Should you renovate for profit?

Renovating a property is an exciting and sometimes stressful process. It’s also a hugely popular one, as the success of TV shows like The Block have demonstrated. Get it right, and a property becomes more stylish, comfortable and, yes – valuable. On the other hand, getting it wrong leads to exhaustion and potential financial disaster.

When planning to undertake any kind of renovation, it’s vital to do the necessary research. A renovation can be as simple as a fresh coat of paint or as complicated as redoing entire rooms, but not all updates and improvements will increase value. Only carefully considered upgrades that take into account what local buyers really want in a property will lead to capital growth.

If you are considering renovating for profit, here’s what to keep in mind:

Don’t overpay
If you a purchasing property for the sole purpose of renovating and reselling at a profit, what you pay will have a big impact on what you could eventually make when you put it back on the market. Renovators who make the mistake of paying too much for a property up front often end up trying to make up for it during the renovation process by cost cutting or taking shortcuts that diminish the quality of the work. Brush up on your negotiation and auction bidding skills.

Plan
Jumping in too soon means wasting time and money. Be realistic about what you can afford, how much time you have, and the amount of hassle you can handle. For large-scale renovations, plan in stages, easing into things with a small project first. Too many people leap into renovations without a realistic idea of costs and timeframes.

Consider local home trends
In leafy suburbs, open plan family living spaces are key. In inner city areas, clever apartment storage is more important. Do your research on buyer demographics and market trends in the suburb to determine how best to tailor your renovation to those tastes and preferences. Advice from local real estate agents, architects and designers can be invaluable here.

Put emotion aside
You won’t be living in the home after it’s renovated, so your particular preferences shouldn’t guide the changes. Act rationally and plan your renovation according to what local buyers are interested in. To sell at a profit later, it’s vital to ensure you are delivering a property that has the features buyers will be willing to pay for.

Put your money where it shows
Buyers need to see a certain amount of wow-factor, like a new facade or state-of-the-art kitchen. Less visible jobs may still need doing, but don’t expect them to add value. Bathroom and kitchen upgrades are popular, but be careful, as some buyers will prefer to buy a home with an older bathroom and then do it up themselves, in their own style. In such cases, it’s better to focus on small-scale changes like repainting door frames and updating handles and doorknobs.

Sustainability is a serious consideration for many buyers; consider adding things like solar hot water or rainwater tanks. And if the bulk of your improvements are indoors, set aside a portion of your budget for landscaping to complement the house.

Budget carefully
The more detailed the budget you create, the better off you’ll be. Break down exactly what changes need to be made, from painting and knocking down walls to tiling and adding power outlets. Get quotes from a variety of tradespeople so you know exactly what each step of the process, no matter how small, is going to cost.

Engaging the services of a professional valuer at this stage can also be helpful. An independent expert knows what the house will sell for in its current condition, and what it could potentially sell for after the renovations are complete. A valuer may also spot opportunities for profit that have been missed.

A solid budget is vital. Over-capitalisation leads to an endless list of problems, from lost motivation to not being able to pay suppliers for their work. You should also plan for emergencies – it’s likely that something, somewhere, will go wrong. Having an emergency fund built into your budget will make these situations easier to deal with.

Bring in professionals
Average DIY handiwork won’t impress future buyers, and things can go seriously awry when underqualified and inexperienced renovators let their ambition run away with them. Paying for professional designers, architects and tradespeople means higher quality work. DIY may seem a logical way to cut down on costs, but the likelihood of things going wrong is much higher – and you can actually end up spending more if you need to call professionals in later to fix mistakes. In some instances, like electrical work, you are legally required to get a licensed professional to complete the task.