Renovation expert Belinda Smith says identifying the right properties and staying emotionally detached will ensure capital growth from renovation projects.
With 30 years of experience in the renovation sector, Belinda is confident in the ability of property investors to renovate and/or flip their properties for profit.
She joined KnowHow founder Bushy Martin on the Get Invested to reveal the tips and tricks to smart renovation.
The five steps to successful renovation projects for investors
Belinda provided a rundown on the five key strategies, from purchase to sale.
“Number one is to buy under, or at least at market value, and don’t pay too much. Number two is buying in a really good location where there’s going to be sound capital growth, if you’re going to hold that property long term, or if you’re going to flip it, in a location where properties don’t stay on the market for too long. You need to have confidence in your ability to sell that property once it’s renovated,” she said.
“Number three is to do a really good renovation on that property, one with heart and soul and thought and planning. Number four is to style that property like an absolute champion, because styling is just such a big component of setting that desire for buyers to buy. And number five is just to sell that property as best you can and hopefully to an emotional buyer who will pay probably more for it than they should.”
Why you need to stay emotionally detached to renovation projects
One of the biggest pitfalls to renovating is when property investors make decisions based on their emotions and preferences, instead of researching what’s best for the market and potential demographic.
“People get so caught up in their own desires, in what they believe is necessary, or what they would put into their own homes. And they try and apply those strategies to investment properties, but it just doesn’t work,” she said.
“They end up spending too much money and not understanding the market, what the demographic will pay for, and how far to take that renovation. And even having a little contingency set aside for the unknowns that you’re naturally going to come across in a renovation somewhere is important.
“I think that people fly blind and they just grab a property and they stick it in their own name and go and renovate it and flip it. And then they’re surprised when they get a capital gains tax bill.
“So it’s all about getting in, getting the job done, really considering the demographic, looking at the facts and figures, and getting all of the right features for that particular property. And you just need to move through that process as quickly and efficiently as you possibly can, and come out the other side with it all ready to rent up for more money or to sell on.”
The key spaces to focus on in renovation projects
The two boxes that must be ticked in any renovation are the kitchen and bathroom.
“Overall, you have to pay attention to the kitchen and the bathroom, because they sell homes. It doesn’t mean you need to rip out kitchens or bathrooms altogether, but they need to be considered and you need to pay attention to them,” Belinda said.
“A family is going to look at that home and particularly the female of that family is going to come into the kitchen. And she’s going to walk into that home and say, ‘this kitchen is fine, I can cater for my family and entertain’. Or, she’s going to say, ‘that’s a really small oven and this is a four bedroom house’. So people will judge what they see.”
The bathroom should particularly be a focal point if you plan to do any cosmetic renovations.
“If you get a house and you’ve got the opportunity to do a cosmetic renovation and there’s only one bathroom, your priority should always be to get another bathroom, or at least a second toilet in that house,” Belinda said.
“It doesn’t mean they have to be brand new, but they certainly have to be clean and they certainly have to be functional. And so why not spend a little bit of time making them look great, whether that’s just renewing a splashback or some top cupboards, or adding some shelving, or making sure that there’s adequate storage. All of those little things count.”
The importance of staying resilient when renovating
Belinda urged investors not to be immediately deterred from renovating if things don’t go your way the first time.
“The sad thing is that if people have a bad experience when they do a renovation and they’re flying blind a little bit, they may never have another go at it. But when you’re doing a renovation for the second and the third time, that’s when you really hit your straps and you just get really good at it and everything becomes easy. You start to form a great team and you’ve got builders you can trust that need less supervision. Just everything starts to flow. But a lot of people never get to that because they just don’t make good choices in the first place,” she said.
Part of the process is also about staying slightly flexible with your expectations, depending on the market.
“Allowing perhaps for things to take a little bit longer in your contingency is totally fine. If you expect to get in and out of a renovation in six weeks with all the list of things that you’ve got to do, and so took you ten weeks but you’re still making great profit, that still counts as a win. So just change your expectations a little bit according to what’s happening in the market. But never think that it’s impossible to get a renovation done because it’s not,” she said.
“Don’t be too hard on yourself and enjoy it. And don’t be too hard on your partners because it’s not worth fighting with builders and partners. Just keep moving through the process, tick it off, learn from any mistakes that you make, and be proud of your achievements.”