Although renovations are common among homeowners who want to improve their homes, some renovate for profit. Renovating for profit is when someone buys a property at a low price, renovates it and resells it at a higher price. This is an excellent way of investing your money, but before you dive right in, you need to know what you're getting into to avoid crucial mistakes that may result in bad investments.
This article will let you in on the secrets to renovating for profit and how you can transform an unattractive property into something that buyers would love to get their hands on.
What to look for in a property
Looking for a property worth investing in can be tricky, and you need a keen eye if you want to ensure success. You've probably heard of the popular real estate maxim 'location, location, location', and this is something you need to keep in mind when property hunting.
Location is a deciding factor when determining the value of a property which is why an unattractive property in an excellent location is worth more than an attractive property in an undesirable location.
Devote time researching locations attracting buyers like suburbs experiencing revival or modernization. If you time your purchase right, you can snatch a property before it becomes too expensive.
This doesn't mean that you should pour your money into a derelict property just because it is in a prime location. A property should be structurally sound so you don't end up demolishing it, which may cost you more and wipe out any prospect of profits. An excellent investment is a property that looks unappealing but will look great with a few carefully planned renovations.
Know your market
After buying a property to renovate for profit, your next step is to determine your target market. Are you after newlyweds looking for a starter home or growing families who need more room for their growing needs?
This is critical because the type of renovations you will make should appeal to your target market. For example, if you target growing families, you want renovations to make the property more suitable for couples with children, like installing child-proof doors or safety windows.
Renovate or remodel?
Most homeowners think that renovating and remodelling is the same, but they are entirely different concepts. When we say renovations, you are trying to restore a property to its original state. You're trying to revive a property without dramatically altering its design.
Remodelling often involves altering the structure you are working on. An example is when you knock down a wall to combine the kitchen and the dining area or add a porch to your home.
As for whether you need to renovate or remodel, it depends on what you want to achieve. If you believe restoring the property to how it originally looked will make it attractive enough to sell at a profit, you should proceed with renovations. However, if the property needs some drastic changes to make it attractive to buyers, remodel it.
Remodelling a property is more expensive than renovating it because it requires complex design considerations. You will need to hire a home design expert to ensure that your remodelling plans are doable. Remodelling also involves hiring a construction crew, plumbers, painters, electricians and engineers, while renovations often involve hiring individual tradespeople.
Most states also don't require permits for renovations, so you can save time. Remodelling requires permits and the production of paperwork or documents that you need to secure from an architect or draftsman. These documents take time to complete and will add to your expenses.
Budget for renovate for profit projects
Your budget is a primary consideration when renovating a property for profit because you're gunning for renovations that will have maximum impact but will still result in profits when it's time for you to sell.
The rule of thumb is to try to keep the cost of renovations to within 10% of the property's value. This will help ensure that you can still make a killing when you sell the property.
Typically, renovation costs around $40,000 to $300,000 according to the Housing Industry Association (HIA). The hourly cost is around $50 per hour, but it can also go as high as $65 per hour.
What to renovate first?
If you're working on a limited budget, you need to prioritize renovations that greatly impact your property. It is tempting to splurge on renovations that will make your property look fabulous, resulting in profit loss.
Prioritize the essentials or those that will likely attract buyers, like fixing a leaking roof or ensuring that electrical wirings are safe and up to standards. Look for those that will make the house comfortable to live in because those are what buyers will be looking at.
When you have fixed these essentials and still have some money to spare, that is the time to go for nice-to-have things like repainting the interiors or updating bathroom fixtures.
Simple renovate for profit ideas you can try
Here are some simple renovations you should consider if you want to make the most out of your renovate for-profit business:
Repainting a property is a renovation project that will have a significant impact because it will make the property look new and more attractive to prospective buyers. Since you won't be the occupant of the property, don't select a paint colour according to what colour appeals to you. It is more sensible to choose a colour palette that is not too bold because you want a house colour that will attract a wide range of buyers.
Improve window treatments
Renovating the windows of a property is another high-impact renovation project you can embark on. Buyers will immediately notice how the windows look, so you might want to renovate the windows if they look grimy or have broken or cracked panes.
Selecting the replacement window is also critical and can help add value to the property. If the property is located in a high-traffic neighbourhood, consider using double or triple-glazed windows because of their sound-dampening properties. You can use this as a selling point and might help increase the value of your property.
Replacing or updating fixtures like faucets, light switches, doorknobs and cabinet handles can go a long way towards improving how your property looks at minimal cost to you. Fixtures wore out quickly because of daily use, so replacing them can help make your property look newer.
Restoring hardwood floors
If your property has hardwood floors, then you've hit the jackpot because they add immense value to a property. Scuffed hardwood floors are easy to restore, so you should make them your priority if you want to get maximum returns on your renovate for profit venture.
Stain or repaint cabinets
Repainting or staining the cabinets on your property is another profitable yet straightforward renovation project compared to replacing existing cabinets. Most buyers want properties with many storage options, so they're sure to scrutinize how the cabinets in your property look.
As mentioned earlier, the exterior of your property is the first thing that prospective buyers see, so be sure to make an impression by presenting a property that looks inviting from the outside. If your property has seen better days and looks grimy, power washing the exterior walls, driveway, and curb will make your property look fresh. If you're lucky, cleaning might not need to repaint the exteriors after removing deep-seated dirt on the walls.
Upgrade your landscaping
Buyers love properties with fantastic yards or gardens, so you might want to spend some time on landscape renovation. What's great about this is there's no need to resort to expensive landscaping services to achieve the results you desire. Just make sure that the lawn is not overgrown and repaint the fence if needed. You should also remove weeds or dead plants to make the yard or garden look more attractive.
How to save during renovate for profit projects
Don't get carried away
Going overboard during renovations is one of the easiest ways to lose profits. Concentrate on high-impact yet straightforward renovations like the ones mentioned above.
Consult an expert
Seeking expert opinion from a home designer or an architect can help ensure that your renovation project is doable and will yield positive results. An expert can advise you on whether you can proceed with a renovation or if remodelling is your better option.
Hire a project consultant
If it's your first time renovating a property for profit, then you might want to hire a project consultant to ensure that your renovation project will proceed smoothly. Use this opportunity to observe how the project consultant works and how problems get handled so you can learn new things and minimize the costs of your next project. Superdraft has efficient project consultants who can help you connect with various renovation professionals and seamlessly plan your project.
DIY whenever ONLY possible
Make a checklist of renovations that you can handle to save on labour costs. Simple renovations like replacing fixtures and cleaning up the garden are easy enough for you to handle without hiring a professional.
However, you should also know your limitations and source renovations beyond your capabilities. When sourcing out labour, interview several experts and compare quotes so you can hire an experienced yet reasonably-priced tradesman.
Renovations require materials like paint, tiles, window panes, and fixtures, and they can eat your profits if you don't know how to source them appropriately. Spend time talking to different suppliers so you can compare quality and prices. If you are working with a seasoned project consultant, ask for input on sourcing materials. The project consultant will likely know which suppliers have the most competitive prices.
Invest in your property today with Superdraft
Renovating property for profit is an excellent way of investing, but only if you know what you are doing. The guide above contains critical information you can use in ensuring that your first renovate for profit project is a success. In the right hands, a property that looks unattractive can transform into a property that buyers would love to call their own.
Get a free quote for your renovation project via Superdraft so you have a better idea of the total costings