Financial planners and mortgage brokers alike have worked with a lot of clients in and around Perth who purchase homes as “fixer-uppers” and plan to maximise their investments by fixing them to increase their market value. However, can you always increase the value of your property enough to cover the costs of renovation?
If you are using your SMSF to fund your Perth properties, either to rent or to “turn” on the market, it is essential that you do everything right. According to a recent Gumtree Tradie Trends Report, as many as 20% of investment property owners have botched an attempted renovation, to the tune of over $380 million in repair costs.
You cannot afford to be one of those 20%. Where does DIY go wrong? Here are three common mistakes.
Overestimating Your Own Time, Financial Resources or Abilities
This is also known as “biting off more than one can chew.” A neophyte investor sees a property marketed as a “renovator’s delight” or a “great fixer-upper” and decides he will make a quick buck by renovating an undervalued property. Then, they find out that the job is simply too big; there are too many repairs that take too much time and cost too much.
Before buying a “renovator’s delight,” you need to make a list of proposed renovations and turn them into a plan. Pretend that money is not an issue and estimate the costs of each project, including materials and time. Then, prioritise the repairs and set up a proposed schedule and budget. Before buying, make sure that what you have written is possible.
Finding the Right Tradie
For those who don’t DIY, you will have to find a tradie. This will also be figured into the proposed costs of your renovations. If you choose the right tradie, everything will be fine. But if you choose the wrong tradie, it could spell disaster.
Meet the tradie beforehand and set out your requirements. Set clear guidelines and deadlines. Communicate regularly. If you aren’t getting things done on schedule, it’s either your expectations are unrealistic or you need to find another tradie.
Make sure that you will see a good return on the money you spend. Otherwise, walk away.
Call (08) 9472 9766; talk to our financial planners in Perth.