Why I don’t renovate houses to make money

When starting out in property, you tend to have a bigger income compared to your deposit. 

That was the case for me. I started investing when I was 19. I lived at my parents’ place and paid them just $50 a week in board. 

So I could afford to get a loan, but I didn’t have a lot of deposit. 

I needed to renovate properties to make quick money and build up my capital. To do this I’d buy properties with the smallest deposit possible, complete strategic renovations to boost the value, and sell. And the profits went straight into my next property, repeating the cycle.

It worked well … at the time. 

3 reasons I don’t renovate properties to make money (anymore)

Renovating was a great stepping stone early in my career, but I’ve outgrown the strategy for three reasons:

#1 – It takes up a lot of time

Back in the day, I had time to spare. I didn’t have kids and I could leave my job at 5 pm.

Now, I’m 40. Between running a business and raising a family, time is a precious commodity.

I don’t want to spend my spare time with a paintbrush in my hand when I could spend it with my family instead. 

And if I spend a lot of time renovating properties, perhaps my business will make less money – and then I’m no better off. So when I weigh up the extra benefit vs the time and stress ... for me, renovating isn’t worth it. 

I still invest in property, but with a less time-intensive strategy.

#2 – It doesn’t make as much money as everyone thinks

As I said with subdividing, there’s a misconception that renovating is a path to rivers of gold. 

It’s true that you can make good money renovating – especially compared to a salary. But sometimes those big profits have less to do with smart renovation and more to do with the property market going up in value. 

For example, a couple I met recently bought an Auckland property for $800,000 in 2019. They spent $200,000 on renovations and sold it for $1.5 million at the market’s peak.

On paper, it looks like they made $500,000 – a great return. But during that time the property market naturally grew 50%. 

So about $400k of their profit came from the property market going up … and $100k came from spending $200k on a renovation. Yes, the renovations added value, but once you factor in time, effort and costs, the profit isn’t as significant as it first appears.

People will see the $500k win and say: “They did good” (and I’m not saying these people didn’t do a good job of the renovations). But in reality, they added less value than they thought.

More from Opes:

• New vs existing – Which is the best investment?
• Property apprentice vs wealth mentor vs assetlab vs ronovationz
• How do I add an extra bedroom when renovating my property?

#3 – It feels like a full-time job 

For me, renovating properties wasn’t a fun little side hustle – it was a grind. 

Social media may glamourise property flipping, but behind the scenes it’s all-consuming. If you only see the Instagram influencers who do these flips, you can fall into the gambler’s fallacy. Just because you see all the wins doesn’t mean they didn’t have losses. 

It can easily turn into a full-time job in addition to the full-time job you already have. 

One option to get around this is to hire professional tradies to do the work, and there’s nothing wrong with that. Some investors do it that way. 

But, while tradies would definitely do a better job than me, their fees would eat into my profits, so I’d make less money than I used to.

Who should still renovate (even though it’s not right for me)? 

Even though renovating isn’t the right fit for me (anymore), there are still lots of property investors who should renovate. 

#1 – If you’re a builder or a tradesperson

Tradespeople often have an edge – they can use their skills to save costs. 

For example, a builder might do a lot of the renovation work themselves. I’ve got a friend who’s an electrician, and when he does a renovation project he calls on all the people that owe him favours. That way he makes more money through those lower costs. 

He also spends a lot of time on building sites, so gets ideas for those renovations. 

If this is you, just make sure you don’t spend all your time renovating. You don’t want to fall into the trap where you stop doing work you can charge for. You still need to account for what your time is worth.

#2 – If you’re just starting out

If I was 19 again (or in my early 20’s) I’d renovate again. That’s the stage of life where you have more time and energy than money and can build your deposit up really quickly. 

If I were 20 again, with $100k to invest, I’d buy, move in, renovate, sell, and repeat the cycle until I’d built enough equity to move on to other strategies. 

But as a 40-year-old with equity and better things to do with my time? Not any more.

Why I don’t renovate 

I think people, myself included, look back on our renovation projects fondly.

Sometimes I think: “Oh, that was great fun. It turned out to be a really nice house.”

But then I remember how horrible it was – living in a construction zone, painting in the dark after a full day at work. No thanks. 

Now that I’m older I still want to grow my wealth, so I invest in more newer properties that don’t require as much time. Then I let the market work its magic. 

And I focus on what I do best: growing my business and spending time with my family.