The Mistakes Renovators Make When Buying To Profit
We see many renovators buying property in Seven Hills trying to make a quick buck but many fail and some don’t even realise it.
Ever since the hot property market has been in the mainstream media and TV shows glorifying renovating with crazy profits, we have seen a spike in investors buying run down properties.
Tip; Most of these TV programs have extra tradespeople working when the cameras are off. Also the profits from the sale don’t include all the costs including time spent. I like to think of it more as prize money than renovation for profit.
What this media frenzy does is raise the prices of un-renovated homes and then you end up making less or no profit on the actual renovation. You might say “that’s not true, I made $50,000 on a property in less than 6 months”. This might be true but what if you didn’t do a renovation? Would you have made $50,000? This happens because the bottom of the market is going up rapidly. We have noticed un-renovated properties in Seven Hills have gone up $50,000 in the last 6 months.
Tip; If you want to be a profitable renovator you need to get $2/$3 back for every $1 you put in.
Basically people watch TV and say “I can do that!” and buy in a market they are familiar with. This is entirely the wrong way to go about it.
You need to do your research, research, and more research. What you need to know is;
- Are properties DOM (days on market) going up or down?
- Track the suburb for at least 3 months.
- Find out who the good and bad real estate agents are.
- Know how much un-renovated properties are.
- Know what quality of renovation you need to do and what sale price you will get.
- Is the market moving up or down?
- Where is the housing commission? Find out using ripe house.
- Where do owner occupiers want to live?
This is just some of the things I look for when buying and can make the difference between a profitable or unprofitable renovation.
Classic mistakes renovators make are;
- Did not get the agent on side (rubbed them the wrong way).
- Did not do their pest and building correctly or DIY.
- Did not stay in constant communication with the agent.
- Paid too much.
- Did not factor in all the cost.
- Did not have a B.A.T.N.A. (Better Alternative To a Negotiated Agreement), basically they get stuck on one property and don’t have an alternative. This can make renovators fearful of missing out. Just like at auctions it can make you emotional and pay too much.
- Getting emotional.
- Talked too much.
- Bought a bad layout.
- Buying the wrong type of property.
- Property has too much competition.
- Rushed the diligence.
- Inside their feasibility research they had quotes from cheap and nasty tradespeople (not all tradespeople are like this).
- Did not calculate their time correctly.
- Under-priced fixtures and fittings in feasibility research.
- Did not calculate fixing the layout.
- Choosing to buy off a good real estate (An agent can add or lose you over 10% to a property’s value, so pick wisely).
If you take these concepts and learn from these common mistakes you will be setting yourself up for a win. I recommend in this market to buy a un-renovated property to live in (after doing the research above of course). Renovate it over a year or so. Hopefully you choose an area that has good capital growth. By doing this you will have twice as much of a chance to make money from the market and the renovation.
Remember! The profit is made when you buy well not when you sell. If you buy a lemon none of this will work. I wish you good luck for a profitable renovation..
About Jhai Mitchell
Jhai is an award winning Internet Marketing Real Estate Agent for Elders Toongabbie and Kings Langley. After running his own internet marketing business he has now set his own sites for the real estate industry. He observed that 90% of real estate agents did not know how to market themselves online. Jhai is now fixed on one goal. To teach real estate agents that they can market online so much better than they currently are.
Since then he has been consistently quoted in the Sydney Morning Herald and Real Estate Business online. He is a regular guest blogger on TheHomePage.com.au, sharing his expertise of marketing aspects for the Real Estate Industry. His biggest passions are his wife, martial arts, dogs and most of all property.