Using the renovation strategy can lead to profit if done correctly. This strategy is increasingly becoming more popular amongst property investors adding value to their property portfolio and creating capital growth regardless of the market conditions.
Here are our top six tips to help you enjoy more success with your next reno project.
1) Find the right renovation property
Renovation properties should be at least 20% below the median price. These properties will commonly be poorly presented or cosmetically distressed, for example - tired paintwork, poor landscaping or poor street appeal.
The key is targeting properties with potential that you can make improvements and add value to, for the type of buyer or tenant looking to reside in that area.
However, there are some signs renovators should keep in mind when targeting suitable properties:
Roof and Foundations - When the property looks to be a easy renovation but has been vacated for a long time. If nothing seems wrong on the outside, hire a professional to check for any structural issues. Also, look inside for cracks on the roof or walls.
Electrical or Plumbing issues - Hiring building inspectors to check over the property could save you a lot of money in the long run if their are a lot of expensive fixes.
Rotten Boards - Sometimes hard to spot as they can be covered by paint, be sure check around windows and doors.
2) Research key suburb and property facts
Investors must research and consider the suburb and property facts before renovating, some facts to consider include: population demographics, migration and median price trends and local culture.
Current demand for real estate in the area.
The median sales price for similar properties in the area
Look for similar properties in the area, and their current rental earnings.
The history of the property: on-the-market and sales history, ownership details, recent comparable sales and an estimated market value for the property in its current condition and then after renovations.
3) Renovation budget
Investors must consider the initial costs and the improvements to ensure the renovation is affordable. Also ensuring not to over-capitalising, when the cost of the renovation outweighs the market value it will add to your investment property.