Renovating to Make Money
I often meet people convinced they have exquisite taste and determined to enter the renovation business: buying and renovating properties with the guarantee of big profits when complete. My advice is always the same:
Nothing is guaranteed. Markets shift and you might have to wait 2-3 years or more for better market conditions. Budget for this.
To renovate for profit, you must buy and build at wholesale. The best of everything means paying a premium. If you can sub-contract yourself - and know exactly what you are doing - you can capture profits others would charge.
Use quality materials, but temper yourself. When you buy the very best you're likely limiting your potential return and your risks are higher.
Timing is everything: a 2-3 year renovation eats up profits compared to a nine-month project.
Build a team you know and trust: your team is everything to bringing in your project on time and on budget.
Do a conservative Pro-forma, with generous allowances for cost overruns.
Never forget the cost of money and the opportunity costs.
Know the market: what sells for how much fully renovated: that will likely be the most you can expect when completed.
Go classic, either classically traditional or classically modern. High-fashion finishes can get dated quicker and de-value faster.
Renovations can be stressful and take away time from that which you do best....if you are not already a professional renovator. Then again, you have to start somewhere and many people do well renovating and love what they do. Make sure you go in with eyes wide open.
Renovating a property is an outstanding opportunity to create value and upside without relying on market appreciation. But renovator beware! A rapidly rising market can mask a lot of errors in judgment and execution. Without that wind at your back, you could find yourself dead in the water, or worse, sinking fast.