Renovating For Profit: Investors Guide - Part 1
Investors guide to renovating: essentialsLearn to see the potential beyond the problemsAn investor must learn to look beyond the problems of what you can see with your eyes. Many times you will see a property labelled: RENOVATORS DREAM. Which simply means a lot of work is needed. The most common problems in a property is an ugly exterior of the house, peeling paint, very dated, dirty carpets and walls, a bio-hazard bathroom, old cars in the yard, etc.These are the points that turn most people away from a property and leaves the investor with an opportunity. The investor has to look at what the property can be when the renovating is complete. You must be able of see the potential beneath a facade of problems or bad design. Many times people are turned off renting or buying a home because of the way that is looks. However, sometimes a quick cosmetic renovation can turn this around if you have learnt to see beyond the ugly.Know your StrategyThe whole point of renovating is to increase the value of the current property. Some renovations will be cosmetic and others more extensive and this will depend on the profit goal and selling price that can be met. There are two main paths in terms of strategy. The first is renovate and hold (to rent it out) and the other is to renovate and sell the property straight after the renovation.In short:
- Renovate and sell.
- Renovate and hold to rent.
Either way the property investor must add value to the property and increase the desire for others to rent or buy the property. All renovators solve problems and fix things that other people do not want to fix or do not know how to fix. At the end of all renovations the property must have increased in value by the cost of the renovations (at least) and the any related costs. You must pick properties that you can add value to and still make a profit. It is important to know your strategy before you buy and be very picky when searching for the right property. Never buy on a maybe or your chance a property that does not fit all of your search criteria.Research: know your market and demographicResearching the area and the demographic is the best way to maximise your investment return. You must know the type of people that will be buying or rent the property.For example: If the area is made up of mainly young families you do not renovate with retired people is mind. Buying the right property at the right price is the indisputable key to success. Meaning it does not matter what strategy you use, sell or rent out, the money for the investment is made at the time of buying. You should always try to buy below market value in the right area. Buying with the people in mind that will buy your property is essential for success. Find the right property that is close to infrastructure such as public transport, schools, shops, community amenities helps ensure that the property will appeal to a wider group of buyers.Investor renovations: The boot camp basicsWhile every property and renovation is different there are some universal basics when renovating for profit.
- The clean up: do not underestimate the value of a good clean up. Remove all rubbish outdoors and indoors. Remove any over grown trees, shrubs, and clean down all paths and window.
- Clean down the internal walls with sugar soap.
- Try as much as possible not to replace the electrical wiring and plumbing as these things will not be seen by the buyer. However in some older homes electrical wiring and or plumbing will need to be done.
- Keep the colour schemes neutral; however it is important that they are not all bland.
- Keep up the current trends by looking at display homes and home decorator magazines. For example: check colours, taps styles, and tile colours.
- The best way to make a large difference to the appeal of the property is to concentrate on the following elements: Bathroom, kitchen, paint, light fittings, carpets, curtains, blinds, built in wardrobes, extra storage, and doors and door knobs.
- Try to create a touch of luxury in the bathroom and kitchen but make sure it is also easy to clean.
- Make sure the house has a light feel as you may need a sky light or mirrors to bring in light or reflex light.
- Make sure that all parts of the property are complete and clean at the time of sale or rent.
Real Estate Agents: build relationshipsMany of the bargain houses do not get listed in the glossy magazines as they may look bad and or are snapped up by others quickly. Form a relationship with real estate agents in the area you wish to buy in. You can also have a detail list of what you are looking for so they will ring you straight away when a property comes up. This way they will know that you are serious and that they can make a sale. It is also best have your finances pre-approved so you are ready when the opportunity comes.Some of the things on list to the real estate agent:
- How many bedrooms?
- Brick or clad
- Sizing in square meters
- (between $ and $)
- Condition: (needs renovation)