The secret formula to help guide your reno budget
The love of renovation is still running strong, with many people taking up renovating as a full-time business and many others adopting the strategy as a way to create additional wealth.
With the Australian property market being so diverse, being a conglomerate of many micro markets, it is no surprise that there is no one-size-fits-all renovating budget or buying price that can work across the country without fail.
To account for this diverse landscape I like to apply a formula to my renovations. This allows for variables specific to the location, property and price point to be accounted for and then result in a renovation plan that will return the greatest profit.
There are many elements that create the Rapid Renovation Formula, which has proven results in creating wealth for renovators all around the country.
These include the foundational elements of how to set yourself up for success, how to find the right areas for a renovation, how to surround yourself with a "mastermind" team, how to become an expert renovator in your area and how to develop the best strategy to fit the wealth profile you want to achieve.
Once you have these foundations in place, next come the action steps. There are seven steps to renovating to create wealth, and I am sharing three of them with you now.
Finding the property
Developing a strong source of leads is an essential step to finding your next renovation project. They can be from many sources including local business, real estate agents, other professional renovators and tradespeople, just to name a few.
Once you have a system in place to assess each lead you are one step closer to having a stream of solid opportunities to choose from.
Planning the renovation
For every property there are multiple options for adding value and generating a profit from it.
A key element of the Rapid Renovation Formula is how to determine the "sweet spot": this is where your profit will be the greatest. Determining this will mean that you are extracting maximum profit from each renovation rather than using a one-size-fits-all approach.
Assessing a deal
There is no room for estimations or gut feelings here - this is where attention to detail and thorough planning must be adhered to, otherwise when the rubber hits the road you will come unstuck.
At this stage the main focus is determining the buy price. For me this is an analytic process and emotion does not enter the equation, regardless of how much I love the facade, the neighbourhood or the tessellated veranda tiles.
To come to your buy price you have to do some reverse engineering. It is as simple as: the final selling price or post-renovation value minus all costs, minus profit, equals the buy price. Seems easy, right?
Let's break this down some more and look at each of the elements individually. The more preparation you have put into being an expert in your area, the easier this will be.
While this will become much easier with experience, you will find it is not a one-way linear process. For example, your sale price will depend on the level of renovation you complete but the amount of work you complete will depend on what will achieve the maximum sale price.
Similarly, the holding costs will alter depending on the level of renovation you complete.
This process requires you to ebb and flow through some different scenarios until you locate the sweet spot. As you can imagine, this is a repetitive process until you hit that point of optimisation.