When renovating a property to sell, it’s important to realize that it’s a very different process compared to renovating your own home or even a rental property.
Is it feasible?
The first step in renovating a property to sell is figuring out if the project is feasible to begin with. Figure out the numbers and how much you feel the home will be worth with your renovations completed.
Most experts suggest spending between 5% and 7% of the property’s pre-renovation value on the property renovation. Of course, less is always better if you can. If you only have an expected profit of $10k, you may ask: Is it worth the risk for a relatively small reward?
If you are happy with the expected profit, the next step is to break down your budget and decide what you are going to spend it on. Depending on the house, cosmetics in the bathroom and kitchen might fare better than trying to add a finished basement. Compare the home to others in the market and try to determine where the money will be best spent.
Where are you making changes?
It is important that you take your personal emotions out of the situation and put on your business hat. This will help you make smart decisions when determining what areas of the home to renovate. Maybe curb appeal is a big priority, or perhaps you are looking to add valuable living space with a backyard deck, a finished basement, or an outhouse.
Curb appeal is usually very important, but it also doesn’t cost a lot to accomplish a nice looking exterior. Planting some flowers, having a nice fence installed, and even a fresh coat of paint (whether on the siding or just the front door) can make a huge difference.
Tip: Make sure you have adequate home insurance cover, before you start with significant renovations.
Determine Your Target Market
Finally, when thinking about what renovations are most important for the property, think about the neighborhood and the potential buyers who will be looking at it. Are they bachelors who would appreciate a spacious garage? Is it a big family who would enjoy the extra living space a finished basement provides? How about a multi-generational household who would pay for an in-law suite o ‘granny flat’?
Once you know your target market, you can make changes depending on what their priorities are likely to be. By figuring out what they place value on, you can expect a better return on your investment rather than simply making the changes that you think are the most important.
Chances are, people purchasing the home to live in it will have different expectations than you do as a seller.
So, figure out who your potential buyers are going to be and put yourself in their shoes. Is it one of the less attractive houses on the street? Curb appeal may be a big thing to focus on. Is it the only 2-bedroom in the area? Then you need to figure out how to maximize space.
Connect with Local Agents
Remember you don’t need to be alone in this process. If you have built up a solid relationship with one or more real estate agents in your area, you can ask for their input.
Maybe they’ll let you know that a lot of new couples move to the area, and a nursery could be seen as a real benefit. Or, they might say that a lot of students are coming into the neighborhood and they are after space for roommates along with a common game area to entertain their friends.
By speaking with a real estate agent who knows the area well, you can gain clarity on what renovations will give you the biggest return on investment once you start making changes.