When it comes to renovating for profit, or ”flipping” property, the best way to ensure success is to neatly fold away your emotions and lock them somewhere safe for the duration of your project.

”Concentrate 100 per cent on the numbers and zero on emotions,” says the founder and chief executive of property-investment consultancy Empire, Chris Gray, who has 20 years’ experience in renovating.

He says for every dollar spent you should get an additional dollar of capital growth; for each $100,000, you should get an extra $100 a week in rent.

It’s also crucial to consider your experience and finances before you rush out and buy a ”renovator’s delight”. If you’ve never renovated before, start small with a unit needing a cosmetic update. This might involve fresh paint, new floor and window coverings, and new appliances in the kitchen. The next step could be a project requiring a new kitchen and bathroom.

Gray says he has seen people with no renovating experience tackle large structural renovations and blow their budget by 50 per cent.

”It’s like share trading,” Gray says. ”Everyone wants to jump in and make a quick profit, but you should really be paper trading first.”

Another common mistake is investors falling in love with a property and deciding they want the best appliances and finishes.

”They haven’t renovated for the target market but as if it were their own place,” Gray says. The cheapest tradies can also mean heartache. ”You take the biggest risk, and quite often the cheapest becomes the most expensive.”

Buying the worst house in the best street is a great strategy, provided you buy well below the street’s median price. ”If you really want to guarantee your renovation is going to work, double the time frame and the budget and see if you will still make a profit,” Gray says.

In Sydney:

14 William Street Tempe $650,000+

Snapshot :A three-bedroom, 1920s brick house on a 316 sq m block. It has separate living and dining rooms and a basic kitchen and bathroom. There is a level, grassed backyard, an external laundry and a narrow, covered verandah. Positioned midway between Sydenham and Tempe stations in a wide, tree-lined cul-de-sac, the property is close to Cooks River parkland and the airport, and eight kilometres from the city centre.
Rent estimate $450 a week unrenovated, $750 a week renovated.
Yield (at purchase price of $650,000) 3.6 per cent up to 6 per cent renovated.
Agent Agency by Glenn Regan, 0411 567 203.

The property three doors down at 20 William Street sold for $910,000 in 2011, little more than a year after it was bought unrenovated for $485,000. Agent Louise Mitchell says there is plenty of growth potential for No.14. There are floorboards under the dated carpets and period features, including picture rails and a feature fireplace. Investors might consider demolishing the back of the house, which comprises a dining room, kitchen, outdoor laundry and shed, and replacing it with an open-plan living space, a large bathroom and an internal laundry. The garden and the facade both need some attention.

Best features Solid brick house, room to extend and still retain garden space.

Worst feature Aircraft noise.

And Melbourne:

78 Gardner Street Richmond $600,000+

Snapshot A three-bedroom, 1880s weatherboard cottage on a 150sqm block. It has a central living room, a dining room with brick fireplace and access to a study or small fourth bedroom, a very basic kitchen and bathroom, an external laundry and a concrete courtyard with back-lane access. Positioned in a wide, tree-lined street only metres from Bridge Road shops and restaurants, the house is five kilometres from Melbourne’s centre.
Rent estimate $500 a week unrenovated, $900 a week renovated.
Yield (at purchase price of $600,000) 4.3 per cent up to 7.8 per cent renovated.
Agent Biggin & Scott Richmond, 0418 536 262.

As this house is still in largely original condition, agent Chris O’Shaughnessy suggests a full renovation with the addition of a second floor to best capitalise on the popular location. O’Shaughnessy says Gardner Street is one of the best in Richmond: it is wide, with parking on both sides and two-way traffic.

With a number of recent sales in the area ranging from $900,000 to $1.2 million, O’Shaughnessy is confident the right renovation could almost double the property’s value. It has great street appeal and coveted access for off-street parking. An investor might consider demolishing the house from the kitchen back, adding a new eat-in kitchen-bathroom-laundry downstairs and a bedroom with en suite upstairs. The courtyard could be landscaped for outdoor entertaining and still double as a parking space.

Best features Charming facade, off-street parking, freestanding to the north.

Worst feature Small block; extending up can be expensive.

Posted by Kate Farrelly – The Age Domain on 7th March, 2013