In the early days of my renovating business, my main concern was minimising my costs. I believed that the less money I spent on a renovation, the greater my renovation profits potential would be. My approach was wrong. My renovations lacked a profit strategy.
After many years I realised that to manage the renovation profits potential you need to have a strategy in mind. It was only when I became strategic that I started making a real profit.
Maximise Your Renovation Profits With The Right Strategy
Your profit depends on your understanding of the property market. Get to know your target market and the location of your renovation project property. The aim is to learn what kind of renovation the market will value and pay for in that particular area.
Over the years we have learned that a ‘Cosmetic-Plus’ renovation is the sweet spot. It is not a full structural renovation, but it is more than just a cosmetic makeover. It increases the function and livability of a home. This type of renovation has great potential for increasing the value of the property while maximising your profit when you sell it.
Factors You Must Consider For Projecting Your Renovations Profits
A good renovation project feasibility assessment includes a projection of your profits. To calculate your profit you need to make sure that all the costs of the renovation are covered by your selling price. These are the costs and fees you have to consider:
- The purchase price is not just the amount you pay for the property. It also includes solicitor’s fees, the buyer’s agent fees, stamp duty, and finance establishment fees.
- The holding costs include the interest you have to pay on the loan, insurance and strata fees. The amount you will have to spend on electricity, water and gas while you own the property should also be included here.
- The renovation costs include all the expenses related to the renovation including getting council approval, hiring an engineer, having a private certifier check the renovated property, paying the tradespeople you hire, materials, and security deposits, like the ones required by apartment buildings.
- The selling costs also need to be considered. You will have to pay your estate agent, advertising costs, and legal fees. You may also have to spend some money on styling the property to make it attractive.
- The tax you have to pay on a renovations project is GST (goods and services tax) and land tax.
Take the time to develop a renovating strategy to maximise your profits. Remember to include all of the costs of the project in your profit calculations. It is the best way for you to make a real profit from your renovations business.
At The School of Renovating our mission is to give you the tools and the inspiration to experience all the joy, creativity and profit that renovating has to offer. Have a look at our free resources to get you started on your own or with a partner.