Home Renovation Mistakes To Avoid At All Costs! How To Renovate Your Hong Kong Property For Profit!
Renovating an investment property in Hong Kong the right way can boost its market value and lead to a nice profit gain, but only when it’s done strategically. The phrase “Fix it and flip it” has become synonymous with real estate investment. The idea behind the concept is that the execution of a few strategic remodelling work can add significant value to the price of a property when it comes time to selling it back on the market. With this being said, many Hong Kong homeowners and property investors choose to undertake major renovation projects before putting their real estate properties up for sale with the hopes that giving the place a makeover will result in bigger returns. What investor wouldn’t want more money for their products? The problem is that not all renovation projects result in success, and some “upgrades” end up failing to pay for themselves and being no more than downgrades. Renovating an investment property has become a popular strategy for property investors seeking their up the value of their real estate portfolio, because when it’s done correctly, the returns can be great. However, there are renovations that work and others that well…do nothing more than put a massive dent in your bank account. Before you embark on a massive renovation project, make sure you understand the reasons why you are doing it and all the rights and wrongs that can come with it.
Stay with us to find out how YOU can renovate your properties strategies and learn which renovations actually add value to to your property. There’s some renovation mistakes that you should avoid at all costs - mistakes that you simply cannot afford to make as a property investor or homeowner. Before we get started on our list of renovation do’s and don’ts, it’s necessary to take some time to investigate the difference between being a real estate investor and being a homeowner. How would either of these roles affect your renovation strategies? Let’s find out.
Generally speaking, overhauling an investment property is usually a sound choice when implemented with the right strategy. The idea is that you take a run-down home with wear and tear (at a bargain price) and use the money saved on renovations and repairs to make the home look and feel brand new. A little extra work can go a long way toward making a real estate investment more profitable when you put it back out on the market with a new, fancy face. Property investors often do this, but they are very careful and strategic about the remodelling projects that they choose to take on. It’s not a random choice, and property investors will focus on the projects that will result in the most value for the least amount of effort and cost. That’s the essence of investment, not just in real estate. Property investors choose their projects carefully according to detailed analyses of market research before they embark on a renovation job. You need to know who you are competing against in your market, and then decide on the renovation projects that complement it. You don’t want to put more money and effort than you need in to a project if you know the returns are not going to be significant. Homeowners on the other hand do not generally follow the same strategic approach to renovating. Homeowners have more emotional attachments to their property, and often will make the mistake of sprucing up their home with significantly more money than they will end up getting back out of it when they sell. Homeowners don’t tend to do detailed market research before renovating, they renovate for the sake of renovating a lot of the time. The difference is that property investors are doing it as an ongoing business; a stream of income, whereas homeowners are often renovating on a one-time basis to get their home off the market and call it a day.
There are a few types of renovating projects in real estate. Let’s discuss these first:
The Basic Renovation
The basic renovation is as the word suggests, the foundation of most remodelling projects in real estate. It’s the most basic features that buyers expect when they purchase a property, and these are often the unspoken things that everyone requires out of a home. This may include such things as, a leak-proof roof, solid floors, walls that are in good shape, functioning appliances, working air-conditioning and heater systems, a certain number of bedrooms and bathrooms, and any other amenities that often come with their type of property. These are the foundations of every home. The basic requirements depend on the type of property is is as well. These are renovating projects that won’t necessarily add value to a real estate property, but merely brings the property up to the accepted standard level of the rest of the (similar) properties in the area. Usually, the budget that you allocate to these types of renovations will not be recovered in the final selling price because these are common-sense features that every home should have. The basic renovation merely puts your property at the same level that is comparable to the other homes in your area, but these are necessary renovations nonetheless. Without basic renovation, you put your property at risk for not selling for a long time or worse, selling at a significantly lower value compared to the rest of the other properties in the area.
The Curb Appeal Renovation
Then there are renovation projects that add curb appeal, which essentially means that these are features that help upgrade the property’s look for when prospective buyers visit. While these types of renovation projects won’t necessarily boost the monetary value of your property, they can in a sense, help sell your property faster by making it more attractive and appealing. It’s like giving a pair of shoes a nice scrub and shine, or a puppy a fresh groom. These are nice curb appeals. Curb appeal renovations may include things like, a newly landscaped backyard, fresh paint on the walls, a new carpet, new appliances, fresh flooring and tiles. Some people add curb appeal by baking fresh food from the oven during open houses and buyers’ visits to basically set the stage and create an transformative experience. These are all little extra somethings that can help you sell a property faster.
The Value-Add Renovation
The value-add renovation projects are the ones we are most interested in. These are the remodelling jobs that strategic property investors make to boost market value, and is a big favourite amongst fix-it-and-flip-it real estate professionals. Projects that are considered value-add renovations may include, full kitchen remodelling, full bathroom remodelling, new windows, new patio, knowing down walls to create more open living spaces…etc. These projects when done right can add value to a property during the resale phase.
The Personal Preference Renovation
Personal preference renovation projects are features that have nothing to do with boosting a property’s market value. Often times, these are the extras that people may not necessarily need, want, and wish to pay a higher dollar amount for, but features that you add nonetheless because they are your own personal preferences. Although there’s no harm in adding these extra features to you property, we wouldn’t get our hopes up and expect prospective buyers to willingly pay a premium to get them. Then again, these are all dependent on the market you are in. In the luxury real estate space, prospective buyers may be more willing to shell out the big bucks for added bonuses like, heated swimming pools, tennis courts, hot tubs, wine cellars, office room, water fountain and so on.
Whatever renovation project you embark on, do understand that the point of renovating is so that you can sell it at a price that is profitable to you. If you don’t have the budget for it, don’t waste money and effort on big undertakings in the hopes of increasing the value of the property. Do the basics to get the property up to par that is comparable to the rest of the neighbourhood. The problem with renovation projects is that people often spend far more money than they end up getting back in return. That’s the biggest mistake you can make, especially as a real estate investor.
With renovating real estate property, there’s no room for error. Renovation mistakes can cost you a hefty amount and a whole lot of wasted time when your actual goal is to place your property on the market for sale. If you are embarking on a renovation project for you property, make sure to take some time to read through the following mistakes you absolutely want to avoid:
Hiring The Cheapest Budget Contractor
It’s tempting to choose the contractor that offers you the lowest bid, but we’re all familiar with the saying - “You get what you pay for”. This couldn’t be more true in terms of real estate work. Very rarely will the contract that offers you the cheapest fees provide you with the best quality of work. People will reputable skills know their own value and will therefore charge a premium for their work - for good reasons. Real estate contractors work the exact same way. You want to work with contractors that are skilful with good credentials. With that being said, you also don’t wan to go crazy and blow through your budget allowance by hiring the most expensive contract out there. Do your research, ask for referrals by other industry professionals, interview thoroughly, and get quotations from various contractors before you give the green light. Make sure you take the time to properly review and compare their past work, portfolio, suggested ideas and references. But our tip is that you want to avoid the cheapest contractor because let’s be real here, the cheapest are usually cheap for a reason. You don’t want to test out whether this is true or not with your money and time, not on projects as big as these.
Designing and Renovating According To Personal Tastes
If you are a newbie in real estate investment, it is normal to approach the renovation process with your own personal preferences in mind, but you have to always keep in mind that you are not renovating the property for yourself. You are renovating the home to boost its value so it can sell faster on the market. Your personal tastes do not matter at all because what you consider appealing may not be received the same way by prospective buyers. The most important thing for you is that prospective buyers like the style of the property - the way it looks and feels. The biggest mistake you can make is to design and renovate according to your own personal preferences, instead of going for a neutral look that is appealing to a broad audience. Maybe you love the contemporary minimalistic look in residential homes and renovate according to those design aesthetics. That’s wonderful and all, but you will be narrowing your audience tremendously because not every prospective buyer out there will like the contemporary minimalistic look. You want to go with aesthetics that are generally accepted across the board. If you need inspiration, just look at the other properties in your area to get a idea of the kind of people who purchase homes. This is why doing market research and studying your demographic thoroughly is essential to the success of whether you sell or not.
This takes us to our next point: Avoid making things to niche. While some people enjoy bright, flashy and bold colours in their living space, it can be terrifying for others. You want to keep a neutral palette - stick to colours like white, beige, taupe, tan and sandy tones. Don’t go crazy and paint the walls every shade of colour of the rainbow. If you wish to add colour, you can do so by accenting. Adding pops of colour is good because it brings a room to life, but definitely avoid going too bold and too flashy. This can scare off prospective buyers. You are better off appealing to a wider group of prospective buyers by keeping with neutral tones, and neutral aesthetics design. As a property investor, your ultimate goal is to make the property as appealing to the masses as possible. By going too niche, you risk only landing yourself a limited number of interested buyers because a lot of people will find it difficult to get past design tastes that are much too “out there”. It is better to be more reserved than to be too loud.
Neglecting To Get Proper Approval and Permits To Renovate and Remodel
People often make the mistake of thinking that they can renovate and remodel however they desire because they own the property. This couldn’t be less accurate. Just because you own the property doesn’t mean that you are free to tear things down, break things down and build new structures to your heart’s content. There are laws in each city and in each neighbourhood that purposely forbid certain procedures and often, you will need to get pre-approval and permits for any big renovation projects. Usually, if you have a project that are below surface level (more than just slapping on a fresh coat of paint), you are required by law to get it approved and have permits that prove it. Anything that requires structural changes and inner hardware changes to a property will usually require you to follow specific procedures first, otherwise you put yourself at risk for being fined.
If you want to build a patio on your property, or build another floor to make a rooftop terrace, or implement a new swimming pool, it is always best that you find out about the legalities first before you start knocking things down. There are strict laws against hard renovations in each city. Newbies often make the mistake of starting big renovation projects due to being unaware that there are laws against such practices. It’s important that you don’t neglect these legal policies, otherwise the damage control could end up being more than you can afford to pay.
Obsessing Over The Nitty-Gritty Details
Obsessing over the tiny details is something that homeowners do more than property investors. Homeowners often make the mistake of stressing out over the nitty-gritty details instead of focusing on the bigger picture. Of course, we aren’t suggesting that you should take short cuts and neglect certain renovation details, but there are certain features that you would only obsess about if you put too much of your own personal emotions in to it. The end goal is to sell the property, not to make it perfect for yourself to live in. When renovating, focus on what your prospective buyers will see, and target on the areas that they will want improvement on. Stay focused on the bigger picture and don’t sweat the small stuff.
Use Your Logic, Not Your Emotions When It Comes To Property Renovation:
Finally, we have to go back to the point that real estate property renovation projects should only happen if they are strategically done and can add value to your property. A home renovation project can get out of control if you are not careful. Before you start any big remodelling tasks, remember to use your logic and not your emotions. We hope that these rules will save you from making costly mistakes in your real estate business.
Don’t forget to plan your renovation in detail and put a budget in place before starting. By doing a thorough analysis of the potential profit of the property with renovation costs in mind, you can ensure that the return on investment is going to worth your efforts. Its also important that you study and understand the key facts behind your property and market. Some factors you want to consider when renovating for profit include: population demographics, turnover rates, median price trends, local culture, comparative property features…etc. By understanding what the other homes in your market are like, you are at a better position to renovate your property accordingly.
Are there any other renovation mistakes that you want to add to the list? What mistakes have you made in the past as a property investor or homeowner? We would love to hear your comments. If you are new to real estate investment and need guidance, our team at Engel & Voelkers is happy to speak with you. Feel free to contact us at anytime.