Renovator’s Delights

This entry was posted by on Saturday, 3 November, 2012 at

After having done all of the required research, you’re now ready to begin shopping for a place.

This is where things get exciting. You need to keep your wits about you, because choosing a property is critical.

When you take your researcher’s hat off and put your buyer’s hat on, what you’re looking for is renovation potential.

You must assess each property not only on what it is right now, but what it could be when you’ve done your magic to it.

The main consideration is the condition of the property. You’re searching for something that’s crying out to be renovated, but notutterly derelict (unless you really love a challenge)!Then you will think about the needs and wants of the current market, and whether this property might meet them with optimal improvements.

Finally, you need to consider how far you can take the property.
Some places will only need a facelift to bring you a tidy profit.
Other properties can be totally transformed, bringing them to the next level and unlocking higher profits.

Generally speaking, there are three kinds of properties that attract renovators:The ‘Patch ‘n’ Paint’ means it is a solid property, in sound condition structurally but the decor is dated.

It will respond to fresh paint, carpet, fittings and fixtures, and the garden needs a tidy up.
The ‘Fixer-Upper’ will generally be older and in rougher condition than the Patch ‘n’ Paint.
The decor still needs updating, but it should also have a kitchen or bathroom makeover.
The ‘Fixer-Upper’ often has structural issues.

It might have cracks in the walls or need a new roof. Possibly the plumbing or wiring is uselss and needs replacing. These problems can be costly to repair and yet won’t necessarily add any value.

The ‘Knock-Down’ says it all, requiring a top to bottom restoration or demolition. These properties often catch the eye of developers, especially if they’re in a good location, on a large block or have fantastic views. From experience, the best places to renovate for profit are the ‘Patch ‘n’ Paint’ and the ‘Fixer-Upper’.

The type of renovation work you should attempt depends on your knowledge, skills, experience and contacts, but the average person should be able to do up these kinds of properties without too much trouble.
Plus, they don’t tend to have a high level of risk.

Dealing with structural defectsIn general, I advise people to avoid the properties that need serious work.

It’s best to spend your renovation budget on improvements that tenants and buyers can see because that’s how you get results.

Spending money repairing defects that are unseen eats into your renovation budget and you may not see a buyer who appreciates quality for some time, therefore your profits will be reduced.

Basically, tenants and buyers expect a property to have good foundations, wiring and plumbing. They won’t pay extra for it, so the extra expenditure to fix the defect doesn’t add any value.

If you do decide to make an offer on a property with structural defects you need to get a quote to find out how much it will cost to rectify the problems so you can factor that into the maximum purchase price.

If the numbers still stack up then go for it. And, you can usually negotiate because most other will be scared off by the “problems”.

Don’t skimp on inspection reportsMany property investors are tempted to save a few bucks by going without an inspection report when buying a property.

Don’t do it! Termite infestations, dodgy wiring, rotten foundations. There are many possibilities of problems with any structure that most people won’t notice.

Remember, just one of these problems can cost you big bucks. You wouldn’t buy a second-hand car for $10,000 without a $250 inspection report, so why purchase a property for several hundred thousand dollars without an inspection report for a a little more? For your peace of mind get the inspections done. For building inspections brisbane, contact Home Inspect today or visit their web site.

Meeting market demandLet’s forget about property for a minute and think about people, because despite what most renovation newbies think, renovating for profit is a people business, not a property business.

That’s because the tenants or buyers of your renovated property are the source of your money -from either the rent you receive or the profit you make once it’s sold, so to maximise your return you must develop a property that tenants will rent and buyers want to buy.

It’s the golden rule if you want to profit from renovating houses.

If you intend to keep the property then you need to research your target tenants for the suburb.
When you match a property to target tenants you’re less likely to have down-time with an empty house, or need to cut therent just to get people in.

Build a good relationship with property managers and find out what type of properties are most desirable in the area. Tell them you’re looking at buying an investment property in the area, and ask them what tenants prefer.

What sort of property is in short supply? What kind rents the quickest?In this suburb do tenants prefer houses or apartments? Do they prefer one, two, or more bedrooms? Do they require parking or not? You should know these facts before you can make an informed decision about what to buy.

If you intend to sell the property after renovating it, the same principle applies but now you must consider the wants and needs of buyers rather than tenants.

While there are some similarities, there are differences you should cater for.

And finally, although there will be some features of the property you can improve, some features, such as the location and aspect, etc, are fixed.
You can do a first class renovation, but if the property backs onto train tracks you’ll have trouble renting and selling it.

This is why selection of a property is critical. I always say, you may be able to improve a house, but you can’t improve its location.


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