How much should you invest to renovate a property?

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How much should you invest to renovate a property?
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• Are you planning to buy an investment property or
  undertake a flip project? If done right, such
  projects can be highly lucrative. At the same
  time, though, it can have negative repercussions
  if the project is not executed professionally. It
  is a good idea to connect with home renovation
  contractors in the early stages of the renovation
  project to ensure that your money is not going
  down the drain. You need expert guidance
  throughout the process starting at the stage of
  buying a property for investment or flipping.
  Some properties can produce a higher return on
  investment than others.

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• Once you have purchased the property, you need to
  figure how much you want to invest to renovate
  that property. Investment property renovation
  projects can cost you anywhere between a few
  thousand dollars to hundreds of thousands. So,
  does the budget for renovation merely depend upon
  how much you have available to spend? Not really!
  There are a few factors that are involved in this
  decision. Lets take a look at a few of them

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Budget

• The first step in the process is to ascertain
  your budget. How much money can you shell out for
  this project? You could use your savings towards
  the project or the funds can also be raised in
  the form of a mortgage or a Home Equity Line of
  Credit (HELOC). Many people prefer the latter
  because that allows them to keep their savings
  intact. The amount that you have in mind will
  certainly have a bearing on what kind of work you
  can get done. Talk to a few investment property
  renovation contractors before you arrive at that
  budget. They can give you a realistic idea.

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Value Enhancers v/s Cosmetic

• As laymen, we may think that the cosmetic changes
  are what enhance the value of the property. While
  its true to an extent, but experts will tell you
  that this thought may not hold true in many other
  cases. As an example, completing an unfinished
  basement may offer a high return on investment
  against having pot lights installed in the house.
  Similarly, redoing kitchens and bathrooms can
  provide a push to the investment propertys
  value. Again we cant emphasize enough on the
  need for a qualified contractor. They will guide
  you on which projects to undertake and which ones
  wouldnt make sense. This has to also be decided
  on the basis of the budget that you have set for
  yourself.

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Market Trends

• Another important factor to consider is the
  market trend. As an example todays hot
  real-estate market provides immense potential for
  investment projects. Any upgrades you do may have
  the potential of adding significant value to your
  investment. However, things were different back
  in 2017-18 when the market was lukewarm, at
  best. There were more listings than buyers, and
  properties werent moving as fast. In this case,
  youd also have to evaluate the cost of holding
  the property for that long. While you may sell a
  property in a matter of days today perhaps, you
  have to account for a month or longer in a slow
  market.

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Client Preferences

• This relates to point 2. What are your clients
  really looking for? Doing things that they arent
  interested in may not pay you rich dividends.
  Suppose you purchased an entry-level townhouse
  for 500,000 and installed a hot water pool in
  the backyard. Do you think you can charge an
  extra 50,000 to 70,000 for that upgrade?
  Probably not! Entry-level townhouses are
  generally purchased by first time home buyers.
  The functionality of the house matters to them
  more than the cosmetics and the luxury elements.
  In that extra 70,000 they may manage to upgrade
  to a semi-detached house or a slightly bigger
  property with an extra room.

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• On the other hand, this hot water pool may reap
  rich dividends for a 1.5 million-plus property
  where people have the money and willingness to
  pay for cosmetics and luxury.
• In short, your budget for investment upgrade is
  reliant on multiple factors. You need to evaluate
  your budget, market trends, client preferences,
  and return on investment among other factors to
  complete a successful renovation project.
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