1. Leading with the heart not the head
If you’re not buying your forever home, you really need to dial the emotion down.While you can indulge a little feeling – the type that lets you spot the potential of a renovation gem – don’t let the heart dominate the head.
If you intend to improve and move on, keep your eye on your objectives.
Stay rational and let your research guide you.
And while we’re on the subject of research… you can never do too much. Really.
Comprehensive research will help you avoid common mistakes, identify the right property projects, cost your renovations accurately, understand your target market and maximise your end profits.
Know where, what and why you’re buying, and be prepared to defend it with real data, not instincts or assumptions.
2. Paying too much for property
A mistake in any situation, but especially if you’re looking for a fixer upper that you hope to turn a profit on.
What you buy your property for has a huge impact on what you will ultimately make from that property.
No matter how exciting the deal seems, if you over spend, you’ll be forever trying to make that up in your renovating. This leads to ill advised cost cutting and can further crimp your success over time.
Watch out for the usual things that can lead to over spending, such as letting an auction bidding process run away from you, getting emotionally involved.
Develop and be confident in your negotiating skills. They’re as important as your skills in finding great suppliers or tradespeople to work on the property.
If you’re not sure, get some help or training.
3. Over capitalisation
It’s worth adding between 20% to 30% contingency for unforeseen expenses. That way you’ll stay on top of your finances, no matter curve ball comes at you.
4. Doing it yourself
Unless you’re a professional by trade, it’s usually not worth the risk of DIY when resale is your objective.
While it might seem cost efficient at first, it’ll quickly lead to budget pain if you don’t know what you’re doing. You don’t want things falling apart once your new tenant or owner has arrived. The pros can work fast and they know their business.
Using a specialist gives you certain guarantees. If there are issues down the track, you’ll have recourse because you used a professional, governed by professional bodies and grievance policies.
Returns are born of smart decisions, not picking up a drill in and of itself.
5. Ignoring your audience
If you’re improving a property with profit in mind, it’s essential you think about where that profit will come from – that is, who’s going to buy it and what will appeal to them.
Your starting point should be neutral — and then tailor to those people most likely to buy the property, whether families, students, couples or retirees.
Don’t trust your own assumptions here. Even if you think you are, or understand, your target market, make sure you actually seek them out, research them, and understand their real tastes and needs. Advice from a professional designer or stager is often a great investment, and will help you win hearts and minds when your ideal buyer walks through the door.
It’s possible to renovate for profit, even when overall market conditions are flat or uncooperative.
But you need to keep focused on your end game and collaborate with a team of specialists who can offer trustworthy guidance.