As many property investors have
discovered, a bad renovation can cost you a fortune, so here are tips on
how to spot the diamonds from the duds.
1. Know the approximate price of what
things cost to fix - and that is a major advantage. It means
not
being
fazed by
problems that might scare other buyers off, like concrete cancer or a total
rewire job, because by
estimating the cost
of repair and factoring
that in.
Having a good idea of costs means you can do a
rough crunch of the numbers as you are walking through a property and know
by the end whether there's profit potential in renovating it.
2. The big no-nos -
never consider:
buying on a main road or beside a railway line, or a house that sits below
street level these are what are called 'major buyer objections' and there
are a heap of them. No renovation will ever fix them. Move on.
3. Look at whether there is sufficient
scope for improvement. If you can't substantially improve a property and uplift
its value, whether through a cosmetic facelift or significant structural
changes, then it's not worth bothering with.
Older properties
offer the best pickings for structural improvement as
there's obviously more work to be done., whereas cosmetic
renos are
well suited to properties of a certain age and style.
And you want to be familiar with what
type of renovation works for the particular style of property you're looking at.
4. Conduct due diligence
on property prices in that suburb, so you know what price you
should offer for the property to make a decent return on investment,
after
you have factored
in all other
project
costs, and the price of the renovation. If the price isn't right, walk away.
There's no better way to erode your profit than pay too much for a property to
start with.
5. Get to know the suburbs where you
plan to buy - know
the best and worst streets, where high and low price pockets are and
what style of home buyers want to buy.
An intimate understanding of your
local suburbs is key.
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