Creating the Right Renovation Plan – Five Tips to Help You Avoid Catastrophe
DG Institute founder Dominique Grubisa shows you how planning your perfect home renovation can help maximise your ROI. You need a renovation plan in place to make sure you don’t end up overcapitalising on your project.
The key to succeeding as a house flipper is figuring out how to get the most from your renovation work. Your goal is to spend as little as possible on the right renovations – renovations that will make the property more appealing to your target market. This allows you to ask more for the property.
It sounds simple enough on paper…
However, failure to create a detailed renovation plan will put paid to any aspirations you had of making a profit.
Anything That Can Go Wrong…Will Go Wrong
A recent article on Domain shows us just how easy it is for renovation projects to go wrong. The writer asked a bunch of industry experts and celebrities about their renovation disasters.
There were plenty of stories showing just how tricky renovating can be.
Take musician and TV presenter Adam Brand. He started a renovation project under the mistaken belief that termites don’t chew through hardwood. As he puts it:
“I didn’t check the hardwood frames because I thought I had a handle on the extent of the termite damage just looking at the softer wood skirts that had been dined on – big mistake! New frames were needed in 80% of the existing house structure.”
Those extra frames added thousands of dollars onto the renovation project. Imagine getting caught out by a similar issue as an investor. Something that seemed like a guaranteed profit driver would suddenly become a money sink. And there’s no telling how deep the rabbit hole might go when you’re dealing with such extensive termite damage.
Interior stylist Sibella Court had her own nightmare to deal with. As she explains:
“Tile colours were incorrect only to be discovered after they were laid, paint colours were mixed differently and only noticed once on the walls, tables were damaged on packing and were the only ones left in Australia…”
And that’s just a small sample of the problems she dealt with on one of her renovation projects.
Now, we’re not going to claim that these people didn’t have a renovation plan before they got started. But it seems pretty clear that their plans didn’t account for everything that could go wrong.
You need to create the best possible plan for your own building renovation. And these five tips will help you to do just that.
Tip #1 – Outline Your Main Project Goals
This is a crucial step for any renovation, especially if you’re an investor looking to make a profit.
You need to know exactly what you’re hoping to achieve with your renovation. Typically, you’ll have a profit goal in mind when renovating to flip a house.
This is so important because it helps you manage your home renovation project scope. When you know what you need to achieve, you’re in a better position to choose the renovations that will help you to reach your goal.
This means you avoid wasting time and money on things that don’t serve your ultimate aims.
Tip #2 – Set a Home Renovation Budget
While setting your goals, you may have created a wish list of renovations for your project.
Now, it’s time to see which ones are the most feasible. You have to set a budget based on the numbers you’ve run for the project.
The key here is that you don’t allow your desired outcome to influence your budget. This is an emotionless process. You need to look solely at the numbers to figure out the maximum amount you can spend before the project becomes unfeasible.
You also need to have an emergency fund set aside. As the stories above show us, things can go wrong even when you have a good renovation plan.
If the project requires you to spend so much that you won’t make any money, it’s time to walk away.
Tip #3 – Refine Your Scope
Now that you know how much you can spend, it’s time to refine the scope of the project.
The likelihood is that you’re not going to be able to carry out every renovation you have in mind. The key here is to select those that will both fit your budget and increase the property’s value.
Keep tinkering with your plan until the numbers add up.
Tip #4 – Don’t Overcapitalise
So, what happens if the numbers don’t add up?
You have to walk away from the project.
Unfortunately, many new investors don’t do this. As a result, they end up spending a little more here and a little more there to try and make things work. This leads to them overcapitalising.
You have to keep track of your money throughout the project. Any extra spending in one area has to come out of the budget for another area. If you start pouring more money than you budgeted into the project, you’ll end up losing profit.
Tip #5 – Build the Right Team
You’ll work with many professionals during your project. Larger renovations may require architects and engineers to develop a design plan. You’ll also work with builders, who need to be able to follow your construction plan.
Invest time in finding the right professionals.
Don’t go for the cheapest offers and don’t rush the process to get the job underway. An extra week or two spent in this area can save you so much money in the long run.
You’re Ready to Create Your Renovation Plan
Now, you know how to start renovating a house. Before you even think about building anything, you need to have a solid renovation plan in place.
These tips will help you in planning your perfect home renovation.
However, you may need a little extra help. That’s where the team at DG Institute can step in.
We’re offering a huge bundle of resources and learning materials for renovators who want to create a house flipping strategy. Check out the Flipping Houses Australia offer to find out more about how to make this strategy work for you.
Lawyer, Asset Protection Specialist and Property Educator
Dominique Grubisa is a practising legal practitioner with over 22 years of legal and commercial experience. She is a property investor and developer, an entrepreneur with businesses in Australia and Southeast Asia, a speaker, educator, writer and published author. You may contact Dominique at firstname.lastname@example.org
This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.