If you’ve ever renovated your own home or investment properties, even on a small scale, then you know how satisfying it can be to breathe new life into a space when transforming old to new.
A common mistake and problem you face as an investor is that you become emotionally attached and often renovate to your own personal tastes.
But there are plenty of other risks involved when renovating, especially when you decide to try and do the job yourself. These can include:
Risk 1: Thinking you’re more qualified than you are
Doing you own renovations allows you to save money, but obviously you should only take on jobs you are qualified to do. Attempting to build your own retaining wall or install your own tiles when you have no experience or qualifications could mean you end up with an unprofessional finish.
Risk 2: Spending more than you’ll save to fix your mistakes
DIY renovators often end up spending even more in the long run, when they have to pay an expert to come in and fix your mistakes! This happened to one investor I know, when she attempted to DIY her roof gutter renovation. She paid a professional to transform the terracotta-coloured roof to a modern slate grey, but when he quoted an additional $500 to paint the gutters, she decided to do it herself – and the result was so sloppy (with so much overpaint onto the house) that she had to pay a professional painter to fix the work, at a cost of $900. Lesson learnt!
Risk 3: Assuming costs rather than pricing them
As a renovator you can’t simply assume what the costs will be – you need to actually price and quote the components of each renovation via multiple sources. Most renovators will spend a minimum of 10% more than they budgeted (and sometimes much more) so make sure you crunch the numbers well before you get started on your project.
Risk 4: Banking on an unrealistic end value
Generally, property renovators tend to be an optimistic bunch. They’ll often enter a renovation project with an unrealistic idea of what the property will be worth post-renovation. I recommend that you turn to a number of sources – including real estate agent appraisals, viewing comparable recent sales and even engaging a private valuer, if you can spare the cash – to paint a realistic picture of what the property will be worth post-reno. Ending up with a property that is worth less than you anticipated is one of the biggest risks renovators face and it can really stall your investment strategy.
Risk 5: Renovations that turn ugly
I once knew an investor who decided to retile his property’s bathroom himself. It was only after ripping up all the tiles that he discovered a mould and rendering issue behind the wall, which required him to demolish the walls and re-plaster them before attaching the new tiles. It ended up costing him another $3,500, not to mention the extra time it added to the project. What’s the moral of the story? Don’t attempt to renovate anything unless you’re prepared to deal with what lurks beneath!
If you have the skills, then doing a DIY job may pay dividends. But for first-timers, remember that an unprofessional finish or sloppy paint job can actually look worse than it did before – and in the eyes of potential buyers, poorly completed renovations can simply represent more work for them to do. They’ll take this into account when coming up with their offer.
My advice? Do your research: make sure you know exactly how much every component will cost before you tackle it, and don’t be afraid to get it priced by a professional. Their fees may even be tax deductible and if engaging an expert saves you time, stress and energy, they may be well worth their fee in the long run.
Helen Collier-Kogtevs is the Managing Director of Real Wealth Australia, a leading education and mentoring company for real estate investors. Not only is she a highly successful property investor and an educator, but also a best-selling author, and a philanthropist.
Helen is particularly passionate about helping people, especially people who are keen to create wealth and make a difference in their lives, and she has been mentoring thousands of new and experienced investors in their pursuit of wealth creation through property.
She founded Real Wealth Australia to mentor investors create wealth and financial freedom by focusing on helping them build an investment strategy to fit their individual goals, rather than focusing on one particular investing method using her successful “10 Properties in 10 Years™” system.
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.