Current Home Renovation Costs Snapshot

Home Renovation Costs

Discover what your home renovation costs really are

When it comes to property renovation, money is just about everything!

You need to be able to work out your home renovation costs. Yes using a home renovations calculator will make things easier but you still need to understand the cost to give you a good estimation of your average costs.

I’m talking about a fact of life. And that fact is that there‘s no point in going out into the market to search for properties to renovate unless you have some idea about what you can afford to purchase and what you can afford to borrow.

Here’s what I mean: You’ll need to have funds available to…

• Buy the property.

• Pay for stamp duty and legal costs

• Fund the renovation, and,

• Cover the costs of holding the property until it’s re-sold.

One source of funds is, of course, banks…

However, there may be times when you can’t get a loan from a bank. In that case, you’ll have to find different sources of funds.

First, I want to cover three very important financial concepts – debt, leverage, and loanto-value ratio. It’s essential that you understand them right from the start so you know that you have the proper financing in place for any renovation project.

Good Debt vs. Bad Debt

In basic terms, ‘bad’ debt is money borrowed to buy things that lose their value over

time and that don’t help you to earn any income. This might include cars, boats, or any luxury item.

‘Good’ debt, on the other hand, is money borrowed to buy things that go up in value over time and help you make more money…like houses!

My point is that, it’s okay to borrow money if you are going to use that money to make more money.

The Power of Leverage

When we’re talking about property, leverage (or gearing), is the use of debt to purchase a house

Leverage is an important part of property investing, and here’s why: Banks and other lenders see property as a secure investment. So, that means they’ll allow you to leverage a small amount of savings to buy a property and have that bank fund most of the purchase price.

Now, when you borrow for a renovation project, you only need funding for a relatively short amount of time, so it’s not as critical to get the “perfect deal.”

However, if you intend to hold the property and rent it out, then you’ll want to get the best deal possible. That way, you can keep the costs of the loan down over time.

The objective of obtaining finance for a renovation project is really just to secure the deal.

Sure, you don’t want to pay ridiculous rates of interest or exorbitant establishment and exit fees. These costs will reduce your end-profit. But you do want to get the funding or you won’t have a project to do!

Loan-To-Value Ratio (LVR)

This ratio is used by the finance industry in order to determine risk in terms of any property loan.

Generally speaking, lenders have lending policy limitations in place based on LVR. This gives them a buffer to protect the debt in case legal recovery of that debt is required

So these are the 3 important concepts you need to know about. And I discuss them all in much more detail in the Renovating Quick Profits Cash System. In this system you get the exact formulas to work out your loan to value ration plus you get access to our cash required calculator which does all your calculations in the blink of an eye.

Click here to access the entire Renovating Quick Profits Cash System

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