The ultimate goal of many property investors is to make a profit when the time comes to sell. For many property owners, renovating to add value might seem like a simple enough concept, but the reality is that it not only takes money, it takes knowledge and skill.
We had a look at what it takes to renovate – here are our top tips to help make sure that you’re adding value to your property.
Use your skills where you can
At Loan Market we believe the people who are most likely to make the biggest profit in renovations are those who can save money in the process. Being handy around the house can stretch beyond fixing leaking taps – utilising the skills you have can have benefits throughout your renovation. If you have carpentry, plumbing, electrical or landscaping knowledge – put it to use where you can rather than hiring someone to do it all.
Look at reality shows such as The Block; you might notice the contestants always paint the properties themselves. The difference between hiring painters and buying the paint and doing it yourself is huge.
Don’t get emotional
It’s easy to lose yourself in a renovation – it takes your time, your energy and it’s all going towards your biggest asset. But when you’re renovating to add value, it’s important to keep your emotions in check.
When shopping around for materials try to avoid a “have to have” mentality. Just because you love something doesn’t mean it’s the most suitable, functional or economical option in a value-add sense. Keep in mind that you’re renovating to make the most out of your future sale – it won’t be your home forever.
Be aware that overspending on the fixtures and fittings of a renovation could lead to less profit come sale day.
Understand the selling costs.
We decided to leave you with (what we think is) the most important point – know the cost of your ins and outs.
When you renovate to add value, it’s not simply a matter of calculating a budget for renovation costs. Think about the cost of stamp duty, the commission paid to the real estate agent, the cost of marketing your property when selling and capital gains tax.
The reason you need to think about all of this is because it can cost you a fortune. All of these things – on top of what it costs you to renovate – eat into your profit.
Understanding all the selling costs can not only help you determine your renovation budget, it can help you identify how much value you need to add to your home in order to make a reasonable profit.
Speaking with a mortgage broker before you start your renovations is the first step in identifying what you can and can’t afford.