How often have you said the following phrase? Ooh, we should buy that super run-down place that's just come on the market, do it up and then sell it on. We'd make a fortune!
It's a well-trodden, romanticised idea. Property investors all over the world dream of buying a dilapidated building, throwing time and money at it until it's a gleaming, dream home by the time they're finished with it. Idealised? Yes. Unattainable? No.
There's a lot to learn before renovating your first property: being an excellent property investor and an excellent renovator are not one and the same. Here are our tips on making renovation go smoothly (and profitably). Pay attention.
1. Investment Properties are NOT Your Home
You can picture how it goes: the renovation home becomes your baby. You put your own time and money into reviving it and it can quickly become your vision of your home. Investment properties are a business. You need to remember that every decision you make needs to reflect the profit you want to make.
2. It Takes a Village…
Even the most talented DIYer in the world will need copious amounts of help on their renovation project. Any job worth its salt will employ experienced contractors to carry out the work quickly and efficiently. If you're doing the work yourself and roping in friends and family, remember you will be eating into their own precious time. Also, it means the project could grind to a halt due to their individual commitments.
If you don't already have the connections, make sure you're choosing reliable, reputable companies that are tried and tested. Professional General Contractor, Tom Silva, shares his expert tips on hiring a solid contractor in this article.
3. Don't Scrimp on the Scope of Work
Before a single nail is hammered into the wall, you need to make sure the scope of work is nailed down. The Scope of Work is the foundation of your project. It needs to be detailed and it needs to be clear, as it's essentially your to-do list that all contractors are going to follow religiously.
Learning how to write a Scope of Work is down to you.You need to learn to avoid any ambiguous language that could be misconstrued; clarity is key here. Check out this article by Fortune Builders, on how to write an effective Scope of Work.
4. Don't Underestimate Cost
Accurately assessing the cost of a project is one of the most difficult tasks you'll come up against. It's so easy to go over budget, but if you follow the Scope of Work as a guide you'll be more likely to stick within it. Create an extensive materials list for each part of the project that will help you pinpoint the exact materials cost. This post by Lowe's Pro Services gives you handy worksheets for each potential stage of your project.
If you're taking on more than just a lick of paint you're going to need capital to pay contractors and buy supplies. At times, you may feel that you're haemorrhaging money and can't see an end to it. Try not to take on more than necessary.
5. Don't Overspend on Finishes
There's no better way to overspend than when finishing off your newly renovated property. This comes back to our earlier tip of remembering that you are not going to live in this house. It's so common for a renovator to fall in love with the property; it makes sense, it's a labour of love, after all. But the moment you start thinking of gold-plated fireplace fixtures, you can safely say it's time to stop going overboard and squeezing profit, which in turn will reduce capital and buying power for your next project.
6. Be Ready for Anything
You need to make sure you stay flexible. Anything can happen in the renovation game and you can't account for every possible obstacle. Even with a well-oiled contingency plan, you're still going to run into unexpected issues and hidden defects that may have not come up at survey. For example, you may need to pull up a floorboard to check some plumbing and unearth damp or rot. This means you're going to have to quickly think on the hop and make some cutbacks.
This is where your experienced contractor will come in extra handy. Make the most of their expertise and knowledge; it's going to be a huge help at some point along your journey. There's no doubt that renovation can be a tough part of investment but, if done correctly, it can be a truly lucrative and exciting business venture.
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