Renovations begin but each victory only reveals more problems with the house. Toward the end of the movie, the couple is left hopeless, broke, and with a house that is in ruins. While this is only a movie, stories like this happens everyday in real estate investing.
Since failed real estate investments are no laughing matter unless they are seen on the big screen, avoiding disaster is the key to success in real estate investing. You start doing this on day one when you begin to browse properties looking for the perfect opportunity. But even the perfect opportunity can turn sour if you don't know how to avoid mistakes during the renovation process.
The number one renovation mistake made in real estate investing is hiring an incompetent contractor. You should always check and double check references, but more importantly you should make sure that you can communicate with your contractor. I once saw an investment ruined by a contractor that thought that he was supposed to gut the house during demolition when he was really supposed to scratch at the surface and salvage what he could. When the investor arrived to see what had happened, she had no option but to redo the entire house and hope that she broke even.
Another common real estate investing mistake that is commonly made during the renovation process is to take on too many structural changes. These changes usually don't earn a great return on your investment and they drain the budget and eat up valuable time. Granted, removing a wall or two can really open up a floor plan and make your property sell quickly. These are the types of structural changes that you should go for while avoiding ones that serve no purpose.
You should always stay true to a home's style when renovating for the purpose of real estate investing. This means that you should avoid putting a New York City loft in an Arts and Crafts bungalow. Keep in mind that people who look to buy a house of a certain style want that house to be true to character. Therefore, don't change the character of the house during renovations. Enhance it instead.
When renovating a house that you wish to sell to someone else, you should strive to make the changes neutral and impersonal. Avoid infusing your personality and decorating tastes into an investment because they might not be tastes shared with your potential buyers.
The renovation process is where you make the money in real estate investing, but it is also where you can lose a great deal of money. Strive to stay on schedule and on budget, and don't be afraid to ask others for their opinion before you make any final decisions.
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