Wealth

But with the property market shakier than it has been in years and global economic gloom predicted by many – is it still possible (or even sensible) to attempt to renovate for profit?

“All those renovation TV shows have a lot to answer for,” says Michael McNamara, who is the General Manager of Australian Property Monitors.

“I think there are bound to be more tears than dollars in renovations for the average person who isn’t a professional tradesman.”

But there are times when renovation is the way to go, Mr McNamara adds; he suggests that if it’s time to upgrade your property, renovating your home to add a bedroom or make it more liveable is wiser than paying all the expenses and taxes you incur when you sell your home and buy another.

The Housing Industry Association estimates that the average ground floor extension costs $110,000, while the average second-floor extension comes in at around $115,000.

“The reality is that in a tight property market, there really isn’t that much of a difference in price between renovated and unrenovated properties.”

He adds, “Any real estate agent will tell you that the banner ‘Deceased Estate’ will attract a bunch of hopeful twenty-somethings looking for a toehold in the market. People also love a blank canvas and unrenovated properties will actually attract more competition.”

With interest rates rising, the cost of building materials soaring and the property boom a distant memory, is there any money to be made in property investment at all?

Master renovator Paul Eslick thinks so; he says that an imminent credit squeeze can be an opportunity for people who are ‘cashed up.’ “There’s a lot of truth in the old saying, buy in gloom and sell in doom,” he says.

Mr Eslick and his business partner Geoff Doidge run “Reno Kings,” travelling the country presenting workshops and seminars on property investment.

He says that there are still plenty of good buys to be had. “You can certainly renovate and make a profit, providing that you don’t over-buy in the first place,” he says.

“If it’s an investment property, the biggest mistake you can make is getting too emotional and too fussy with it.”

He says that there are some very simple and cheap renovation techniques that will lift the value of a property enormously, such as replacing old carpet and blinds, polishing floorboards and cutting back overgrown gardens.

“And the best bang for your buck in renovating, without a shadow of a doubt, is paint,” says Mr Eslick, adding that he once painted a three bedroom house in 64 minutes using an airless spray gun that can be hired for $18 a day.

“They called me Bradman when I finished, because I had so many runs!” he jokes.

He advises would-be property investors to get a valuation of a property before they start renovating to make sure that they don’t over-spend.

“I’ve been doing a lot of my properties up to increase the rent,” he adds. “Another side-effect of the high interest rates is a tighter rental market.”

And he also recommends that renovators plan to keep their spruced-up property, raise the rent, get a new valuation from the bank – and then borrow against the increased value to fund another property purchase.

But while most people with a finely-balanced mortgage are looking to reduce their loan, in the property investment world, debt is good and more debt is better, with the common wisdom being that property, once bought, should never be sold; it just becomes another asset which can be borrowed against.

The popular property investment seminar circuit provides proof that talking about property is just another one of the many lucrative opportunities available to be exploited.

And smart renovators are now even offering their expertise to the uninitiated; like Chris Gray, a professional property investor and now renovation manager-for hire.

Mr Gray has been on the renovation treadmill for over a decade and now estimates that he carries out a renovation every two weeks.

“Quite often, I will buy a unit, put $50,000 into it to renovate it and increase the valuation by about $100,000. I do that time and time again on a regular basis,” he says.

“The main thing that people need to learn is you don’t get rich by saving money, you get rich by spending money and using that money to make more money.”

Well, if spending money is the main skill needed, I’m all ears.

Mr Gray says that these days, his role is just project management. “I outsource everything and that’s effectively what I do for my clients. The average person with a job and so on, they don’t have time to look at 100 properties and go and renovate a property.”

That’s where Mr Gray comes in; he charges about $13,500 to clients to source a property for them. “I can often buy a property 10 per cent cheaper, so often they are paying $13,500 to save around $50,000.”

He also charges 15 per cent of the renovation cost back to the client. “If they tried to do it themselves it will cost them a hell of a lot of headaches but because I might do fifty renovations a year, I get a lot of bulk buying power that one person buying one kitchen wouldn’t get.”

People get into trouble when they become emotional about property, says Mr Gray, and often think that everything they do is going to add value.

“Quite often I pay a valuer to give me consulting time on the likely costs of my renovation plans and how much will it add to my property’s value.”

Knocking down a wall might make a place look nicer inside, but if it doesn’t increase the square footage it may not increase the value of the property, he explains.

Buyer beware, says Robert Caulfield, who is the Managing Director of Archicentre.

“There is always money to be made in any market, but the key is to buy well and renovate sensibly.”

He advises potential property investors to make sure they get building and pest inspections, only look at properties that are structurally sound - and pay for professional advice before they buy.

Otherwise, he says, “It’s very easy for a renovator’s dream to turn into a renovator’s nightmare.”