Whether you feel you have a good understanding of the process or not, it is critical - in my opinion - that you must do three things simultaneously when attempting a renovation:
Plan your budget
Outline your critical path
Draw a visual representation
The budget and the critical path are like Siamese twins - if one moves the other has to move.
1. KEEP YOUR PATH CLEAR
If there is a delay or hiccup in your path this will ultimately affect your budget and time-frame. These two tools are the most important in the toolbox and should be treated like they’re connected at the hip. Another key is to get your pencil out and draw sketches of how you think each stage of the build will look and come together. Putting thoughts/drawings on paper can really help you visualize (even if you’re not great at drawing!).
Visualization can be key
You may not be able to draw the detail of every stage of a building the way a building professional would; but my 30 years of experience tells me that you can stare at plans all day and not comprehend the process. Putting it on paper can make all the visual difference!
2. REMEMBER – BUDGET FOR PROFIT!
A common formula for renovating for profit is a budget of 10% of the pre-renovated value of the property, e.g. if the property cost you $300,000 - you shouldn’t spend any more than $30K on renovating it.
With these tips in mind, when considering a property as a renovate for profit project, you will hopefully be able to quickly evaluate if the property is a good buy, approximately how long the construction period will be, the cost and profitability.
The number one mistake I see is people buying for the sake of being in the market.
I encourage potential renovators to chart sales and do the exercise on paper several times before buying their first project. A project that is cheap because it is held together with band-aids will prove very expensive if it needs a full heart transplant!
5. A REWARDING PROCESS
Renovation for profit and managing that process can be very rewarding but you must maintain discipline. There is no room for emotion or ego in this process. Any decision that has to be made in haste is, in my opinion, a decision that shouldn’t be made. I don’t believe the future can be predicted, but I do believe futures can be anticipated. Renovation budget = 10% of the pre-renovated value of the property