The transformations before and after a renovation exhibition can give rise to romantic moments for an investor or a DIY enthusiast. But let's dig deeper, and there's a solid game plan, meeting numbers and wisdom that can only be gained through experience. So, what does it really take to "buy, return and sell" a property in the current market? And how do you avoid ordinary escaped people?
If an investor wants to buy a modest property – shabby on the edge, but nevertheless framed by a promising bone arrangement – the return on investment must be sufficient or sufficient to justify the time and money required be directed to the phases of purchase and turnaround.
As Director of Results Mentoring, Brendan Kelly shares, through his experience, the one who for the first time approaches a project "Buy, Return and Sell". "If you do not fully understand the fundamentals, it can be a recipe for disaster."
"The romance of television [renovation] like this one is really attractive. they make it easy, they do it relatively without stress. There is a lot of praise and a lot of recognition, "notes Kelly.
"But for beginners who have never done it before, the risks are much greater than they know. Risks exist in a world they do not know. "
So, how do you go in and make the best first step to success in the field of 'buy, return, then sell'? According to Kelly, it's by connecting with the right person.
"Let's call it someone who has done it already and who has done it well, many times if possible, who is willing to share his time, educate and help someone to to do, "he explains. "You have to be able to see how hard it is and learn from someone who can understand the dilemmas of the problems."
A step in the right direction
As with all real estate investing strategies, the secret of success lies in the numbers. The results can be powerful when the numbers are strained, and this does not have the disadvantage to renovate with a reduced budget or to do DIY.
According to Kelly, it is even more crucial to plan your finances well in advance when you start your career.
"Most people do not think about money, but about dreams and romance, success and victory. They do not see the money management process through. One of the pitfalls is to run out of money along the way, "Kelly says.
"Here's a rule: you need 40% of your cash purchase price to carry out your project. If you buy a $ 500,000 property, you need $ 200,000 in cash. You need a 20% down payment to $ 100,000, and the additional $ 100,000 is fully spent on conservation, renovation, stamp duty, and other fees. "
According to Kelly, the amount of money that the investor thinks he has to bear during the renovation must generally be doubled – just like the time he thinks necessary for the renovation of the property.
For example, if you have a budget of $ 25,000 and a four-week schedule, you should expect to spend up to $ 50,000 and up to two months.
If DIY is added to the mix, the renovation process could be further stretched, taking up to three times longer and costing an investor three times more time.
"It costs so much more because they do not have the necessary tools and skills," says Kelly.
"When a person goes to Bunnings to do a renovation or a project, they have to buy, for example, plaster, glue or nails. [The store] sells you in more packages than necessary. So you pay more than what you need and there are always leftovers that you will probably end up throwing away. "
The mentor also increases the extra costs that an investor must be willing to devote to the right tools for the job and to get the necessary construction equipment that he might not have already reserved.
On some occasions, this could mean buying a tool that they could only use once for a specific job.
In an effort to reduce labor costs, what might seem to be minor additions to DIY costs may eventually accumulate. This is the case when an investor has to pay the retail price, rather than a reduced trade price for in-store purchase of certain equipment and tools.
In addition, Kelly emphasizes the evolution of the nature of time.
"When you really work on DIY, you have to know what to do and then do it well enough to finish it. So it could take you two or three attempts to get it right, "he shares.
"It will be a problem and it has the ability to actually erode profits, or perhaps to put the project on its knees near the end. The solution for renovating is to determine the budget you must spend on renovations before you buy the project. Then, knowing that respecting this budget gives you the best chance of making a profit, get the "best value for money" without spending a penny more than you promised.
"But in and of itself, spending money on your renovation budget will not cause failure or prepare you for failure. Absolutely, what prepares you for a failure is not knowing the realistic selling price of the building. "
Know your competitors
Although Kelly acknowledges that an investor should aim to create as refined a property as the rest of the competition in the market, the key to success lies in the numbers.
"Whatever [price] properties you sell, you have to buy an unrenovated property for no more than three quarters of that price," he advises.
"You must understand the prices of houses on the market, in terms of non-renovated or renovated dwellings."
Kelly recommends that investors ask: What is the purpose of a renovated property? And what does a renovated property look like in this area?
It's equally important to know the target market, he adds. That's why investors need to do extensive research on what people want or want in a particular area. What is currently in demand in this suburb? And who is most likely to settle in the property?
"The solution to properly renovate and sell at a profit is long before you buy a property," says Kelly. "Knowing and budgeting all the project figures, from the purchase price to the sales price, including a profit, before signing on the dotted line, is the difference between hoping for success and trusting yourself. -even.
"The success of the former is often supported by luck rather than good management. But there is truth in the sentence: "Fortune favors the brave". "
