Passive vs Active approach to creating value
Renovating a property is about upgrading, repairing, refreshing and creating perceived value that is greater than the actual cost of the renovation. Many Australians renovate their homes firstly to provide a more comfortable and usually larger living areas. The secondary purpose is usually to increase the capital value of the home upon a successful renovation. The traditional and still the most popular form of property investment is to buy and hold, in the hope of capital growth over the long term. However, there is a new breed of active property investors in the market who are actively looking for tired and old houses which present good opportunities to upgrade and increase the value. These investors have a systematic approach to ensure the risk of making mistakes are minimised and hence, they maximise their chances of returning tidy profits from each renovation project they undertake.
Cherie Barber’s 8 Systematic Steps of the Renovation Process
Cherie Barber, popularly known as Australia’s “Renovation Queen” is arguably the most successful professional renovator in the country. attributes. She threw in her full time job some 10 years ago when she renovated and sold 6 houses in her first year as a professional renovator which turned in a profit of $1.15 million. With 10 years of solid experience and many millions dollars in profits later, Barber attributes her success to an 8 Systematic Steps of the Renovation Process. This process is meticulously followed to ensure a consistent approach to the renovation process which attempts to eliminate most of the big risks associated with each project, regardless of size and complexity.
1. Target an area / location to specialise
2. Conduct suburb due diligence
3. Conduct property due diligence
4. Analyse potential and project feasibility
5. Acquire the property
6. Create higher and better use
7. The renovation process
8. Project completion and sell-off
Cherie has also written a chapter entitled Renovating for Profit in the book Think and Grow Rich in Property.