You might think it seems like an easy decision… renovate and then make lots of money right!  But renovating for profit is not that simple.

There are a number of ways you can add value to your property through renovation. 

What is true is that renovating a property can bring you profits, even in a flat market.  Renovating is about bringing a fresh new look, feel and design to a tired old property.  If planned well – you can make really good money to put towards your next property or pay off your home loan faster.

Here are some factors to consider when renovating for profit

• You need to consider the area that the property is located in – as I always say – buy the worst house in the best street or best suburb
• You could consider getting a real estate agent in to give you some facts and figures on the suburb, property types and values in the area – they will also be able to give you  some guidance on how you can add value
• Don’t buy with your heart – if the house is not for you – then get your head making the decision not your heart
• Don’t over capitalize – make sure you have a decent renovating budget in mind and an achievable growth figure and stick to it
• Be prepared to get your hands dirty – the more you can do yourself, the more money you will save.  For example if you can remove tiles yourself and demolish a bathroom you can save hundreds of dollars in labor
• Get a specialist in when you need one – things like tiling, plumbing, electrics and possibly even painting can be best left to the professionals
• Add a bedroom whenever possible. You can add serious dollars to your property by adding a room – for large rooms, consider adding a partition or turning a nook into a study
• When you get quotes, get at least 2 per task (utilize your feiends network and ask around for good LOCAL suppliers. Make sure each supplier quotes on exactly the same item – apples for apples!
• Watch some TV – by that I mean watch the renovation shows that are all over our screens like the BLOCK – you can get some great tips and ideas from these shows
• A good budget figure to work to is 10% of the purchase priced of the house
• Allow a minimum 10% contingency on top of your budget – maybe even 15%

Remember, always focus on your end audience!  Who are the people who are going to buy a house like yours and in that suburb – then make sure you provide a solution that suits them.

Here is a scenario for you.

Say you are looking at a property in a suburb where the median price for a 4 x 2 is $550,000 – (this is for an average property in the area – a well renovated property might sell for $575,000).  You have found a run down property on a big block for $450,000, then you need to add your purchase fees including stamp duty  – I would allow around $15,000 to cover everything.  The purchase price is $465,000 now.

You then allocate a budget of $40,000 which you want to cover the following items:

New kitchen, bathroom, new flooring, window fittings, painting throughout plus landscaping and the front facade.  Then add in your contingency of $4000.

Your new purchase price is $509,000.

If you then sell the property for the median price in the area – you would make a profit of $41,000 less selling fees of around $12,000 – so total profit of $29,000.  If you can sell it for the price of a good renovated property in the area – you could make up to $54,000.  Now that’s not a bad days work… or lets say 3-6 month work.

You do need to factor in mortgage repayments too over the time you hold the property for renovation.

Staying on top of your weekly finances can be a big task.  You have to consider your grocery items, car, petrol and travel expenses, health, rent or mortgage, school and other costs if you have children and then there are the costs associated with your lifestyle and holidays.Here are some great tips to help you plan your budget and save some money.

Budget Planning Tips

Start by writing down all of your known expenses into a spreadsheet  – this should include absolutely every known expense like

• Rent or mortgage payments
• Council fees
• Groceries
• School or study fees
• Gas, water and electricity
• Rates and taxes
• Medical/dental fees and private health
• Insurances
• Car and petrol or public transport
• Holidays
• Clothing and personal care like hairdressing etc
• Add in a contingency or miscellaneous budget for unforeseen items like birthdays, gifts, urgent medical, leave a good amount of Christmas too

• Automate as many payments as you can – that way – you are less likely to forget payments and
• Look at ways to do salary sacrifice or payments into your superannuation to reduce your taxation
• Start a savings account if you can and add to it regularly – even a direct deposit from your pay each week – even if its just $25 or $50 can all add up
• Determine your weekly income and deduct expenses – this leaves you with your spare cash.  If you do not have spare cash – you need to look at ways of saving money

Saving Tips

• Get a mortgage health check – you could save thousands over the term of your loan by reviewing your bank and rate and repayment structure
• Look for special offers on gumtree and sell unwanted items on gumtree or ebay – you will be amazed at who might want your items that you no longer need and that you can grab a great bargain’
• Start a veggie patch – great fun and plenty of fun ways to add some colour to your meals
• Buy a deep freeze – if you buy items in bulk – you can save lots of money every week by shooing smart
• Do your shopping for groceries on line – its amazing how much less you buy when you are not tempted by the packaging, your hunger or your kids
• Do regular maintenance on the home  eg scale the clean the cofeee machine, empty the gutters etc – this will prolong the life of things like machinery and reduce emergency repairs and big call out fees
• Shop at the right time of year – wait for the sales or buy ahead if you can (only what you need though)
• Look for specials on items you buy regularly – especially big cost items or regular purchases – but in bulk if you can store it
• DIY – that’s right – do it yourself or have a go – Bunnings and Masters have great classes and courses to give you some tips on how to do things
• Then there are the little things like spend less time in the shower, keep reticulation to the recommended minimum, turn off taps properly, shut doors, turn off lights, wash clothes in cold water, try not to use your dryer

Our final tip – stay away from the shops if possible – an outing to the shops will cost you money!  Try packing your own snacks and head outdoors to the beach or park.

Good luck and start planning today!