outcome.

Want some help?

If you’d like to explore how some if these strategies could work for you, no one can help you quite like the independent property investment strategists at Metropole.  

Remember the multi award winning team of property investment strategists at Metropole have no properties to sell, so their advice is unbiased. 

Whether you are a beginner or a seasoned property investor, we would love to help you formulate an investment strategy or do a review of your existing portfolio, and help you take your property investment to the next level.

Please click here to organise a time for a chat. Or call us on 1300 20 30 30.

When you attend our offices in Melbourne, Sydney or Brisbane you will receive a free copy of my latest 2 x DVD program Building Wealth through Property Investment in the new Economy valued at $49.

from Property UpdateProperty Update http://propertyupdate.com.au/6-things-first-time-renovators-need-to-know/