House Restoration – How to generate a Redevelopment Profit

We all want to make a profit when we sell our home, so doing some renovations is the obvious solution, but you have to do it right or it could cost you money.One of the biggest problems is over capitalisation. In a neighbouring street, which is quite pleasant but a popular short cut there is a large home for sale. The asking price is $1,600,000. In that street a top value home would sell for $850,000.It is a classic case of spending too much on the wrong property. They may sell it, home renovation costs money, within a short distance there are lovely homes with nice vies in quiet streets.That house is an extreme example but this is a common mistake. Spending too much to make the house perfect. Most buyers don’t want perfection, they want a good buy and they want to stamp their own mark on the property.Renovating a bathroom or kitchen can have a good return. If you want to make some structural changes then think of en suites and creating storage. Most homes have insufficient storage for the huge amount of stuff we all seem to have these days.The important thing is to remember why you are renovating. If it’s for yourself, then you do what you want as long as you can afford the extra repayments. If you want to increase the rent, the extra loan repayments should be less than the cost of borrowing to renovate.If you want to use your increased equity then you must know that the money you spend on the renovation is much less that the increased value on the home. E.g. you spend $50,000 on a renovation then a revaluation adds $100,000 to your home you could use the extra $50,000 to invest in another property.Be sure your expenses will be returned with a profit if you are selling the property. This means properly costing the renovation before you start. This is not as easy as it seems.If you are getting a builder to quote on the job make sure it is a fixed quote. Remember in many places that if you make changes to the plans once building has commenced then the contract quote is void.Try to avoid changes, it gets the builder off side, it adds to your costs, it takes longer to complete the job and often the extras can completely blow out your budget. Don’t forget that changes may also require removing work done and wasting materials.