Whether your planning to renovate your own home, an investment property to hold for the long term or its a property to flip for a profit, the fundamentals don't really change.
The end goal is usually always to maximise the value and to increase the rental returns of the property.
1, Avoid over-capitalising
Start with establishing a post renovation market appraisal on the property.
Allow for purchase price and any associated costs, interest, marketing or selling fees and a healthy buffer and deduct that from the post Reno market appraisal.
What's left is the budget, inclusive of profit for the renovation.
As a rule, keeping the renovation budget to 10% of the market value of the home is about right.
2. Allow a contingency amount
Once a budget is established, allow a contingency based on your experience level and extent of the renovation works.
Allow a little more if structural works or there's planning/building approvals requied and a little less if the works are purely cosmetic.
Remember, renovating is full of variables that not allowed for could quickly make your project unfeasible.
3. Tailor the renovation for the target market
Becming an expert in the area by attending property inspections of similar properties, discussing the expectations of the tenants with local real estate agents will help determine the scope of works for your renovation.
By knowing what the market expects, you can tailor the works to suit that market and therefore not spend on things that may not bring a return on your dollars.
4. First impressions matter
Natural light, fresh paint, new floor coverings and window furnishings go a long way towards transforming a tired old property into something that will be sort after.
Often it's the little things that can make or break a successful renovation.
Neutral colours allow tenants to create their own identity with their belongings.
Dominant colours and textures tend to close in the wall and makes spaces feel smaller than they are.
5. Kitchens and bathrooms sell properties
When assessing the scope of works for your renovation, keep in mind that the two big ticket items, the kitchen and bathroom generally come a package deal.
If you renovate the kitchen but leave the original tired and rundown bathroom, it will de-value the kitchen, and visa versa.
If the budget doesn't allow for both them, it may be worth deferring renovation works until the budget is healthier or consider undertaking a smaller refurbishment to include repainting, floor coverings and window furniture or air-conditioning to improve the first impression and the feel of the property.
6. Avoid DIY
Unless your a skilled tradesperson, don't get lured into to misconception that you'll save money by doing the work yourself.
TV shows like the block glamorise and simplify the renovation process.
In most cases, it will cost you the same or more but always take you longer if your doing the work yourself, therefore resulting in poor finishes, delayed completion dates and unnecessary holding costs due to the extended completion times.
7. Remove the emotion
Adding value to an investment property or a flipper should be run like a business.
There's no room for latest fad in design and you shouldn't be trying to make the cover of Belle magazine, that's for your own home.
The purpose of renovating investment properties should always be about maximising both the rental return and capital value of that property.
8. Get a good team around you
Renovation involves coordinating various tradespeople all of which are managing a whole lot of other 'jobs' at the same time.
Discuss your schedule and plan for the renovation and seek their assistance and advice.
Remember, they're the experts.
They've done it before and probably seem the mistakes others have made.
By getting close to your trades, you'll avoid falling into the same trap.
9. Thrifty is good, cheap is bad
There's a lot of cheap products in the market place these days, especially online.
In my experience, cheap stuff is cheap for a reason and will cost you more in the long term.
Take engineered timber flooring for example; you can buy a imported laminated timber board from your local hardware store starting from about $19 per m2, that has a lifespan of 1-2 years if your lucky.
Same deal with paint, carpet, window dressings etc.
Cheap just doesn't last and it's a false economy to suggest otherwise.
10. Ask yourself the tough question
"Do I have time to execute this renovation effectively?"
If the answer to this "No" or "I think so?" Consider paying a professional to manage it for you.
The additional cost will most like be offset by the works being completed in a more timely manner, to a higher standard and with a guarantee.
About the author:
Greg Hankinson is director of and a Registered Building Practitioner and hold a Gold membership with the HIA and National Kitchen and Bathrooms Association.
Specialising in the domestic investment market, Greg has over 20 years experience in all aspects of residential construction, development and renovation.
His expertise in building and construction for the investment market is unmatched and along with his team of highly qualified trades at Metropole Constructions, can quickly transform your investment property into a high performing investment vehicle.