The biggest consideration for any real estate investor is making significant profits. There is no denying that renovations and property upgrades are key to increasing rental yields. Subsequently, this has a positive impact on your income generation and ultimately your profits. Here we go over some crucial aspects when renovating for profit.
1. Adopt the habit of keeping records
Remodel ventures require a sharp eye for detail and the capacity to remain over expenses and timelines. You must be financially vigilant and be able to account for every bit of money going into the project. This is due to the fact any money going into the venture is coming straight off your bottom line. Regardless of how small, all the money is very important.
Firstly, you need to adopt good financial habits. This starts with understanding that to stay on top of your cash flow you need to strictly track costs. Furthermore, this will enable you to maximise your return on investment on every single Kwacha.
Secondly, keeping detailed records of all your cash movements assists you to develop an inventory of project costs. Although costs change with time, having a reference point is critical to know in what region costs should be. In the event that any supplier or contractor is not being honest with their quotation, a quick check of your records will enable you to catch onto them quickly.
Finally, keeping detailed records of everything going into a renovation project is crucial when tax season comes around. This is simply because most of your spendings will be tax deductible. A reduction on the amount of tax you have to pay is important as it has a positive impact on your overall profit.
2. Keep a comprehensive photo portfolio for every property
The habit of taking a lot of comprehensive before and after photographs of any project is great practice. It goes beyond just merely being a keepsake. In the first place, these captured moments form part of an effective marketing campaign when selling the property. Secondly, these pictures are practical evidence when looking to revalue your property. Providing extensive photo evidence, as well as detailed cost documentation will help you argue your case when seeking an increase in property value. In as much as valuers base their assessment on comparable sales, they will take into account any value addition renovation undertaken. As such, there is no denying the picture your photos will paint of all the work you have put into the property.
3. Engage experts
Resist the temptation to do everything on your own and leave it to the experts. Depending on your skill level, there obviously will be some things you can do on your own. However, for the more complex tasks just sit back and leave it to the experts. For instance, electrical works and plumbing tasks are best left to competent contractors. If not the resulting outcome can be disastrous and cost you a fortune to rectify.
In addition to knowing your skill limit, you must objectively weigh the opportunity cost of undertaking a task on your own. In most instances, you will realise that it will take less time and cost you less to let a professional do the job. A professional has probably done the same task multiple times and knows how to do it right the first time and efficiently. This means they can complete the task in the least possible time and excellent results. You could find yourself redoing the same thing over and over just to get it right and without the same outcome as when a professional does it. Moreover, the same time you spend on the task is time you could be undertaking other income generating tasks to not only pay the contractor but remain with extra. As such it is very important to know your worth and how best to spend your time.
