So did you actually renovate for profit?
So you’ve finished your renovation but do you know the final cost? More importantly, do you know whether your renovation was worth the effort?
Whether you are renovating an investment property for profit or you are just trying to improve the value of your own home, after the dust settles on the renovation take some time to work out whether you actually managed to renovate for profit.
Renovation Budget Bravado
I was pretty sure I was all over this renovation budgeting and return on investment stuff when I undertook my last property renovation in Frankston, Victoria.
I had spreadsheets, I had targets for how much to invest in each room as a % of the overall value of the property.
It all started out pretty neat; I was getting quotes, entering them into my spreadsheet and negotiating the best price at every turn, I was on top of who I owed money to and when.
How Renovation Budgets Get Off Track
Then life happened. Which for Type A’s like me is a harsh reality check.
- I hadn’t estimated my tile quantities correctly, so I just needed to race to Bunnings and buy whatever tiles would work so I could finish those areas
- The rangehood I so thriftily purchased online as seconds, no longer had filters available for that model so I had to bin it.
- I needed a second pair of hands to put the kitchen cabinetry together, that wasn’t in the budget!
- The very cheap brickie who had come out and quoted with no issue at all, disappeared off the radar. So I had to pay a premium and get whoever I could.
- The young fella I had helping me sand the floorboards; plugged in the floor sander – having left in gear and it screamed across the room and through a window – hadn’t planned that expense.
Contingency? What contingency?
You know the deal, and this was only the tip of the iceberg.
Getting Your Renovation Budget Back on Track
So I have blocked out some time (get it Block-ed?) and gotten some help from my faithful bookkeeper in crime and actually taken some time out to set up my Renovation Budget in Xero
We have structured our chart of accounts and created line items for everything from Acquisition Costs, to Renovation Costs, Holding Costs and happily income lines for the rental we are now earning.
Whilst I am not doing this as a business, I will simply claim the expenses and income in the course of our personal tax returns, meaning the initial effort to set up a Xero file for this purpose will set me up for future renovations. This will also set me up to manage the ongoing financial whirlwind of property investing include tracking depreciation, expenses related to holding a rental property and rental income – yay.
So is renovating worth the effort?
I’ll let you know in the next SheBuilds instalment where I will get down and dirty with the actuals of the budget I undertook. I am still finalising all the numbers which should be done by the end of tomorrow. So at the moment I still don’t know if it was worth the effort but I sure enjoyed it!
In the meantime if you want to take a sticky beak at my Xero Chart of Accounts on my renovation projects, subscribe and I will send you a complete Chart of Accounts that you can use.