Renovating at the top of the market is a particularly dangerous strategy.
Indeed a full renovation at any stage of the cycle is a mugs game.
If you have ever observed smart operators in real estate then you will realise they buy the worst house in the best street at the cycle lows, do a cosmetic renovation, and then rent it out until the market peaks.
This strategy ensures that their capital input is minimalised and that tenants mistreatment of the property has little effect.
Consider the opposite (which most people follow). A full renovation with all the hidden costs ie. your time coordinating tradesmen, time doing less complicated projects such as painting and landscaping. Just these last two points can burn up vast amounts of your time. Time that needs to be calculated on an hourly basis as an input to the project (a fact many people are either oblivious to or choose to ignore).
The other factor needed to be considered is the loss of income while the property remains in an unlivable state. For example the owner has to live somewhere while some aspects of the reno take place, so he/she will have a rent outlay eating into his/her profits. If it's an investment property then the owner will have other living arrangements but will still have a drain on the capital gain as no rent is coming in to cover the mortgage costs.
Another point to consider is does your renovation suit the buyer. So many times I've noticed a renovated property sell for little more than the shabby house next door mainly because of poor choice of decor etc. In fact a lot of people will prefer to buy the shabby one so they can create the house they want. So in summary renovating can certainly be fun and creative, but as recently witnessed on the Block hardly the path to riches espoused by the commentators.
