7 Min Read.
7 Min Read.
There are many ways to add value to a property. One of the most effective ways to do it is by renovating. A new renovation can rejuvenate the look and feel of a property. A new room, flooring, or even backyard features can help make a home more appealing to potential buyers.
What inspires a lot of people to renovate is the potential to make a profit from it. Before you consider buying a house to renovate, it’s important to think about all the costs involved. Can you afford to have a house vacant while renovations are happening? The pure scale of the renovations could see your property vacant months until work is complete.
The term property flipping gets thrown around a lot. It’s the act of buying, repairing, and fixing a property before it’s sold again for a much higher price. While the concept sounds easy, many things need to fall in place to successfully flip a property for a profit. First off, you’ll need an estimated budget for repairs and renovations. Think about these costs before you start bidding on the house.
Renovating can be a worthwhile investment when it’s done right.
Renovating for profit can be a great way to create capital growth and cash flow. If it’s something you want to do for years then you’ll need to be on top of the property market and the latest real estate news. Having an eye for style and layouts is great but that’s only part of the knowledge you need to be successful at renovating property for profit.
Your journey to success in this area of real estate can take years of research and careful planning. Like we say to anyone buying their first house, don’t rush into it. Take your time. Wait until you’re confident that you’re making an informed decision before you start bidding on houses with flipping potential.
When you start your search for the perfect house don’t be afraid to ask for help. If you have some suburbs in mind then start reaching out to local real estate agents. Some agents have spent decades selling in the same areas. These agents are the ones with the most experience and are likely to have the best insights and advice on the local real estate market.
Before you start reaching out to real estate agents try and make a wish list for what you want in renovating property for profit. Your list should have criteria that are easy for a real estate agent to follow. And try not to be too picky in the process! Here’s one example of criteria that an agent could follow:
If you’re renovating the house you live then it only makes sense to choose features that you want. But when it comes to buying and renovating for the sole purpose of selling, then it’s a different scenario. Yous should be renovating the house based on what the market wants, not what you want.
It’s important to identify the most wanted features that current buyers are looking for. This is where doing your research really helps. Work out what the standard features are for houses in your investment property’s area. If any of these standard features are missing from your property then you could see less interest in local buyers.
Some examples of standard features could be a formal dining room, off street parking or a double garage. Put your mindset of potential buyers. If you saw other houses in the area with these features would you bid the same price for a house that didn’t have them?
After you have decided on what features you want from a renovation it’s time to make a budget. It’s crucial to figure out exactly how much all these renovations are going to cost. You don’t want to get stuck halfway through renovations only to find that you can’t afford the rest of them.
With careful budgeting and planning you can avoid any potential delays or missteps with renovations. Start costing everything up and finalise your design plan with a reliable builder and interior designer. Your project plan for renovations should be outlined step-by-step. There should be a clear vision of what features are being worked on first and how long they will take.
When you’re establishing a budget, always plan to save more than you need. You never know when a building project can reach a snag. Sometimes a builder won’t recognise a structural issue with a house until renovations have already begun. So budget and plan for any delays that might happen. Don’t leave anything to chance.
When you’re renovating property for profit, try and break things down with formulas. Did you end up buying your house for more than you expected? If so, then it’s time to make a few adjustments. See which areas of your renovation you can adjust costs for. If your purchase price was too high then maybe consider cancelling one of the renovation features all together.
Are you painting, or recarperting several rooms of the house? Try and break your budget down by room. See how much paint or carpet is required per square metre. Calculations like this can help you make a more informed decision about what changes you want to make to the entire house.
After you have renovated and flipped a few houses you’ll get a sense for how to calculate renovations costs. You’ll start to understand why flipping can be such a balancing act between the cost of purchasing a property and renovating it. Once you’re done with renovation don’t forget all the costs involved in putting a house back on the market too.
Before renovations begin, take a good hard look at the existing features of the house. A careful review of furnishings and fittings could save you thousands. Sometimes it’s worth seeing just what you can salvage from the property without having to buy completely new things.
Ripping out old fixtures and fittings can be a costly exercise depending on how much labour is involved. Do bathroom tiles need to be replaced when they can be cleaned or repainted? What about the flooring? Is it worth giving the carpet a thorough steam clean or should it be ripped out to make way for sanding and polishing the floorboards underneath?
When you’re renovating property for profit every little bit counts. If you can save money on keeping some of the existing fittings then don’t be afraid to use them. Just make sure they don’t detract from the value of the house.
So when it comes to renovating property for profit, don’t rush into things. Take your time and do the research needed until you feel confident. When you find a well priced house you need to adapt your formulas for house flipping. Make sure you consider what the local market wants and what you can afford.
Understand that the process for profit could take months or even years. So don’t assume you can make a quick dollar out of a house straight after you buy it. Don’t forget to expect the unexpected either. Set extra funds aside in case things don’t go to plan.
Glen came to Wise Real Estate Advice looking for a property to flip. The strategy was targeting an old rundown house then renovate for profit. Having a strict budget, we began a property hunt with the end goal in mind. Our team worked backwards starting with the final sale price of a renovated property, deducting the cost of renovation, fees/taxes and profit margin which gave us a shopping budget.
The criteria our buyers agents developed:
Check out my podcast on adding value to property with renovations.
After conducting an in-depth property search across inner Melbroune we targeted the Brunswick area. One of Melbroune’s most popular suburbs, known for it’s hip cafe’s, trams and retro real estate it made good business sense. Like with all property purchases, Wise Real Estate Advice always buys property with re-sale in mind and there were plenty of comparable examples in Brunswick.
Mark provided great advice, and saved me an enormous amount of time and research in finding properties that fit my criteria. Despite the fact that it has been a tough market for buyers, Mark was very patient, and we eventually closed the deal on a great property after the auction thanks to Mark’s negotiations. Mark is a very professional and knowledgeable Buyer’s Advocate and I couldn’t be more happy with his service. GLEN
Thinking about renovating a property for profit? There are many factors to consider in selecting the diamond in the ruff property to turn a healthy profit. Prior to being a buyer’s agent I sold many homes to amateur renovators. I discovered there was allot if skill in selecting the right property, knowing what to renovate and a correct selling strategy. Experienced buyers advocates can help you with the right property selection pointing your project in a profitable direction. Below are some points I look out for:
MAKE YOUR PROPERTY STAND OUT
At any one time there are hundreds of homes buyers can choose from, how is your property going to stand out and achieve a premium price? Desirable features make a house stand out from the rest. Look out for a property that has the potential for a high quality finish, high ceilings, unique landscaping or floor plan.
GOOD FLOOR PLAN
A good floor plan is one of the most important selling points of a house so renovators need to pay careful consideration when looking for property’s. Look out for multiple living spaces; windows that maximise natural light with good out looks. Consider the functionally of the living spaces and how practical it would be to live in the property.
OFF STREET PARKING
Off street parking is something most people expect to have with a property. Not having off street parking will be a detractor for some buyers and reduce completion when bidding for your property.
CHOOSE A PROPERTY BASED ON LOCAL MARKET DEMAND
Consider the demographics of the area and target a property that will attract the most buyers when selling. More competition increases your chances of achieving a premium sale price.
Avoid properties that need structural work. A key factor to a profitable renovation is adding visual value to a property, this means focusing on surface renovations that buyers and tenants can see. Spending money on structural improvements that are unseen can be costly and reduce profit. Buyer’s agents always recommend employing the services of a building and pest inspector. A building inspection report will identify major structural defects and reduce risk.
DECIDE YOUR PURPOSE
Knowing what you hope to get out of your renovations is fundamental. If you’re hoping to add a new floor or expand your existing layout there are different considerations than if you were to just change your floors and cabinetry. Mark Ribarsky, senior buyer’s advocate, suggests “sit down and work out what you’re trying to accomplish: are you hoping to make the place more comfortable with your existing layout, is the primary purpose to add more equity into your property, is your family growing and you need more space, or are you preparing the house for sale?” Depending on the reason you will have a better idea of where to start and how large a budget you will need to commit.
MULTIPLY YOUR OPTIONS
The easiest way to capitalise on your improvements is to save money along the way. For each job obtain three quotes from relevant tradesmen to make sure you don’t pay more than you have to. Remember though, that cheapest isn’t always best so make sure you do some research into the credibility and workmanship of the company. Word of mouth and online reviews are a valuable tool in ensuring the company you choose will be the best for your project.
PUT SOME WORK BOOTS ON
There’s a reason that many reality shows on television focus on DIY. Many jobs within a renovation can be easily accomplished without a trade qualification or without breaking a sweat. Painting, fitting internal doors and laying floorboards are simple things that can usually be achieved without the need for many tools. There is a great range of options online to help you through the process or check with your local hardware store as many provide free, or cheap, DIP classes to help you learn a range of skills to apply to your renovations. It is important to check with your local building authority about building restrictions in your area. Many states require certain works to be conducted by registered tradespeople and you may even need to get a permit for the jobs you undertake.
It may feel overwhelming choosing the right flooring, fittings or fixtures for you’re your renovation, but that doesn’t mean you have to spend a fortune. Once you have a good idea about what type of style you’re going for, shop around. There are great deals to be found online or by taking a trip out to a wholesaler to get the products you want at a reduced cost compared with major retailers. The money you save by shopping around will help keep your budget down or even add to a much-deserved post-renovation holiday.
Buying property is an exciting time and a buyer’s advocate may be just the right person to help clarify your options. For an obligation-free conversation contact Wist Realestate Advice on 1300 009 473 to find out how their services can assist your property needs.