You may have heard about people making serious money by renovating for profit. This involves buying a property, adding value to it in the form of renovations, selling at a higher price and then keeping the difference earned.
4 Tips For Renovating For Profit:
It definitely works but you have to do it right. So here are some tips to maximise your potential earnings when renovating for profit.
Target the right kind of property
First of all, arguably the most important tip, target the right kind of property. There’s no point buying a property in which you can’t add any value to. Ideally you should look for a property at least 20% below the suburb median price which is also poorly presented. This could include things such as a bad paint job, or unappealing landscaping.
Once you purchase the property fixing these unsatisfactory features should raise the properties value. Ultimately you need to look for properties in which you could add value to. If you have painting skills look for a house that needs a new paint job. If you’re an expert landscaper buy a house that could use some improvements in that area.
Create a budget
Another option to look into is using your parents as guarantors. This involves the guarantor to use the equity in their home as added security for your loan.
This is a good idea if you don’t have enough deposit but are still able to meet the required repayments. Using a guarantor provides the lender with more security and confidence that they will get their money back meaning it can help you obtain additional funds to buy a home.
A good idea is to add value through improvements that require the least amount of effort and cost, but will provide the most amount of value and therefore profit. There’s no point in installing an expensive kitchen if it isn’t going to add enough value to justify the cost.
Remember, you’re not looking to breakeven, you’re looking to make as much profit as possible.
Check for these issues
Some things to look out for when renovating for profit include roof and foundations/structural issues. These can be difficult and expensive to fix and therefore aren’t a good investment when making money is the goal.
Additionally, electrical or plumbing issues can be expensive to fix and can be detrimental to your profit.
Rotten boards are another major issue which can be hard to see if the previous owner has recently done a new paint job. To avoid any nasty surprises check around the windows and doors to see if any boards are rotting.
A very good idea is to have a building inspection done if you’re unsure about anything. These are usually only around $500 and can save a lot of time and money if problems are found. As the saying goes, ‘It’s better to be safe than sorry’.
Another option to look into is using your parents as guarantors. This involves the guarantor to use the equity in their home as added security for your loan.
This is a good idea if you don’t have enough deposit but are still able to meet the required repayments. Using a guarantor provides the lender with more security and confidence that they will get their money back meaning it can help you obtain additional funds to buy a home.
Structure the finance correctly
And the last tip, structuring the finance for a job like this is absolutely crucial to maximising your profit. If you choose the wrong loan type you could be seriously eating into your profit margin.
If you need expert assistance to getting the right loan I’d be more than happy to help. Call me Barry Swain anytime on 0412 400 712 or email me at barry@smsloans.com.au. I would love to help you!