How To Sell Your Home For More
The goal for anyone selling their home or investment property is to always get as much value as you can on that final sale price. One of the most effective ways to make more when you go to sell is to do a quick renovation to add some value.
We recently made a $235,000 profit doing a renovation on a property in Glen Waverley that had an appraised value of only $550,000, which highlights just how effective this strategy can be.
Here are the five main things we did that helped us to make $235,000 profit on the project, that you should be doing before you undertake any type of renovation.
1. Engage a team of professionals
One of the simplest ways to generate a better return on your investment is often to work alongside a team of professionals, who have more experience and more specialised knowledge than you.
The three most important professionals you should be working with are the selling agent, a structural engineer and a property stylist.
Often the selling agent is greatly undervalued in terms of their knowledge of what the market in your area actually wants. They are then able to help you put a plan in place to make sure you are offering up a product that people are actually going to want to buy.
The single most lucrative decision we made on our project was to work with a structural engineer to look at the possibilities of improving the floorplan to create more usable space. In turn, making it far more appealing to potential buyers.
Finally, our stylist was able to create the ambience and often has great ideas on the type of finishes and designs to suit your target market.
These professionals really helped us build the scope for our project success.
2. Create a budget
Before taking on any potential renovation project, arguably the most crucial element you need to establish is the return on investment for the project.
If you spend $1,000, are you going to be generating at least $2,000 of added value? These are questions we always ask when doing any project and it is another reason we work with professionals to help get an accurate idea of what our returns might look like.
On this project, every $1,000 invested returned $4,000 to the value of the property. Our general rule of thumb is as long as we double the money we put in it’s a viable investment. Budgeting during a renovation is often difficult to get right particularly if it is your first renovation or the property type is different from those you have experience in, ie. double brick walls and concrete ceilings versus plaster.
An excellent rule of thumb is to only spend up to 10% of the value of the property on renovations, however, great results can still be achieved with less.
In this particular project, we spent $60,000 on the renovation on a property with an appraised value of $550,000. We were able to achieve $845,000 at auction which shows just how effective a renovation can be. Review your numbers regularly to ensure your costs are under control.
3. Due Diligence
Always do your due diligence on both the property and also the team you are preparing to work with as this is where the value is created or lost.
Your objective is to get a great result, so treat any project you undertake like a business transaction. Interview trades and other professionals to see where they can add value and ask to see how they can substantiate their claims.
Do they have past clients or previous results that quantify what they are telling you? This is your investment and make the decisions based on thorough due diligence of not only the people but also the analysis of a sales price target for your area. And remember your cheapest quote is often not the best.
On our project, we built an awesome team who managed their roles really well and that helped keep the project on time and on budget.
4. Spending the money
It is crucial with any renovation to maximise the floorplan to create extra living space with a bedroom or bathroom.
If this is possible then make sure you budget correctly as we discussed earlier. If this is not possible then target a kitchen and bathroom refresh or replacement depending on your budget.
For lower budgets, simple items such as laminate paint, tapware and handles can create a significant change in perceived value or even upgraded appliances.
The true value of a fresh coat of paint is often underestimated as this can be used on tiling, concrete, kitchens, walls, bricks, floorboards you name it almost. A fresh look and smell with the right neutral colour tone will add thousands in extra value.
5. Have a plan
You need to have a plan for not just the renovation and budget but also in terms of your exit strategy once the property is sold.
You may need to reduce debt/increase cash, relocate for work or downsize/upsize based on your family situation. Reasons will vary so be clear on your next steps as part of the initial planning phase. And build contingencies in so you are covered if the property doesn’t sell within your desired timeframe. What are your options?
These are five very important steps we have refined as part of our renovation process to help vendors extract maximum value from their properties.
When undertaking any renovation, a bit of time working through these steps is likely to save you a fair bit of money and pain down the track.