Renovating for profit can be a very lucrative pastime, but it also takes a lot of research and discipline to do it right. It’s all about carefully adding real value to a property over the long haul. So don’t for a minute think it’s some sort of get rich quick scheme – or you’ll be sorely disappointed.
But one thing’s for sure, there’s a great chance that if you adopt the renovating for profit mentality then you’re highly likely to get a great ROI from a the sale of your property in the future.
There are many people who renovate multiple properties at once. But I wouldn’t recommend this – especially for a beginner. Learn the ropes first then scale up.
The good news is that most homebuyers will opt for renovated properties because they are able to move straight in and not have the hassle of doing the renovating themselves.
What is Renovating for Profit all About?
The main reason why investors are renovating for profit is quite simply to sell it for a much higher price once the work is complete.
Usually, a property that is dated and lacks appeal inside or out is unlikely to fetch a large amount when it comes to selling. Well at least not as much as a renovated home will. This is why many property investors see renovation as a great opportunity to make some extra cash.
Here are some things to keep in mind:
- Make sure you purchased the investment property in the right location.
- Don’t pay over the odds for the property to start with.
- Purchase a property type that’s in demand.
- Don’t blow your renovation budget or you’ll end up eating into your profits.
What is a Property Flipper?
Property flipping is a term coined to describe the act of investing in a home, repairing it and then re-selling it for a profit. And a property flipper is the person that actually does the property flipping.
For the most part, they don’t really care what they invest in, but they certainly want to make money from the buying, renovating, and selling process. There are lots of people who do property flipping for a living, investing their profits into the next investment and so forth. That way they build up their investment property portfolio and their bank balance.
In actual fact, property flipping is a very viable business option that can provide a steady income over time. But you do need to study the market closely in order to find properties that will bring a good return on investment.
One of the main downsides is that you also need to deal with extra costs that may or may not be recouped over the long run. This might seem problematic at first, but in the end, it’s the return on investment that should be your main focus!
Things to Consider When Renovating for Profit
Keeping on top of costs are crucial when you are renovating for profit. Pay particular attention to the purchase and renovation costs right from the start.
As we mentioned earlier, these costs will vary quite a bit depending on the situation. Some of these include:
- The purchased property price especially if bought at auction.
- Stamp duty that is paid from your own pocket.
- Mortgage interest during the holding period, something that does add to the total cost!
- Selling costs – advertising, real estate agent fees, etc.
As you can expect, there are quite a lot of risks to take into consideration.
Renovating for profit can easily place a lot of strain on your life and your close relationships.
It can be an all-consuming activity and you will rarely find the time to do anything else, especially if you are also doing some of the work. It might not be a problem at first, but after a while, it can eat up quite a lot of time from your life.
Obviously, there are lots of advantages that come with renovating for profit. If you can get a fast renovation and sale turnaround it means that your bank balance will be rewarded quite significantly.
If you invest your own time and do a lot of the work, you will get to keep most of the profit for yourself after taxes. Also if you do smaller renovations then there’s probably no need for a council planning approval and you can get the property on the market again quickly.
7 Renovating for Profit Tips for Success
1. Research Like Crazy
Remove the emotion out of the equation and learn which home improvements are the most likely to add value (and profit) for your style of home, suburb, and the current market conditions.
2. It’s Really Not About You at All
If you want to make serious money you need to focus solely on your target audience. Leave your own tastes at the door and keep design choices as neutral as possible.
3. Penny Pinching Comes in Handy
Whatever you do don’t blow out your renovation budget. You’ll only end up with cash flow problems and unhappy suppliers and tradespeople. It’s also likely to increase your blood pressure no end.
You could also hire a professional valuer to help you estimate costs and work out a strict budget. Always add a buffer for those unpredictable situations that might crop up.
4. Simple is Best
Often small, low-cost improvements can make a huge difference to your property’s value. So why not try a fresh lick of paint, new bathroom fixtures, new lighting, a splash of new door and window handles. These can all help a property increase its rental yield and sales price.
5. Your Real Estate Agent Is Your Best Friend
It’s a good idea to start connecting with real estate agents in the area you’re looking to renovate for profit. Agents often chat to a network of prospective buyers before they list properties. So make sure you share your goals with them so they can match you with buyers when the time comes.
6. You Need a Good Team
There are so many contractors that you’ll need to hire during the renovation process. Rely on professionals to transform a property safely and soundly and make sure they’re licensed. Plumbers, electricians, roofers, cleaners, and painters are some of the workers you’ll need. Invest in a competent team you can trust and build good rapport with them. Grievances and misunderstandings cost time and money.
7. The Bigger the Better
There’s no doubt that Aussies have the biggest houses in the world and they love their space! One popular way to create more appeal in a property is by enlarging or adding more rooms. If you’ve already got big, unused areas, why not consider creating multiple rooms from them, especially if it increases bathrooms or bedrooms.
Is it Really Worth it to Start Renovating for Profit?
Although it might seem like it’s just a property flipping business, it’s a lot more than that. It’s a sustainable income for you and a business worth growing. It’s not just a flash in the pan opportunity.
At first, it will be hard to make connections in the industry especially sourcing good builders and tradespeople. But just take your time and be persistent. It will definitely pay off!
Is it hard to renovate for profit? Well it does require a lot of work and commitment but it’s one of the best ways to make a yearly income with just a few property flips. It certainly beats the 9 to 5 grind don’t you think!
Enjoy your renovation.
All the best,
CHECK OUT THIS BLOG POST FOR MORE: Why Bother Doing a Home Renovation?