Don’t you wish you could create more profit in almost every property project you’re involved in?
No matter what your main strategy is – subdivision, development, or something else altogether – a strategic renovation can probably add a lot a value to your property and to your bottom line.
But when it comes to property renovation, things can easily go wrong. And when they do, costs start piling up, and your profits get chewed away.
To make sure your property renovation goes well, I went out and asked 6 top property investors to share their best renovation tips with us.
Each expert was asked:
- What’s the biggest mistake you ever made on a renovation project?
- What are the most common mistakes you see other investors make with renovation?
- What are your best renovation tips to make a renovation project a success?
Make sure to read all these answers because I guarantee there’s gold for anyone, and everyone, who wants to be a successful property investor!
Renovation Tip #1: Don’t Spend $20,000 and upwards on your first property renovation without proper guidance
Jane Eyles Bennet
“Spending $20,000, $30,000, $40,000 and upwards on a renovation is a big investment and a huge risk if you haven’t really done it before.
I see all the time where people have spent too much on their Reno or they’ve put their money into the wrong things.
Renovating for profit is about strategically targeting what you spend your money on and the return that that gives you.
The problem is that there isn’t one simple answer to what adds value and what doesn’t. It depends on the property, it’s location, what you are doing with it (rent, sell, revalue, chop the block) and who your target market is.
So whether you get advice from someone like me or someone else who has successfully renovated for profit themselves a number of times, I do think it’s really important to bounce your ideas around.
Even if you have to pay a few grand for the advice; look at it as an insurance policy.”
Renovation Tip #2: Don’t over-capitalise and over-spend
“Always set your budget up front (based on pre/post Reno values and a number of other factors). Decide what you are going to do to the property within that budget (assuming you know what things really cost to get done), and then do it within that prescribed dollar value.
Often the problem lies in new renovators estimating their Reno by multiplying materials costs x sqms plus labour. That is simple enough but there are always (what I call) periphery items which is where budgets get blown.
Very often when I’m designing a renovation for someone and putting budget costing together for a client, they’ll question my cost estimates (saying they’re too high).
However, I know what goes wrong and the extra things that need to be allowed for during a Reno (22 years exp will give you that!) – and they often do not.
Biggest tip here is – trades plus materials costs for each individual part of the Reno do NOT equal the overall cost of the Reno.
Get realistic pricing up front before starting on anything and manage/monitor your budget daily throughout the process.”
Renovation Tip #3: Beware of passing trends
The Renovation Guru
Your Property Success
“My biggest mistake?
In 2001 feature walls were all the go and a purple feature wall in the kitchen seemed vey ‘in’. A few years later it was an eyesore that took 8 coats of paint to cover.
Lesson learnt: colour scheme have been neutral since then.”
Renovation Tip #4: The 3 keys for a successful renovation
“The biggest mistake I see investors make is not understanding that the location of the property makes up at least 50% of the success of a project.
Having enough pricing disparity between un-renovated and renovated properties in the same area so you can make a profit is the next major consideration.
Finally, delivering a renovation on budget and time with a result that shows the perceived value being higher than the actual cost the final part of the puzzle.”
Renovation Tip #5: You can turn a small budget into big profits by focusing on “High-Return Areas”
There’s no doubt that a strategic renovation or makeover can really add a lot a value to a property – but that doesn’t mean that you have to spend a fortune.
Spending just a few thousand dollars in the right places can potentially generate tens of thousands of dollars in value.
There are certain areas of a house and particular improvements that offer a higher return. For example, studies have shown that a large percentage of buyers decide whether or not they are going to buy a home, before they even set foot in a house.
So creating a welcoming entrance to the home that makes a good impression is extremely important, and can be as simple as:
- Tidying up the yard
- Mowing the lawn
- Washing windows
- Touching up exterior paint
- Adding plants and flowers
- Adding a good quality letter box
- Adding shiny new street numbers
For other high-return areas, check out this free report:
Renovation Tip #6: Be brutally realistic
Builder & Renovator
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“Plan meticulously prior to starting, but be brutally realistic. I do mean brutal!, That wall you want to remove, wont take an hour, it’ll take two…..
There is no such thing as best case scenario in renovating. I have done this every day for ten years now and I’m yet to see a project go completely to plan.
What this means from a budgeting perspective is you need to have contingencies in place and expect to use them. If not, that’s great, but its better to have a safety net and not use it than vice versa. (you will use it…)
I am still surprised every day by things that seem sooo simple that turn out to be a big headache.”
Renovation Tip #7: If it sounds too good to be true, it probably is
“Be very wary of trades with prices that are too good to be true. If you get at least three quotes for every aspect of the works you will get a good cross section of pricing and skill.
As a building company we find this is a great tool to keep the good guys honest as they know they are not the only person quoting the job and will try to be competitive on price while still giving great service.
I’ve run into some rubbish trades over the years often supplied by clients who have sourced their own quotes and got an ” amazing price” . It is inevitable that these end up being the biggest problems for the whole job and end up blowing out time frames and costing far more than the original quote.”
Renovation Tip #8: Use a project management solution
“Something I have invested a lot of time into in recent years, is developing a detailed project management software package. There is literally hundreds on the market, some very expensive and others are free….. see point number two ; )
It took me a long time to find the right one for our company but it has made a huge difference to how we plan, and communicate with our trades and clients.
Most use a cloud based subscription, and allow you to update tasks, timelines, key milestones, responsibilities etc, in real time and everyone associated with the project gets alerted to any changes. Some do a whole lot more, and others a bit less.
My advice is find what works for you and use the heck out of it, as the old saying goes ” fail to plan.. plan to fail” love it.”
Renovation Tip #9: Have enough fat in the deal
“Have enough fat in the deal to have a contingency or at least a few thousands just to hire labourers to do miscellaneous bits and pieces that aren’t obvious at the beginning of the project.”
Renovation Tip #10: Add wiggle room and avoid potential drama
“I try to allow a couple of days wiggle room between critical tradies so that they don’t hold each other up (which can cause much longer delays due to rescheduling & bad blood).
It’s far better to voluntarily allow an extra week or two in the overall timeframe than to have a drama unfold and cause major delays. Not to mention far less stress and agro onsite which can lead to emergency measures (cost blowouts)”
Renovation Tip #11: Focus on reliable contractors
“Don’t necessarily go for the cheap guy who can start tomorrow. Focus on developing a team of reliable contractors. Cheap, but not necessarily the cheapest (but maybe…).
Most important is that they have a ‘can do’ attitude, they turn up, do what they say they will do and they get on with other tradies to handle unexpected challenges. Then of course, look after them (be nice, pay promptly).”
Renovation Tip #12: Don’t try to do too much at once without the proper manpower and resources
Advanced Property Strategies
“My biggest mistake on renovating was when my business partner and I purchased these 6 townhouses in Mackay.
She was the project manager (I was the finance partner ) and had too much on her plate with other projects , so what should have taken her 4 weeks to do took 6 months.
WE decided to renovate 2 townhouses at a time, and all we had to do was replace the kitchen and bathroom and quick internal paint. Early on we were gungho and decided to gut 2 of the other townhouses as well, ie take out their kitchens and bathrooms too .
So we had 4 gutted townhouses, and only 2 getting rent.
Having borrowed expensive money the project blew the budget and my business partner wanted out. I had to sell up fast due to running out of cash, and lost about $100,000 in the process.
Had it been managed properly , or just re-sold as is where is, we would have made about $100,000 instead!
I made three big mistakes on that renovation:
- Trying to do too much at once without the manpower and resources
- Not going up there and supervising work and adding value where I could since the project was behind
- Borrowing expensive money
Renovation Tip #13: Remember to factor your own time into the renovation costs
“Not factoring in my own time into the renovation costs and taking this into account when determining feasibility of the project.
I took several weeks away from my business to undertake a renovation project and looking back if I factored in lost earnings in that time it would have made me think differently about the project.
I would commonly underestimate the time and effort on the jobs I planned to do myself – e.g. thinking that I could continue to work plus paint an entire house (amongst other jobs) plus organise all other trades for the project.
Nowadays I carefully consider if it’s worthwhile for me to actually do any of the physical work of the project – and mostly the answer is no, it can be done much more efficiently by others.
Being ‘on the tools’ is not my preference these days, but in saying that, spending that time and effort over several renovations has given me skills and valuable experience in renovating and managing projects, so I see it now as somewhat of a ‘rite of passage’ that renovators need to go through!”
I want to thank again Jane, Chris, Nhan, Karen and Leon for the superb tips and input in this post.
Now back to you… is there a tip that really resonate with you? Leave a comment below and let us know! And of course… don’t forget to download this week’s free report: