The 5 Most Expensive Mistakes in Renovations
Recently, we did a case study on Sky Business outlining one of our renovation projects as well as some of the things that most people get wrong when renovating. If you missed it then here’s your chance to brush up before you dive into your next project.
1. Buying On Emotion
We’ve all seen the renovation shows and fantasized about being involved in a “project”, but just because it’s run down doesn’t mean it’s profitable.
Remember, renovating is all about profit. You need to avoid buying with the heart and focus on the numbers instead. Do your due diligence, research the area and the property and make sure that the venture you’re about to take on doesn’t become a labour of love with nothing to show for it.
2. Paying Too Much When You Buy
There’s a saying in real estate that you make your money when you buy. Just because it’s a “renovators dream” doesn’t make it a bargain and many people pay a premium these days just so they can get involved in a “fixer-upper” and cross it off their bucket-list.
To avoid paying too much, it’s best to start with the end price in mind and work backwards. Take away all your build costs, your holding costs, stamp duty and some contingency left over if things head south. If you cant’ buy the property for this price you’re left with while still allowing for some healthy profit, then walk away. There’s always another deal waiting just around the corner.
3. Blowing The Budget
This mistake has undone many renovators and developers as it’s so easy to do. Budget blow-outs usually come from choosing to go with “slightly” better fixtures and fittings only to find out all those little items added up to a lot more cash than you wanted to spend. They can also happen from failing to control trades when they’re on site. If spending on materials doesn’t go overboard then spending on labour certainly can.
Make sure you’re disciplined and stick to your budget. Keep a daily or weekly update on your spends so you can see your progress before you stray off course.
4. Doing All The Work Yourself To Save Money
Trying to do all the work yourself when you could be making more money in your own job just doesn’t add up. Once you factor in the additional time it takes you to complete the job vs. a skilled tradesman, and the quality of work that you will end up, it’s often far better to leave the job to the pros.
There’s nothing wrong with becoming a “weekend warrior” around the house, but if your project requires a higher standard of workmanship or is a complex build that needs the specialist, engage a skilled tradesman and get on with your own work.
5. Not Renovating For The Target Market
Finally, it’s essential that your project has high appeal for the people you’re going to be selling or renting to. If the price is too high, if the layout is wrong, if the fittings and fixtures are beyond what the market wants – all of these things will compromise your profit levels.
If you’re unclear about what does appeal, spend some time researching “hot” sales in the area. Ask the agents what sells quickly. You can make a list of essential items from this that you need to include when you design your next project.
A renovation project can be a lot of fun as well as highly profitable if you do it right. Taking a wrong turn can be costly though, so the next time you’re faced with a project, keep this checklist in mind and you’ll be miles ahead of the game with a steady foot on the road to riches.