Renovating a Property for Profit: How to Leverage Your Property Agent to Steer Through Minefields and Achieve a Successful Investment
HOW TO LEVERAGE YOUR PROPERTY AGENT TO STEER THROUGH MINEFIELDS AND ACHIEVE A SUCCESSFUL INVESTMENT
Given the recent popularity of reality TV programmes about how to purchase, renovate and flip homes for a profit, many people have been inspired to do the same in Hong Kong. While it looks easy during an hour-long show, there are many decisions that determine success or failure.
For this reason, before undertaking any project of this kind, it’s essential to work with a property agent who can identify properties with great resale potential but also steer you away from common mistakes re-sellers typically make. Property investing in Hong Kong requires vast sums of money. You don’t want to get tied up in a property that’ll take years to sell to recoup your investment or even worse, be forced to sell at a loss. A seasoned property agent has the qualifications, experience and network to help you avoid costly mistakes. Knowing which improvements add value and which don’t
When improving an investment property for resale, you’ll naturally factor in the value that you’re adding versus the investment costs, but knowing what buyers care about is equally critical.
Property agents with the right experience and mindset know what buyers or tenants care about and what they’ll pay for. They can also advise which types of renovations are safer investments or simpler construction projects, and which could create problems in the future. For instance, extensive landscaping or expensive built-in lighting seem like significant aesthetic enhancements or logical investments but may not add meaningful value of what a buyer will pay. Also, ‘invisible improvements’ like installing world-class plumbing or air-conditioning may not create enough of a higher resale value to justify their investment.
On the other hand, certain renovations such as new flooring or remodelling a bathroom can add substantial value to a property. Upgrades of this kind should be the primary focus since potential buyers tend to consider these areas first when considering a home. Your agent can be an excellent guide in this area. Construction costs
It all comes down to ‘upgrade costs’ versus ‘ultimate value’. When you look to sell, your final property value shouldn’t be too far above prices of properties in Hong Kong of similar size and quality in that neighbourhood. This is why it’s important to never ‘over-renovate’ a property you’re aiming to sell for a profit. Aim for that sweet spot of optimal renovation work in order to avoid exceeding the market value of similar properties. If you don’t, this could make it difficult for you to find a buyer. As a rule of thumb, investing more than 10% of the purchase price of the property isn’t advisable as it’s hard to recoup when the property is sold. Connections and resources
An experienced agent can also connect you to their network of designers and contractors to provide ideas, cost estimates or advice on building approvals. Reliable contractors are especially important to any successful renovation project. A good agent can introduce contractors they’ve worked with; a referred contractor will value their relationship with the referring agent and will want to ensure future referrals. As such, they will take extra care to help stay within budget, adhere to timelines and deliver a quality finished product. They’ll also be less likely to view your project as a one-off with little consequence if they fail to deliver. It’s not foolproof but it more closely aligns the contractor’s interests with yours. Conclusion
An experienced agent can do much more than simply introduce properties. They can be an important and valuable asset when investing and reselling at a profit. The pitfalls mentioned here (and many others) can be avoided by teaming up with a professional who has the knowledge and experience to guide you. Their interests are aligned with yours because they’ll not only want to help you make a good investment but if they’ve done a great job, also help you sell the property. So find a great agent who wants to create a long-term relationship and future referrals. They’ll be vested in your success and bring great value to your real estate investments.