Renovate the right way and you’ll add significant value to your property, but if you over-capitalise on the wrong improvements, you risk chipping away your profits at the very outset.
Experienced renovator Chris Gray, CEO of Empire Property Portfolio, buys and renovates dozens of properties every year on behalf of investors, and he’s seen plenty of mistakes.
The biggest mistake most people make is to not do proper research, which leads to them either over- or undercapitalising, he says.
“If you’ve got a beach-front apartment with a cheap kitchen, people who can afford to rent that type of property will be put off, so you have undercapitalised,” Gray says.
“They overcapitalise when they install a $40,000 kitchen, when a $15,000 one would have done the job.”
For renovators, the challenge is to “not only improve a space, but also to increase the property’s value,” he adds – so he has outlined his top five tips to help you maximise your profits on your next renovation.
1. Start small
For your first renovation, don’t bite off more than you can chew. “Purchase ‘cosmetically tired’ rather than ‘structurally tired’ properties,” Gray advises. While a renovator’s delight may be going for a steal, he warns, “Structural work is often where problems occur and budgets blow out.”
2. Get the property valued
There’s no point spending tens of thousands on renovations if you’re not likely to get the returns in the final sale. “A valuer will be aware of circumstantial factors, such as the highest possible sales price for homes in your street,” Gray says. He recommends you get the property valued before and after the renovation, so you can quantify how much value the renovation added.
3. Be conservative, not cheap
When organising tradesmen, always source at least three quotes for every job, but don’t always opt for the least expensive tender. Make sure factors such as their professionalism, timeliness in responding and credentials are factored into your decision. “Cheaper tradespeople will do it in their own time and not always to the best standard,” Gray cautions. “Paying a fair price for a tradesperson will often give you better quality in a shorter space of time.”
4. Consider project management
If you work full-time, have a family or have other commitments that keep you busy, consider hiring a project manager to run the day-to-day renovation. It will potentially save you money in the long run, as their expertise will guide you towards making smart decisions and will keep the project to budget – and more importantly, it will save your sanity. “This can be anyone experienced in renovations, from an architect to interior designer,” Gray says. “They can help find trustworthy tradespeople, keep costs low and manage different tradespeople for different jobs.”
5. Double check your costs
Make sure you’re not being overcharged by suppliers and tradies by enlisting a quantity surveyor for the bigger jobs, to provide a list of labour costs, material costs, and tax deductions you can claim.