One of the biggest reasons people lose money on renovation projects … especially flips … has almost nothing to do with the actual renovation process at all. It has everything to do with the selection of property and it’s location.
If you’re going to tackle a major renovation – whether it’s on your rental property or even your own home – you should understand this one concept. Missing this step and getting it wrong, almost guarantees you’re going to have to hold onto the property a long time to ensure you can recover your costs.
What is the money losing issues? It’s poor neighbourhood research. You see, you can buy a home for cheap and turn it into the most luxurious and beautiful home, and still not make money because you bought in the wrong area for what you were going to do. Every neighbourhood has a price ceiling and while the occasional home does burst through the ceiling, it’s rare. You need to know what you’re up against.
Here’s a video to explain what I am talking about when I say beware the neighbourhood price ceiling.
This really goes back to one of our fundamental investment principles – becoming an area expert. Part of your area expert research is to understand what your neighbourhood price ceiling is, and what factors may elevate a property above it.
Here’s some other real estate related articles that will help you save tens of thousands of dollars on your home buying and renovation projects:
>>Top 5 Real Estate Investing Books of 2013 – including 2 to help you plan those renovations
Image Credit: © Christine Langer-püschel | Dreamstime.com