Common Mistakes To Avoid When Renovating An Investment Property

September 22, 2011

Tips & Ideas

Renovating an investment property is different from renovating your own home, since it has to be done in a manner that it attracts buyers and appeals to a larger audience.  

This is perhaps why probability of making mistakes is higher, but if undertaken carefully common renovation mistakes can be avoided.

An investment property is purchased with the idea of getting returns from it, and renovation is one way of increasing earnings from it.

Renovation definitely adds value to the home besides transforming its appearance, and increasing its salability, provided these mistakes are avoided.

Common mistakes

  • Going into a renovation overdrive- the biggest mistake people make while renovating investment property is going into an overdrive, and undertaking too much, while the property may require much less renovation. This is a waste of time, effort and money.
  • Changing all fixtures- While renovating, a cost effective option is to retain and reuse some of the old things in good condition rather than replacing all of them. Durable products that are in good condition should be recycled rather than thrown. This mistake may mean a few hundred dollars extra, and definitely not worthwhile.
  • Using renovation to show own good taste- Many investors wish to display their own good taste through their renovated properties, and go all out to spend on the renovation. This is a waste of time and money, and must be confined to one’s own home, not all properties owned.
  • Overcapitalizing- This is the most common mistake made by people. Overcapitalizing means spending more than the returns expected, and is a loss making proposition. This mistake is common when people get carried away with renovations without keeping an eye on the budget and the expense adding up. As a rule, renovation must be limited to 5% of the pre-renovated value of the investment property.
  • Working without a plan and fixed budget- When renovation is started randomly with some repairs and extended to other upgrading initiatives, it can get out of hand in terms of expense and effort. A streamlined approach with the right work force and plan is critical for a good job. Hence working without a pre-formulated plan and without allocating a fixed amount is a mistake that can cost the investment property owner dearly.
  • Long lasting renovations- When renovations last long, it means loss of earnings and incomes and perhaps even loss of good customers willing to pay more, since it is difficult to predict how long high prices will stay and when a downslide may begin. Having renovations last longer than necessary can thus prove to be expensive.
  • Very trendy design- Investment properties need to have mass appeal that extends beyond individual preferences and cannot be very contemporary. Very trendy designs do not appeal to all and may not last long enough for the property to be sold also. Hence it is an avoidable mistake.

Renovation of investment property can be quick and profitable if it is spruced up with more cosmetic changes and essential repairs and the décor transformation can be left to the buyer.

 

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