Did you watch the season finale of The Block? If you did, you’re not alone. The show has broken viewing records with their portrayal of a world of get rich quick renovation stories. Just how realistic is the example set by this season’s winners, who earned $335,000 for their 6 months of work?

Selling their renovated apartment block for $1.91 million dollars, this represents a 17.5% profit. Not too shabby, but also requires a huge up-front investment. It is not always possible for an individual investor to have this amount of cash wrapped up in one project. But that is only the beginning of The Block’s unrealistic picture of property investing. The show also does its best to downplay the fact that most of the contestants earned approximately $10,000 during the project, earning a wage that amounts to much less than minimum wage.

It is possible to earn six figure profits on renovation projects, but anyone considering renovating for profit should also be aware of the fact that it will not happen on every property. Before you invest your life’s savings into a run-down apartment block or even a singular house, consider some of the issues that can cause your profits to soar, or dwindle.

Your most important decision takes place before pulling out a sledgehammer or a single pail of paint.

Fully investigate any property that you are considering renovating. Know the neighbourhood: its features, selling prices and target buyers. While you will want to find homes with depressed selling prices, don’t make the mistake of assuming that an investor’s fortune is hiding behind every low-price tag.

Especially if this is your first project, don’t spend more than you can afford to have tied up for several months. Properties on The Block required almost $2 million of capital, so chances are that you will need to start smaller. Remember that you are not guaranteed to get it all back so invest carefully. Large projects mean significant holding costs (insurance, mortgage interest etc). Even when the project is complete, it will cost you money until it sells.

When searching for the ideal property to renovate, look for homes that need cosmetic improvements. Major repairs, like structural damage or electric and plumbing issues, can suck thousands from your budget with no visible results for your buyers.

Create a budget that allows for improvements that bring the property up to the expected level for its neighbourhood, and stick to it. Overspending comes directly out of your pocket as it lowers your potential for profit. Know what the ceiling is on the selling price for the neighbourhood and avoid making your property the most expensive home on the block. Buyers are hesitant to be the owner of the priciest home in a neighbourhood.

In order to impress buyers for a quick sale, hire professionals when necessary. You may think you’re saving money with your labour, but if the result is obviously the work of an amateur you will lose money in the long run. Hiring an interior designer (like Hotspace Consultants – wink wink!) and professional contractors may be your best investments.

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