A splash of paint, new flooring underfoot and fresh kitchen can take an average property from drab to fab. But while a quick renovation will improve a home’s appeal, how can you ensure it improves the property’s value?
In the past, renovating has been a proven strategy to boost the value of real estate around Australia, but not all homes will generate a profitable result.
“You need to know what properties to avoid – for instance, solid brick homes cost more to renovate and homes with asbestos can be very costly,” explains Charyn Youngson, property consultant and renovation specialist at Houses to Impress.
“I find the best houses to renovate are those built in the ‘60s, ‘70s and ‘80s, which are still in original condition. You can essentially find someone else’s problem and create a profitable solution.”
What is your renovation intention?
Before you start browsing for the perfect run down property, you first need to work out what your purpose is.
“You want to start with the end goal in mind,” says property investing strategist Ash Oz.
“Do you plan on selling the property, renting it out or living in it yourself? This decision will affect the types and quality of material you intend to use.”
If you’re renovating for personal use, then you might upgrade your fixtures and fittings. If your purpose is to generate a profit, then cheap, cheerful and durable is the way to go.
“You can start looking for bargains on eBay and gumtree for materials and items you may need to help you keep your renovation budget in check,” Oz advises.
“If you need any additional hands on deck for labour, you can also find an affordable helping hand on gumtree.”
How to find the ideal renovator property
First stop is meeting with your advisors, including your mortgage broker, accountant and solicitor, to work out what your borrowing power and renovation budget will be.
An accountant is especially important, as they can advise you on the best structure to purchase the property in to maximise your renovation profit and minimise tax.
“Make sure you meet with your accountant for advice before you sign any contracts,” Youngson advises.
“Once you know your purchase price and budget, focus your attention on two or three suburbs only. If your budget is $350,000, then look in suburbs where the median house price is $300,000 to $350,000.”
It’s also a good idea to choose suburbs that are not far from where you live. “If you need to travel more than 30 minutes to get on site, it makes a project much more difficult to run,” she adds.
Your next steps are:
Pounding the pavement
“Get out every weekend and go to open inspections so you can get very familiar with the types of housing in your target area,” Youngson says.
Meeting local agents
“At every open home, engage with the agent and ask what other homes they have coming to market that have renovation potential,” Youngson says. “The best deals I have found were never listed.”
Negotiating hard
“Aim to buy at least 20% below market price,” Youngson says. This gives you plenty of wiggle room to complete your renovation and make a profit at the same time.
The information in this article is general information only and does not constitute financial or legal advice. This does not take into account your personal circumstances and accordingly you should seek independent financial and legal advice before taking any action, or refraining from taking any action in reliance on any information contained in this article.
