1. Purchase Price
Make sure that your purchase price reflects the cost of the renovation required and the amount of time you will need to complete your project. Your sale and purchase agreement should always include a builder’s report (avoiding any nasty expensive surprises you may find later) and early access to carry out your renovations for as long as you can possibly get from the vendor prior to settlement date.
Have a realistic budget. If you can’t provide a detailed budget for the project, don’t do it. There are many Traders with renovated homes in buy and hold structures at present, due to overspending and poor budgeting. You’re only fooling yourself if your budget isn’t realistic and if you can’t carry out the work within your own capabilities, employ a professional company to deliver the project on time and on budget for you.
If your renovation is a buy and hold you should know the area well; understand the rental yields and the value of your property as is and after renovation, and be happy with the equity you will have achieved when complete.
These should be your own rules and you should not deviate from these when renovating for the long term.
If you are trading the property, do you have a team that will work in your chosen area that you can trust? Can you travel to and from site every day and commit to finishing your project on time?
If you are about to have an addition to the family or have huge demands from your full time job, then think hard before taking on a renovation.
It’s probably going to take a lot of your time even if you don’t do most of the work yourself and it is going to be stressful at some stage no matter how well it goes – that’s the nature of the beast. Can you take holidays to ensure you can focus all your time and efforts into your project? If so, I recommend you do just that. What happens if the market shifts… do you have a plan B?
Any work involving council will be costly and will reduce your margins. These projects can take many months.
Basic plans will cost $2,000 plus from an architect and council fees will vary hugely. You will have to budget for inspections, bonds and any other individual costs, which each council also applies at will.
If you are seriously considering a renovation to this scale, engage an architect when carrying out your due diligence and have them work through the process with you and your project management company until you clearly understand the enormity of what may be required.
I do not recommend any first time renovators consider this type of project ever. Experienced investors and renovators can achieve great returns, but they will warn you of the risks and will always have their team on hand to cover all the bases and deliver the project completed.
Painting the exterior of a house can be expensive, so try to buy a property that will have appeal after a simple house wash and perhaps painting to small areas such as eaves and doors.
Fences and driveways are also costly, so again look for undamaged properties where driveways can be washed and fences simply painted.
All buyers and tenants like street appeal, so this is a must and should be very high on your criteria. Gardening and basic landscaping can be relatively cheap and although can take time can be done by most people. Make sure the roof is checked thoroughly when having the building inspection performed; this will be the most expensive item should you need to replace it at any stage.
Kitchens and bathrooms will always be the biggest individual costs internally, so if a kitchen or bathroom is in good condition you will have money to spend elsewhere, remember most of your plumbing and electrical costs belong in these two rooms also and they really add up when you need to make changes.
Floor coverings rarely survive a renovation as they are so noticeable. Good internal paint condition should save you about $4,000.00 plus on a three bedroom house.
Look at the numbers and make sure they work, establish the realistic timeframes, be comfortable in the location you are buying, understand the scope of work.
Following these hints and tips above when choosing your next renovation project will not only be easy, but they will also lead to great success.
Mark Trafford Director “Maintain To Profit”