You have been misled!
Those reality TV programs will tell you renovating is always a quick, easy and surefire way to generate more profits from your property.
But we’ve got news for you.
Renovating won’t always make you money. In fact, sometimes a property renovation can drain your bank account and your projected profits to the point where you would have been better off not picking up the tools in the first place.
In this article, we’ll go through how, and why, many Aussies are failing to add value to their property through renovation.
And we’ll cover some of the basics you need to know before your next renovation.
So, without further ado…
1: Buying in a stagnant or falling property market
This is a common trap that many Aussie investors fall into.
In this situation, renovations won’t necessarily add value to the value of your property, but instead will boost its rental appeal and potentially allow you to ask more for rent.
This problem is compounded when investors buy a property with the purpose of flipping it.
When you are looking for a property to renovate and flip, always make sure you buy in an area that is on track to grow in the coming months. By adding value early and selling as the market reaches its peak, you’re more likely to make more from that property.
2: Conducting ”invisible” renovations
Electrical work, plumbing, internal infrastructure…
While these renovations are essential to a fully-functioning property, they’re what we at Adpen have termed ”invisible” renovations. You can spend money in these areas, but prospective buyers typically are non the wiser.
If repairs are needed urgently, of course make sure you fix the faulty wiring or the leaky pipes. Just don’t expect a value jump or to be able to ask for more rent. Tenants expect these services to be provided regardless.
3: Over-capitalising on your renovations
We see owners all the time adding pools where they aren’t highly sought after. You don’t add value by throwing in a pool!
Likewise, installing high-end finishes to a low-end property is a move that rarely adds to the property’s value.
To avoid over-capitalising on your renovation, always start with a valuation and create a budget. At the end of the day, if it doesn’t meet your budget, you shouldn’t be doing it.
4: Structural renovations of your property
Plumbing, re-stumping the property… these things are also ”invisible” renovations and won’t add much to the value of the property.
Sometimes larger structural renovations can add significant value. However, when you factor in time delays for things like development approval, often your profits will disappear into holding costs.
When it comes to renovating, we always recommend that beginner investors stick to cosmetic renovations.
Now that we’ve warned you about some of the potential issues that come with property renovation, we’d also like to say that now is a great time to renovate and add value to your property.
Remember: make sure you own the right property in the right location. Just as important – undertake the right renovations and don’t over-capitalise. If you need more advice on making the most out of your property renovations, the team at Adpen are just a phone call away!