21 Common Renovation Mistakes: Missing The Sweet Spot
Naomi Findlay, Australia’s Rapid Renovation Expert, shares the 21 common property renovation mistakes and her personal advice on how to avoid them.
Whether it’s overcapitalising or, even worse, undercapitalizing, missing the sweet spot is a common mistake that many renovators make.
Many of us have heard about overcapitalisation. Overcapitalisation happens when you spend too much money on a renovation that doesn’t yield the return. A great example would be a property whose price point doesn’t necessitate stone benchtops. You pop them in anyway because you’ve always wanted to renovate with stone benchtops.
Oppositely, undercapitalisation, which people talk about less often, is when you fail to meet that mark, that finish, or that level of market expectation that’s going to buy or lease the property at the end. Equally, undercapitalisation can be as detrimental to your project profit or the end result of your project.
So, when you’re overcapitalising, you’re actually spending too much money for no gain. And when you’re undercapitalising, you’re not spending enough money. As a result, you don’t make the mark which, in the end, jeopardises the price that you can sell or lease the property for.
So what do you need to do?
You need to find the sweet spot.
The sweet spot is that spot on the property where your budget and the level and finish you’re achieving is perfectly tamed with the sell price. Hence, realizing the maximum return for you to spend.
So, remember, there’s no need to overcapitalise and be very aware of undercapitalising. Ways to avoid this?
Know your market and their expectations.
Make sure that all of the finishes you’re doing in that property aren’t about you but your market.
And doing those two things will give you the highest possible chance of identifying and amplifying that sweet spot.