Planning Your Renovation: 6 Tips to Increase Your Profitability
Most real estate investors plan to renovate any investment property they purchase. Whether you are holding onto it as a rental or flipping it for quick profit, you have to plan your renovation in order to maximize your return on investment (ROI). If not, you could be leaving a lot of money on the table and that’s simply bad business.
Here are some renovation planning tips from PropertyLark:
1. Make a Plan
The first, and most important, renovation planning tip is to make a plan. This is not something you should figure out as you go. You want to do your research and plan everything out carefully. That means making a detailed construction budget and laying out a specific timeline of tasks, milestones and deadlines. Know exactly what needs to be done, how much it will cost and when the work should be completed.
2. Stick to Your Plan
Now that you have a renovation plan, stick to it. It’s too easy to veer off course and this can cost you excess time and money. Straying too far from your plan is a good way to lose profit.
3. Budget Conservatively
It’s usually best to build some cushion into your budget. Unexpected challenges will arise during remodeling. Construction delays and other problems can and will usually happen no matter how carefully you plan everything out. Budget toward the high end of expected expenditures. Plan for the renovation to take longer than you hope. If you finish ahead of schedule and under budget, then that is a bonus. If your margins are too tight and you don’t leave yourself enough wiggle room, the investment could be a disastrous experience.
4. Prioritize the Most Important Work
Understand which repairs and upgrades will add the most value to the property. Make those a priority when planning the renovation. New marble countertops might be nice, but are they significantly boosting the value of the home? That money could be spent on making much-needed roofing repairs that will make a measurable difference when it comes time to sell.
5. Don’t Make it Too Personal
Always remember real estate investment is a business. You should be passionate about what you do, but be careful not to inject too much of your own personality into the process. Think neutral when it comes to design ideas. Prioritize function over form. Think about the end user—whether it’s a rental tenant or a buyer. Create a house that will be appealing to more people and will attract positive attention from a wider audience. If the renovation is too specific or stylized, you limit your reach.
6. Find a Good Contractor
Never be afraid to shop around when looking for a primary contractor or any subcontractors for specialized projects. A good contractor can bring added value and ideas to the table while keeping you within your budget. Someone that comes too cheap may be questionable to hire. Someone who is charging too much may eat into your profitability. Talk to multiple contractors. Find the ones you can trust and the ones who will work with your budget. For more tips on finding a good renovation contractor, click here.
These are just some helpful tips you can use when planning and executing your real estate investment renovation. You have to find the right balance between being careful with your budget and making all the necessary upgrades and repairs that will ultimately enhance the property’s appeal and profitability.
If you are a real estate investor or looking to get into real estate investment, consider joining the PropertyLark home buying network. We give you all the tools, resources, analytics and information you need to be a more successful and profitable investor. To learn more and to apply, please visit our buyer’s pages.