By Steve Waters
Cosmetic renovations can make you quick profits but that doesn’t mean that everyone knows how to achieve great results.
Too many novice renovators try to sand the floors, lay new carpet or do a terrible job painting, which makes the property look worse than it did before. And often it takes them so long to complete the project that they lose out on valuable rent in the process.
I generally recommend that renovators stick to the grunt-work, which can be expensive if you pay someone else to do it. What I mean by grunt-work or “sweat equity” is such things as ripping out old carpet, landscaping, and anything else that requires a bit of muscle.
Fundamentally there are two types of renovations – for rental properties and for properties to sell – but regardless of which type of property you’re renovating you must understand the demographic of the person who may end up renting or buying your property.
Also you should never get emotionally involved, which means not choosing fixtures and fittings that you personally like, because everything in the property must suit the buyer or renter demographic – it’s really that simple.
Budgeting and timelines are vitally important, so at RPG we create a comprehensive project plan that we never deviate from. This includes all costs and timeframes to ensure the reno achieves its objective, which is usually an increased valuation or better cash flow.
So what are some of the most profitable renovations? Here are my eight top tips to help you get the best bang for your reno buck.
Painting internally and externally can completely transform a property. Only use quality products and use professionals if you’re not confident about your painting ability.
As I’ve said before, you only get one chance to make a first impression, so clean up the yard. I’m a big fan of turf, especially for investment properties as it’s so easy to maintain.
- Kitchen and bathroom
When it comes to the “house and soul” of the house, only use quality fixtures and fittings but be careful not to overdo it. Simple is always best and, again, you must renovate to the right demographic.
Lighting is vitally important because it can transform a dull room into a bright one. At RPG, we use cool white globes to achieve this effect in our renovations.
- Front door
I’m a massive fan of a good front door but too many renovators forget about it or just paint over a 50-year-old one. Everyone goes through the front door, so make sure it’s setting the right tone and impression from the outset.
- Light switches, power points and door knobs
A good paint job will certainly improve the look and feel of your property, but it can also highlight old light switches, power points and door knobs. It’s fairly easy to update these, but make sure you use interchangeable cover plates for light switches and power points, and it’s a no-brainer to only use an electrician to do this for you.
If your budget allows, consider putting in a deck but make sure you don’t go financially overboard. A quality deck can greatly increase your property’s rentability and valuation but you need to keep an eye on costs.
- Property staging
Again, if your budget allows, you may want to consider getting your property professionally staged as we’ve seen this strategy achieve some massive results.
Before beginning any cosmetic renovation it’s also a good idea to talk to local agents and property managers to get their advice on which improvements will provide the best results for the smallest spend. You should also investigate a scrapping schedule from your accountant or depreciation expert.
Before the renovation you must work out the correct order of trades such as the painter before the carpet layer, etc. And once they’ve satisfactorily completed the work, pay them promptly because you never know when you might want to use them again.
There’s no doubt that cosmetic renovations can turn into more equity or cash flow, but they can also cause financial headaches if you don’t know what you’re doing.
Peter MastroianniPeter Mastroianni is a property finance expert and the co-founder of Loans Only, specialising in investment lending. He is the author of two top-selling real estate books and host of The Rentvesting Podcast. Peter is passionate about supporting the next generation of investors rethink the traditional home ownership model. He does this by championing the ‘Rentvesting’ strategy through www.rentvesting.com.au.
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