You’ve watched Channel 9‘s The Block and have decided to buy, renovate and sell your own Aussie castle for a profit.
The show – where the audience gets to see the stresses, tantrums and sleepless nights experienced by the contestants – has been a repeat ratings winner, and its success has encouraged a whole generation of property investors to turn their hands to renovation. Not even a lack of commercial profits on some renovations over the years has dampened their enthusiasm.
Our collective experience of renovating is not much different. Despite careful planning, over 40 per cent of renovators find renovations end up being more expensive than they thought, and half find unexpected jobs pop up during the process. Then there’s the added tension from relationship strain, stress and extra time it often takes to complete the renovation.
So how do you lessen the pressures of renovating and make it financially viable? Here are four rules that will minimise your risk and give you a good head start.
1. Don’t pay too much
Profits are often made at the beginning of a renovation and not the end. If you pay too much at the outset, you will be chasing your tail trying to make it profitable at the end. It helps to look at the price of completed properties in your area, and work backwards from there to determine a reasonable buying price.
2. Be realistic with your budget
The simple fact is that it usually costs more and takes longer than you expect to complete your renovation. A simple rule of thumb is to factor in your holding costs and sell costs, then add 10 per cent to the total.
3. Renovate with your buyer in mind
If you want to sell after your renovation, start with the buyer in mind. Talk to a real estate agent and understand the demographic that seeks accommodation in your area. Plan your renovations to suit the type of person who’d want to live in your area.
4. Don’t get personal
One of the most common mistakes is becoming too personal with the renovations. If you won’t be living there, don’t add your personal style. A hot pink feature wall will turn off buyers who don’t like the colour and who don’t like painting. Keep the decor neutral and you can’t go wrong.
Research
Doing your research early will pay dividends at the end. Above all, remember that renovating is hard work and not a license to print money – but it can still be personally and financially rewarding if you take heed of these lessons.
Moneylogue 