Did you know that renovating for profit is one of the fastest and surest ways of making money through property?
It’s true! It’s a fantastic way of creating capital growth and cash flow.
But what a lot of house flippers don’t realise is that it takes more than an eye for design to increase the value of their property.
In fact, many lose money on their renovations. They fail to plan and don’t renovate to what the market wants.
In this article, I’m going to show you the secrets to renovating for profit. When you’re done reading, you’ll have a simple 5-step process you can apply to any renovation to ensure that your venture is successful and profitable.
Step 1: Do Your Due Diligence
This first and most important step will determine whether your deal is profitable or not.
Don’t rush this step. In order for this process to work, you need to spend a little time attending open homes and monitoring the price of sold properties in the area – both renovated and unrenovated. Without this information, you won’t be able to work out how much you need to spend to come out with a decent profit.
It’s also important you keep an eye on pricing disparity. If there’s little difference in price between renovated and unrenovated versions of the same type of property, there’s no value in renovating. Buyers won’t be willing to pay you what you need to make a profit.
Step 2: Renovate To What The Market Wants
Now that you know you’re going to make a profit, the next step is to choose how you’re going to renovate.
If you’re renovating your own home and you’re not planning on selling, renovate however you want.
But if you’re renovating as a flip, you need to be renovating to what the market wants. You need to look at what style of property is most popular in the suburb. Work out what properties in that area have in terms of number of bedrooms, whether it needs a formal dining room, whether a European style laundry will do, and if you need to factor a garage into your plans.
Think of your renovation like a product: all you’re doing is creating a product to meet the needs of the market.
Step 3: Plan Your Renovation
At this point, you know your renovation will be profitable, and you know how you’re going to do it. So now you’re ready to start knocking down walls… right?
You need to identify the full scope of works before your renovation starts. Cost everything up, finalise your design plan, buy all your materials – get these things done before you start.
Everytime I start a new project, I map out step-by-step the sequence of construction. I work out what materials I need for each task. That way I know if I’m over budget before the reno starts.
As the old saying goes, “If you fail to plan, you plan to fail.” What you do before your renovation determines your profit margin.
Step 4: Know The Formulas
So you’ve done your due diligence, you’ve worked out your design, and you’ve got a plan in place… What happens next?
It’s time to do the maths.
When you’re renovating for profit, everything is formulas. From what you buy and resell at, to how much money you spend on your renovation – every detail is important.
Once you’ve applied the formulas, you’ll have a clear picture of the profit you’ll make on your renovation.
Step 5: Save What You Can
If you want to make even more money on your renovation, keep reading.
Before you start your reno, take a good look at what existing fixtures and fittings you can keep to save money. When you’re renovating for profit, every fixture and fitting you rip out costs money to put back in. Your ability to refresh what’s already there can save you a lot of money – and that increases your profit.
Interested in learning more about making profit through property? Attend ADPEN’s upcoming property workshop or get in touch today.