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Mar 27

Top Tips On How To Renovate For A Profit

Top Tips On How To Renovate For A Profit

Renovate for a Profit

Renovate for a Profit

 

Renovating for a profit sounds easy to a lot of people, right? Get in there, do a renovation and make some money! Well, I’m not going to say its easy but I will say that the more you know about the process the easier it will become!

In my experience, you need to do three things both simultaneously and really well when attempting to renovate for a profit.

1      Do Your Due Diligence:

This is by far the most important aspect to consider when you are looking to renovate a property for profit. There are three research factors to consider when looking at due diligence.

–         Suburb: You need to become an area specialist. This includes knowing things like pre-renovation sales prices, post-renovation sales prices, streets to avoid purchasing in, flood zones and demographics

–         Property: Ensure all inspections are done prior to purchasing, finding out your pleasure points of your target buyers market (what do they like, what do they dislike, what do they value) and ensuring that you can do the renovation with the allocated funds

–         Financial: know how much you can borrow and what you can spend on a property before you go shopping. Without knowing these three things in detail you cannot possibly know how much money you can expect to make.

2    Know Your Numbers:

there are two basic formulas I live by when I am doing a cosmetic renovation on a property with the intention of making some money. To ensure the property is going to make a profit you need to ensure the property will sell for 133% of the purchase price. For example, if you purchase a property for $300,000, you need to be able to sell it for $399,000 to make a profit.

The second formula for success is to allocate 10% of the pre-renovated property for the renovation itself and stick to it. So, if you run with the above property, you would allow maximum of $30,000 on the renovation.   When working with this renovation budget, keep in mind to spend money on things that are going to increase the value of the property. If you can avoid things like plumbing and electrical wiring, do so, as these are things that people do not value and they will add very little value to your property.

3   Time Is Everything:

If there is a delay in your process this can add thousands of dollars on your budget as well as blow out your time frame. Time frame and budget are two of the most important tools in your toolbox and should be seen as conjoined twins. If one moves, generally the other one does too.   Some tools I use to keep these two aspects in check are writing everything down and sticking to your plan where possible. Also, make sure you keep your trades people accountable for their work and their time frames. Sometimes it is very challenging keep them to schedule, however, if unforeseen things occur and you are project managing things well then the impact of these delays will be kept to a minimum.   Any decision that has to be made quickly and leaves no time for all of the above research to be considered should be very heavily reconsidered. A property renovation needs to be without emotional based only on facts and knowledge. Lets be honest, the future of a renovation is hard to predict but it can be anticipated with the proper homework on each and every potential property renovation project. For more information and things to avoid watch this short video.   For more articles on how to renovate for a profit go to PropertyExtreme  Good luck with your renovation!

Written By Deanne Heath


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  1. 7 ways to Earn More through Property starting with no money. | Earn More Weigh Less

    […] and renovation done quickly so the property brings in an income as quickly as possible. This takes good planning and the ability to organize the right tradesman at the right […]

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