Television shows like The Block and House Rules make it look easy. A lick of paint, a slick new bathroom, and bingo - it’s raining money.
But the truth is, knowing how to get the biggest bang for your renovation buck can be tricky.
The Property Mentors CEO Luke Harris said renovating could be personally and financially rewarding, but like all aspects of property investment, it was important to have a solid plan.
“Renovating is still one of my top strategies because you can make excellent profits,” he said.
“With the right renovation on the right property in the right area, with a proper renovation plan and cashflow forecast, and factoring in all expenses – including holding costs, contingency and selling and leasing costs – overall it can work very well.”
He said a good rule of thumb was to only spend your capital on items that improved liveability and to make sure the renovation matched the value of the property.
“If you have a $2 million house then, of course, the renovation needs to be of a higher standard than that of a $350,000 apartment,” he said.
The best way to avoid overcapitalising was to focus on a few key areas of the property - and keep your emotions in check.
“Treat it like a business, and make business decisions only,” he said.
The positives:
It’s satisfying: finishing a project is rewarding, particularly if the work makes you profit.It can add value: a well-planned and executed renovation can add thousands to the value of your property.You can outsource: you can reap the rewards without getting your hands dirty.
The negatives:
Time is money: renovating takes time, during which your property isn’t earning money.It’s a big commitment: you can’t change your mind halfway through a project.Inexperience is costly: learning on the job can cost you time and money.
Reduce the risk with good advice
Knowing whether to add another bedroom or bathroom, replace the carpet, or if a new kitchen will be an over-capitalisation can be difficult – particularly if you’re inexperienced.
There are so many variables when contemplating a renovation, and having a skilled property team around you will give you the winning edge.
Your team of experts will be familiar with the area, the competition, potential renters and your financial position.
They will know where you should be investing your money and what kind of rental returns and tax benefits those upgrades can achieve for you.
When it comes to finding the right team, the old saying ‘you get what you pay for’ rings true.
Often the more you spend on getting the right team behind you, the more you will earn through the short and long-term benefits they achieve.
An excellent property manager, knowledgeable accountant, and experienced property mentor will give you the best possible advice on how to make the most of your renovation dollars.
How The Property Mentors can help
Here at The Property Mentors, we’re privileged to work with some highly talented, investment-focused accountants, property managers, financial planners, solicitors, financial advisors and more.
They bring together a wealth of knowledge and experience, working together to deliver successful results seamlessly to our members.
With your entire team at the ready, support from The Property Mentors and our proven roadmap to success, you’ll soon have the confidence to start realising your financial goals.
