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Property and wealth management expert highlights 7 tips to achieve the best value for your home renovations

With house and apartment prices across Australia’s cities and regional hubs rising 0.9 per cent in September this year,[1] it provides a great opportunity for investors looking for quick returns through property flipping. Renovations provide an exciting lift to a home; however, it can reduce the overall profit margin if executed wrong.

Property investors are getting back into the game in search of quick financial returns by flipping houses. With the housing market showing signs of recovery, investors can buy property for relatively low prices, add value through small renovations and sell for a strong profit. The problem for novice renovators is that they don’t tend to have the knowledge or experience to know where and how to renovate, what to avoid, and the low-cost tips that will help you in the long run.

Here are my seven tips for buying and renovating houses for a profit:

  1. Ensure the renovation will add value before starting. Before you start planning your renovations or speaking to contractors, it’s essential to understand the local market to get an idea of how much your property could sell for. Do your research to find out what other houses in your area, of the same size, are worth and weigh up whether renovations will add more value to the home. For instance, your local area may see unrenovated three-bedroom homes sell for $1 million while renovated homes sell for $1.2 million. If the renovation cost is $200,000 or more, it will be a waste of money and time as you won’t be making any profit. 
  2. Avoid spending money on non-essentials that won’t add value. It’s very easy to get carried away and spend far too much on renovation areas that won’t necessarily add value when it comes time to sell. Before you plan to flip a house, it’s important that you identify a target market and understand what potential buyers are looking for. There’s no point in adding an outdoor bar if the buyer demographic is not after such home-novelties. The same goes for building materials, don’t spend thousands of dollars on marble granite tops if potential buyers do not see that as a must-have. 
  3. Spend money on areas that will appeal to the target buyer. This tip generally applies to the opposite of the above. Do your research and know what buyers are looking for in homes. Visit display homes, inspect local properties and view recent local sales to gauge the key factors in achieving a higher price. If the area is full of young couples and families, it may be a good idea to include an outdoor living space for entertaining or a manageable garden with limited upkeep. Similarly, maybe there are large families in the area that could do with an extra bedroom. Research the area and allow the local market to guide your decisions.
  4. Be realistic about total costs by researching before renovating. Online calculation tools can provide a guide to assist you in knowing the costs of your overall renovation. However, anyone who has ever undergone renovations on their property is well aware prices tend to blow out of budget, and there’s no way to account for the unexpected. Ensure you know the margin flip and reconsider any deals if the margin will be too small or less than the renovation.
  5. Use a mix of low-cost and DIY furnishings to achieve cost-effective results. Not all renovations need to break the bank. Depending on the property’s state and the current market, DIY and low-cost cosmetic renovations can add significant value and may lead to an attractive profit. A simple lick of paint from the local hardware store, freshly cleaned curtains and mowed lawns, or additional plants from the local nursery can make all the difference to the property’s overall appearance.
  6. Choose reliable tradespeople you can trust. While the lowest quote may seem tempting when choosing professionals to get the job done, it could lead to problems down the track. It can also be tempting to cut corners as you won’t be living in the house, but be aware of the repercussions this may have on the overall price. Having a tradesperson who doesn’t follow proper safety precautions, fails to complete the job in the allotted timeframe, or does not complete all their duties will delay your project and jeopardise your profitability. I recommend going for a reliable and reasonably priced tradespeople with a strong work ethic. 
  7. Factor in your own time. When flipping houses, don’t lose sight of how much of your own time is going into the project. Calculate your time spent on the project and the potential profit at the end to see if it is worth your while. For instance, if you buy a property for $500,000 and need to spend $100,000 on renovations and it sells for $630,000, it equates to a profit of $15,000 after interest payments and sales and marketing costs. Say you spent 50 hours on this project, you essentially earned $300 per hour, although if you spent 300 hours, your hourly rate is only $50. Ensure you consider your time and worth before starting any project.

Author Bio: DG Institute CEO and founder Dominique Grubisa has 25 years’ experience as a practising lawyer, debt management specialist and wealth management educator. She founded DG Institute in 2009, and is an experienced property investor, developer and entrepreneur. Dominique is also a seasoned speaker and media commentator who has provided commentary for major outlets including Sky News, news.com.au, Yahoo Finance, and Sydney Morning Herald. Dominque is a two-time winner of the ‘Female Entrepreneur of the Year in Asia, Australia or New Zealand’ Stevie Award in 2018 and 2019, and was a ‘Businesswoman of the Year’ finalist in the MyBusiness 2019 Awards. For more information about DG Institute, visit dginstitute.com.au.

Joshua

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