Multitasking renovation octopus woman
Renovating for investment is still the most common ways for the average Australian to create wealth. Considering our great love affair with renovating its surprising that we frequently commit the following 7 deadly sins of renovating, mistakes that prevent us from making the maximum return on our investment(ROI).
Not creating strong street appeal
If you're in the property market you'll see this all the time. You turn up to a property that looked neat and tidy from the internet photos, but in reality it has horrid street appeal. The value has just dropped in this property. Street appeal is not a new term and people still talk about street appeal being important but too often investors don't follow through. For many people looking at buying a property for the long term, driving up to their property after work or for the holidays and feeling proud of your purchase is worth big bucks.
Gardening is one of the easiest ways to add value to a property and it need not cost a bomb. See this link on gardening on a budget.
New external finishes
Most renovators realise that a lick of paint is essential to the outside of a building but for some homes it's just not enough. Recladding over existing cladding and possibly adding architraves to windows can really lift the quality of the external facade of a home.
Renovating your tired aluminium windows make a huge difference to the quality of a renovation. There are companies that will renovate your old aluminium windows as well as repaint them. Your thinking "that sounds tacky" right? Wrong. Re-painting your windows is really catching on in Australia as an affordable option compared to replacing windows. It's an option worth considering, and if your still not sure ask a service provider if you can take a look at their work.
Not able to manufacture growth 3 ways. When you purchase a property for investment you need to ensure you can manufacture growth at least 3 ways to ensure maximum return of investment. For example:
- Lots of cosmetic renovation required
- An extra bedroom can be created
- Subdivision is possible
- Adding a granny flat is an option
- The property can be positively geared
- Holiday rental is possible
- The property can be developed into units
These are just a few ways to increase the value of your property than just simply renovating.
Not knowing your target market/demographic
Understand the area you are buying into, the demand and type of purchasers you are targeting, and what they want and will pay for.
Buying in a dying local economy
Ensure that the area you are purchasing into is on the increase of demand not the decrease. Research the local economy and ensure that there are forcasted increases in consumer demand. Ensurethat large employers are increasing there services and not decreasing services.
Not waiting for a motivated seller
Not waiting for a motivated seller can easily cost you tens of thousands of dollars. Buying from motivated sellers can see instant returns on investments even before you start renovating. You can even search realestate.com for example and it will produce a list of properties that need to sell.
Signing a contract as is
Try signing a contract with a few conditions to your advantage. This will depend greatly on the vendors situation but it never hurts to ask if you can have a few of the following conditions.
- Extended settlement
- Access during settlement to do some renovations, or
- Moving in before settlement, ask for certain items
- Items to be fixed before settlement.
Just make sure you have the appropriate insurances in place if you plan to enter the property before settlement.
Not Sticking to your purchasing strategy - Having a clear strategy (or conditions that must be meet by your future investment) is essential in maximising you ROI. Waiting for the right property is important and not getting emotionally invested in the purchase is essential. Your strategy might look something like this.
Example of an ideal property
- Located in a holiday/ working professional location (close walk to beach and cafes)
- Extra bedroom can be added within existing footprint
- Street appeal is none existent
- Needs internal renovating
- Granny flat is possible
- Holiday rental is possible
- Sellers are motivated
- Seven deadly sins of renovating for investmentUnit development is possible
- Property has been on the market for an extended period.
Aussies love the renovating game and many of us still make the same mistakes over and over. Understanding the 7 deadly sins above will hopefully not only help you purchase more wisely, and but will also potentially help you increase your return on investment, creating wealth faster and in larger chunks.