Renovating is an exciting concept for most people. Having the chance to pick your favourite paint colours, go shopping for all the appliances, fixtures and fittings and generally put your signature to something can be a real buzz.
Renovating for a profit on the other hand, can be a little daunting. How to make sure you really do make a profit? What should you do to the property? How much money should you spend? Will you stay on budget? Will the property ultimately sell, rent or revalue as you need it to?
There is a definite science to renovating for a profit, which is why some people get it right – and some don’t. You need to renovate the property in the right way (that is a whole other volume of books I could write about right there!) – but first you need the right property to begin with.
In fact, this is one of the questions I get asked most is; ‘How do I choose the right property to renovate in the first place?’
It’s not enough to just buy an old dunger – the worst house on the street and think you will make a profit on it. Nothing is guaranteed in renovating (particularly when renovating for a profit) but you can err on the side of the positive by selecting the right house in the first place.
When I choose a house to renovate, I have a checklist of 7 main things I look out for. The more tick boxes I can put next to each of my checklist items, the better. Ideally the property will be:
- 15-35 years old
- Structurally sound
- Have minimal necessary invisible costs – such as re-roofing, re-wiring, re-stumping, replacing windows etc.
- Be either too busy looking (lots of pattern and old fashioned finishes and materials or overgrown garden etc) OR
- Too plain – for example no landscaping, no contrast in materials or colours
- On a street where there is a mixture of house styles (e.g. there is only limited value you can add to a 3 bedroom brick house on a street with only 3 bedroom brick houses)
- Mostly a cosmetic reno with potential to add a bedroom or an ensuite without extending
Other really important factors to consider when renovating for a profit are:
- Did you buy at a discount? It’s often not enough to rely on the renovation alone to return you a good profit. You need to buy well or have owned the property for some time to give yourself a head start
- Is there enough of a jump between the value/cost of your property unrenovated vs renovated (comparative property). I.e Do the numbers stack up?
- Are you comfortable with the extent of your renovation? Don’t do anything that makes you feel like you’re in over your head – get help if you need to
- Can you get early access (if purchasing) to begin planning or implementing your renova
For more tips on renovating for a profit, visit www.hotspaceconsultants.com
© The copyright to this article is held by Jane Eyles-Bennett. 23/5/12