1. Be realistic!
Extensively research the value of products and services (get at least 3 quotes per trade) and consider worst-case scenarios. KNOW the value of your property before you buy it and be conservative with estimates and your selling price. Don’t under-estimate your time-frame.
2. Work backwards.
With all the knowledge you have accrued researching your particular market you should have a comprehensive understanding of what your property is worth now and what it will be worth once the renovations are complete. Knowing this, deduct the expenses (calculated as accurately as possible) from your potential selling price and consider if your plans are even worthwhile. Consider the time, effort and opportunity costs of investing in the renovation to realize a decent profit.
3. Don’t forget to build in a contingency buffer of at least 10%.
This is to ensure you are covered for unexpected emergencies – which ALWAYS arise. It is important to note that you can not control EVERYTHING. Sometimes mother-nature doesn’t have your schedule in mind and projects can be delayed through no fault of your own. It is better to be strict with your budget than to have to abandon the entire project due to failing funds.
4. Keep it Simple
Every new property presents the opportunity to be over-ambitious. The skill lies in discipline and self-control. Whether it be your colour scheme or your landscaping the more simple your design is the easier it is to keep to budget and to widen your target market appeal.
5. Marry your Budget with a Schedule.
Work FAST! Time is Money. Aim to complete all projects within a realistic time-frame. Consider everything that must be done and what order it needs to be done in. Delegate who is responsible for each task and assign them of their duties. Keep them in the loop. Let them know what your expectations are of them (quality standards and timings). If plans change, inform everyone down the chain. You can’t afford to be the weakest link 😛
By analyzing your schedule you can plan for necessary equipment and save money by not having to double up on machinery. Try and co-ordinate your contractors and machinery (e.g.bobcat, scaffolding, etc.) so they optimize their time and reduce the number of site visit call-outs.
6. Know Your Limitations.
When considering all the actions that need to be taken to reach your end goal, consider realistically what you can and can’t do. Don’t be afraid to hand over the reigns on jobs you simply do not have the time or skill set to complete to the highest quality. It may seem expensive to bring in a professional, but it will save you on frustration and credibility come inspection time. A quality finish can mean all the difference in making a real profit or not.
By being honest with yourself and recognizing what you are and definitely not capable of to begin with, you can project a more accurate budget and factor in the costs of contractors.
7. Familiarity can breed contempt.
It’s always nice to work with people you know and like, but sometimes using the same tradespeople for every job can make them a little complacent. They may take liberties they wouldn’t otherwise. It can be useful to keep them on their toes by at least rotating teams. If you have worked with a contractor before, be sure to let them know that they have not automatically got the job this time round – that you are getting quotes and will seriously consider hiring their competitor.
8. Never Pay Retail.
For your initial budget it is wise to cost products and services at retail prices. But that doesn’t mean you should PAY retail. When renovating, I NEVER pay retail. It could be as simple as buy when the stocktake sales are on; bidding at auctions (on and offline); using vouchers, trade cards or loyalty programs; or simply asking “Is this your best price?” – Get creative and NEVER pay full ticked price. Those extra pennies you save on one item can allow you to splurge on something else – if you just have to have it!
One of my favourite things to do on the weekend is just drive around my suburb, look at the style of homes, the latest trends, what other renovators are up to and most of all… check out garage sales. Some of my best bargains have come from garage sales. After all…
9. Buy in Bulk.
Included in your initial cost analysis should be an outline for all the materials required to complete the project. By outlining all the inclusions you can see, when and where all your materials are needed. Having calculated your mass requirements, you are in a better position to negotiate with suppliers. You don’t always have to buy the same exact product, often suppliers are just happy that you are buying in full from them, rather than going elsewhere.
Also, Buy your TIME in bulk. When hiring equipment, often you can get a better deal from companies who do not trade on the weekend. By picking up late on a Friday or early Saturday and dropping it back first thing on the Monday, you maximize time and value.
10. Build Relationships.
Arguably the most important factor in budgeting for a reno. Often, it is not what you know but who you know and by establishing lasting, positive relationships with your contractors, suppliers, agents, lawyers, accountants – everyone you meet, you can save $$$ and maximize profits.
I have saved thousands and made tens of thousands by talking to agents at open houses; knocking on neigbour’s doors; asking questions; getting recommendations and referrals; chatting and befriending repeat-business owners, discussing win-win outcomes with vendors/buyers. Call in favours and don’t be afraid to ask for mates rates.
It is important to remember all these people make up your team. You are leading and managing a team, the more smoothly the team runs the easier it is to keep to budget.