As many property investors have discovered, a bad renovation can cost you a fortune. Cherie Barber gives her tips on how to spot the diamonds from the duds.
- I know the approximate price of what things cost to fix – and that is a major advantage. It means I’m not fazed by problems that might scare other buyers off, like concrete cancer or a total rewire job, because I can estimate the cost of repair and factor that in. Having a good idea of costs means I can do a rough crunch of the numbers as I’m walking through a property and know by the end whether there’s profit potential in renovating it.
- I know the big no-nos I would never consider: buying on a main road or beside a railway line, or a house that sits below street level… these are what I call “major buyer objections” and there are a heap of them. No renovation will ever fix them. Move on.
- I 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 structurals, 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, whether it’s a timber cottage, federation terrace or brick semi.
- I will have done my due diligence on property prices in that suburb, so I know what price I need to get that property for to make a decent return on investment, once I’ve factored in all my other project costs, and the price of the renovation. If the price isn’t right, I walk away. There’s no better way to erode your profit than pay too much for a property to start with.
- I’ve confined most of my property purchases to a couple of Sydney suburbs, so I’ve become a real estate expert in those areas. I know the best and worst streets, where heritage restrictions apply, where high and low price pockets are and what style of home buyers want in my suburbs. An intimate understanding of your local suburbs is key.
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