If you’re embarking on a renovation project have you taken the time to work out your risk profile?
Confused? Let me explain. Each property type has a varying level of risk and potential rewards which you as a buyer should be aware of.
It’s important to buy and renovate the right property type to match your risk profile because while you want to maximise the return on the money you invest, you also want to be able to sleep at night.
Everyone has a different risk profile based on their attitudes, knowledge and situation in life.
Before buying a property to renovate, it’s important that you consider your risk profile carefully, including how comfortable you are with the possibility of losing money, or that the return on investment may not be as high as you’d hoped for.
People who are risk adverse are best to do extensive research, liaise with successful investors and work through the steps one by one, or alternatively appoint an experienced project manager to advise them.
While those who enjoy taking risks and who haven’t renovated before have a higher than average chance of losing money on a renovation.
Apartments are low-risk because they’re cheaper to buy and there’s less renovating to do, which means less room for error.
However, the risk – and the potential profit – increases if renovators decide to move or remove internal walls.
Freestanding houses, semi-detached houses and terraces have higher risk which increases if there are added complexities such as Development Applications.
Before you start, take the time to understand your risk profile so that you can work out which project type will work for you.