THE RENOVATORS DREAM
- Written by Melanie Toye, June 29, 2013
Looking to buy a property to renovate?
The idea of starting from a somewhat blank canvas to creating a masterpiece is very enticing for some property buyers.
What should you look into before buying a property to renovate?
Whether buying a new property or one off the plan, always add to the anticipated cost. Underestimating the cost of buying the property and then renovating it, could put an immediate halt to your reno project. Before buying the property, write down every part that you would want to have removed, such as an internal wall, new flooring in the kitchen etc.
The mechanics on the house building renovation will cost a lot more, if something does go wrong. Budgets can be pushed out to double and in some cases triple the original estimated cost, because not all changes were originally costed and not enough money was put aside for unexpected problems.
Be sure you to look at the return on investment.
Speak with local realitors who can tell you, what type of renovations will help build the property value. By doing a detailed costings report from the beginning and seeking advise on possible value to sell the property, once the works are complete and in the current market, you will be able to see a clearer picture of how much profit your might gain from the sale of the renovated property. This is your return on investment.
It can be noted, working out the above is where you decide to walk away from the deal to find something more relative to your costs or to proceed.
With any investment it is important to look at the location of the investment, really look at the property value and market trends within the chosen area for at least six months.
Think about your end plan, if the property goes to market after the renovations are complete roughly six to twelve months later and the property market is at a lull. Would you consider renting out the property until you could sell the property for the value you want it? Also can you afford the extra possible mortgage repayments (please work this out before purchasing the property you intend to re-sell after a short period). In some cases, rent received will not be enough to pay the full mortgage.
Be sure to get the relevant checks on the property before buying it and check if the property is heritage listed, as there are a number of restrictions in place for renovations.
Think about from the outset, how you want each room to look and how it will best cater to the suburb. For example, the property has ocean views, yet the house outlook faces the other direction. Could you add a front room or add in some windows to open the house to face the right direction? This could increase the selling point immensely.
Renovating tips that need to be remembered is always to remember your target market, rather than your personal taste. You would love black tiles in your kitchen, but grey tiles may create a warmer and more inviting space, while still creating a unique feel.
Plan, plan, plan. Have a workable schedule set-out from the beginning. Show your tradies this schedule and review it every day to keep on track. There will be set-backs, but having a schedule, keeps everyone focussed and eliminates the need of people aimlessly walking around figuring what to do next.
It would also be wise to meet with a tax professional to give you a breakdown of possible tax deductions or even implications of capital gains tax, if the renovated project is sold with twelve months of owing it.
Plan as much as you can from the beginning, speak with as many professionals in the industry as possible. Obtain quotes and do the research before jumping into any major projects.
Buying a property to renovate and re-sell is a major project and costly. It only makes sense to make the time and plan well before getting your hands dirty. Have fun in your next property adventure. Contact our Mortgage Managers for the right advice for you, on 1300 799 266.
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