Recently on Real Estate Talk I interviewed Jane Slack-Smith about the 10 most common renovation mistakes.
It always sounds easy at the outset – “I’m going to renovate a property, I’m going to flip it over, make lots of money!”
And there are some very simple reasons why. Thanks for your time, Jane.But did you know, in fact, that many renovation projects actually fail to make a profit?
Jane Slack-Smith: And thanks, Kevin.
Kevin Turner: What is mistake number one.
Jane Slack-Smith: Look I think that most people concentrate on the renovations and they actually miss the big picture. And that is finding the right suburb to renovate in.
So my famous trident strategy, having three ways to make money, buy below the market, buy in a good capital growth area, and buy to be able to add equity through renovation, allows you to have three ways to make money and that means that finding the right suburb that’s going to have that capital growth is so important.
Kevin Turner: Yep. Number two.
Jane Slack-Smith: Research, research. So the right street and the right suburb. You really need to have pricing disparity between renovated and unrenovated properties.
Often people just find a really good suburb, think it’s all going to happen for them, and they can renovate, and it’s not the case.
You really have to narrow it down to the right street, as well.
Kevin Turner: Okay, number three.
Jane Slack-Smith: It’s the right house. You have to have a house that’s actually fit for the demographic. You need to understand what the demographic is, what they want, and renovate to that.
You need to understand exactly what the fixtures and finishes should be like. You need to understand what the end value is going to be that you’re aiming for and seeing if you can make a profit with what you can purchase the property for.
Kevin Turner: Do you actually picture the end user, and that actually helps you get the right house?
Jane Slack-Smith: Absolutely. I actually call it an avatar. I’ll have somebody in mind, I’ll name them. If I’m looking at a two bedroom unit, I might have Jen and John who are young professionals and I try to sell them what they want.
Maybe it’s security, maybe it’s also good access to Foxtel or car parks, but I try to work out what they want, maybe some fixtures and fittings that are a little bit better than the rest in the area.
Kevin Turner: Tip number four.
Jane Slack-Smith: Buy without emotion. You do all that work, you’ve done all this research to find the right suburb, the right state, the right property, and then all of a sudden you fall in love with the spa bath.
You have to think about this as an investment. This is a business. If you’re going to make money out of renovations, take emotion out of it.
Kevin Turner: Number five.
Jane Slack-Smith: Unrenovated does not equal the capacity to renovate and make money. Just because a property does not have the finishes you think it should have, doesn’t meant that by putting in kitchen, bathroom floor covering that you can actually get the money out of it.
I teach people that every dollar they spend, they should be able to make two dollars. I’ve got a student at the moment who’s just done a property and has made eight dollars for every dollar he spent on the property.
There’s potential out there to do it, but not every property is right for renovation.
Kevin Turner: So, spend a dollar to get two back.
Jane Slack-Smith: Yes, at least.
Kevin Turner: At least, and see if you can get more. What about number six.
Jane Slack-Smith: There’s people who start the renovation with no budget. No budget management throughout the renovation and maybe a limited scope of work.
So, they don’t fully understand what work needs to be done. So as the tradie comes and says, hey, what do you think about some dimmer switches for instance you might go yeah, that’s good, when in actual fact it could cost you anther five hundred bucks in a house that has those switches.
Understanding specifically what you want, what your budget is, and managing that budget through the process.
Kevin Turner: Number seven.
Jane Slack-Smith: That brings us to over capitalization. Just because you love caesar stone does not meant that three bedroom house in the outer Sydney suburb needs a caesar stone bench top.
Maybe you need to actually have a look at properties that are renovated in the area, the demographic that you’re renovating for, and work out what that finish should look like.
Kevin Turner: Okay, next one.
Jane Slack-Smith: This is the paint before you replace. I’ve had people that take my courses who’ve done fifteen, sixteen renovations and it wasn’t until we talked about the fact you didn’t have to pull the entire kitchen out, you could maybe repaint the bench tops, repaint the tiles, put on new doors that they realized they’re wasting a lot of money by replacing everything, where in actual fact a few little tidy ups and fix ups could save them a lot of money and keep the same finish.
Kevin Turner: And the last couple
Jane Slack-Smith: The DIY trap and the relationships test tip. This is a bit about relationship stuff here. The DIY trap is those people who have a go at tiling, or have a go at painting.
And really, you know, if it takes a long time, costs a lot of money, sometimes you have to get a professional back in and in actual fact, the property doesn’t look as great as it could do.
Then there’s the relationship test and that is if you’re having a relationship problem or communication problem, maybe renovating together is not the right thing for you.
If I’m doing a long renovation, I often tell people to take a holiday in the middle of it, take a weekend and plan that from the outset, that if you’ve got some relationship problems, renovation can really be testing.
So just to warn you on a bit of an emotional level, think about renovating with your partner and how you can work with him, and if it really is a good thing for you to do together.
Kevin Turner: Yes Jane, it’s a great way to end a relationship, isn’t it, and that is to actually go into business with someone like that.
Jane, it’s been fantastic. Thank you for sharing those ten with us. I want to say that there’s a heap more advice for you at Jane’s website, yourpropertysuccess.com.au.
That course is coming up really soon. We’ll tell you about it. You’ll only have a window of four days to get in, so stand by, and we’ll tell you right here at Real Estate Talk, how you can do just that.
Jane, thanks for your time.
Jane Slack-Smith: Thank you Kevin.
Listen to the full show at RealEstateTalk.com.au and while you’re there subscribe and receive our weekly podcast (or the transcripts) where I interview Australia’s leading property experts.
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