Not all renovation projects are created equal. And not every renovator can take on every single renovation project. Find out why as I focus on the mistakes related to renovation projects in this instalment
Taking in all renovation projects
Well, if you’re renovating to create profit, it’s quite tempting to dive in on any prospective projects. In the real world, it doesn’t happen that way. Why not? It’s because you might be taking in a renovation project that’s too big for you to handle.
What if your next renovation requires a big budget that goes beyond your capital? What if your next renovation will actually take more time than what you have in mind?
When taking in renovation projects, you have to go through a filtering process. By that I mean weeding out prospects that proves challenging to your ideal project. For example, you might have a potential renovation project in an area where people are actually leaving more than arriving. Or maybe you have a property that turns out to be structurally unsound. And don’t totally discount the possible challenges you’ll encounter with heritage homes.
I can think of a lot more examples but what’s important is that you have to come up with a standard basis for taking in your renovation projects.
Taking in renovation projects in undesirable locations
A point related to the above, be careful to not make the mistake of buying a property to renovate anywhere. The fluctuation of property markets from a buyer to a seller market and vice versa depends on people’s movements. And one factor that attracts movement is geography. You know what I mean when I say it’s all about location, location, and location.
In other words, look for properties to renovate in strategic areas. It can be a property that offers less commute time, it can be a property that offers scenic views and places to unwind, or it can be a property that provides easy access to social service providers.
Keep in mind that you may always have the best of plans and the best of intentions for your potential clients, but those won’t do any good on your profits if your project is in an area where people don’t even want to visit.
Taking in the wrong type of renovation
Doing the wrong type of renovation is one of the causes of over-capitalisation. So it’s not entirely about spending too much money on improvements that add little value. Over-capitalisation is also about the types of renovation that you choose to do.
So what can you do to avoid this mistake from happening?
First, start with the end in mind. What’s your ultimate goal? It’s to sell the property at its maximum sale price and get the highest possible profit. With this in mind, if you’re given a choice between two or more properties, pick the one or two properties where you think you can add value the most.
Second, your choice should also consider the concept of location, property type, budget, and time.
Third, think about your target market. What things do you think would be of value to them? Will an additional room be beneficial? Will granite countertops be practical? Will hardwood floors be suitable?
In the next installment, we’re going to focus on the mistakes you can avoid when it comes to the people involved in your renovation project.
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