Renovations are not a new concept in the world of construction, but what most people don’t realize is how renovations have now emerged as one of the best places to invest your money in. Basically, you search for poorly presented properties, one’s that are below median price, and pledge to change that through the renovation process. Easy as it may seem, there are a lot of investors who find themselves shortchanged in the end upon selling the property. So before diving into the realm of investing in renovations, try to ask yourself the following questions first.
- What makes the property worth renovating?
Is it the overlooking view of the suburb? Is it the accessibility to other major areas? Or is it the fact that there is a nearby pizza parlor for the midnight pepperoni pizza cravings one may get? Before actually buying a property and deciding to renovate, do make sure that there is already worth that can be brought out from it. Most people think that just because a property is existing, people will want to buy it immediately. Nowadays, people choose a house based on its location and access to immediate needs. Try to research about the history of the location the property belongs to. Try to discover hidden value that the initial owners did not know. This will definitely add to the factors that may get a prospect buyer to purchase the said property.
- Is it cheaper than building an entirely new property?
Most people think that renovating costs less than building a new property. Most people underestimate the possible costs it may take to meet your goal for the establishment you aim to renovate. Take note that this will always depend on what is existing and what can be reused. For example, is the foundation of the building stable enough to be continued? This of course must be the 1st thing you need to check or else you beat the purpose of reusing. Next, check if there is anything that can be kept to preserve the “vibe” of the place. When a property carries such, then there is a possibility for the project to cost less. But when you find that most materials are already outdated, then that’s when the costs go up.
- How much should you have as a start-up capital?
Well, since you are going to deal with buying property, whether it be a house, an entire building, units or a shed, search for the possible price ranges of these properties, or that one kind of property you wish to focus on. Next, be sure to educate yourself in regards to the costs of the best possible materials you will be using in the future projects you are to embark on, alongside researching about what is trending nowadays. What are people interested in the most that will definitely fit the budget you are eyeing to spend as capital for this business endeavor? It may be somewhere between a couple of thousand dollars to somewhere in the hundreds of thousands. Take note that this will depend widely on the kind of property you wish to refurbish.
Also, research about the current market ceiling price of both brand new and renovated property. This will give you an idea of how much you can spend and get in return as profit and addition to your start up capital.
You have to understand the ins and outs of construction costs and materials, not to mention the manpower you will need. Remember that you are not going to be working alone, and that you will need all the efficient help you can get and that should be a consideration in mapping out your ideal capital for this endeavor.
- What is your target return?
Same with any other project, you have to make sure that you have a specific amount of money that you are willing to shell out for everything that can possibly go wrong. Always monitor your expenses to see if you are still well below it or if you are close to hitting budget but not to 100% construction.
Setting a budget will also help you visualize a return. Do not, under any circumstance, expect too much from a project and that is why you must envision a project that will not drain your bank account to the last penny. Costs will depend on your target market, and this will remind you not to go overboard and remind you of what the project aims to earn. Do not over capitalize, this is what usually causes a project to fail. When your property is not bought, then it will double your costs and beat the purpose of the project. Make both ends meet, yours and that of your target market. You don’t want to see a buyer feel bad about him/herself for not being able to afford your property because you decided to place a higher value that what is meant for it.
People do research as well and will always go for the “good buy”, so always make sure that your property belongs to that category.
- Who do you plan to sell to?
Always have a target market in mind. Everything that you will do to the property must answer the needs, wants and general preference of your possible buyers: from aesthetics to materials, to foundation and presentation. Never compromise materials for aesthetics but do not neglect the beauty factor as well. Some people, if not all people, want a pretty but sturdy building. If you can make everything meet in the middle, the better. A family of 4 will search for something sturdy, homey and child friendly. You have to know the specifics of how they see that house fit into what they are looking for.
- Is this experience similar to popular notion?
No. Contrary to what our favourite extreme makeovers for properties, your personal experience is nowhere going to be the same with those stories. You are going to make your own version and story.
Do not disappoint yourself just because it did not happen in that one show that you like watching. Look at those shows as fairy tales, and admit that fairy tales are different from reality. Truth be told, most of those episodes are scripted and appear to be more challenging than what you can possibly encounter. Do not peg yourself on the pattern that they go through for you are about to go into a different variation of your project.
- Should you have a vision for this?
Just like any other project, you have to make sure that you have a vision. Do you envision building homes for families to make memories in? Do you envision building establishments that will cater to the everyday needs of the community? Or do you long to provide an avenue for entertainment? Setting a vision will keep you on track especially when you find yourself on the verge of giving up on that project you started.
- Is it going to be easy?
Of course it won’t, and you have to understand that. It will always be a hit and miss process but once you learn from your misses, the hits will come easier than ever. You will get frustrated over building costs and permits to apply for, but always remember your vision. This will keep you going.
- What particular properties should you consider renovating for profit?
From a house to an old warehouse or an old airplane hangar, there are a lot of properties that have lost its value either because of time, or lack of funding from its original owners. In this manner, always remember the saying: “One man’s trash is another man’s treasure.” Your vision will guide you in the entire process, and will surely give you the fulfilment once you see the finished project.
- Is renovation simply a bigger scale DIY?
Yes. It is your chance to pull a DIY with the chance of actually getting returns from it. If you are the kind of person who has an eye for details, then go ahead and immerse yourself. You get to plan the most outrageous visions and execute them hoping that someone somewhere enjoy the same taste as you.
All in all, it may seem like you are asked to cross a railroad blindfolded despite hearing the train’s horn blowing not so far from where you are. But life and business is all about taking the right amount of risks and understanding how far you can go. You can never go wrong with investing in what people long to have. People who are looking to buy themselves a home they dream to have will always go for the house that will hit them right in the heart. If you choose to invest not just your money, but your heart as well in the project, then it will always come through in each property your work on. The most successful entrepreneurs and investors are the ones who learned the process one step at a time, sometimes taking 2 steps backward. But in the end, they find themselves in the finish line. Anything we work hard for will always have a way of paying us back tenfold. In this endeavor, you get experiences, relationships and of course the return of investment. What more can you ask for? Besides, where is the fun in being too safe?
If you are interested in investing in renovations, and you want to know more about home renovations, feel free to visit our site at www.platinumhomebuilders.com.au. We are so excited to assist you.
Author: Clarissa Leary
Bruce and Clarissa from Platinum Homes Hobart have been working in the building industry since 2003 and are active Property Investors. Their experience and skills extend too: New Homes, Renovations, Developments & Investing, Commercial and Maintenance in Hobart, Tasmania.