How to: Find the perfect property to renovate for profit

Finding (and securing) the perfect property is probably one of the hardest things we do at Three Birds Renovations.

There’s no shortage of ugly houses out there just begging for a makeover, but getting your name on the title can be the biggest challenge.

Here are the key things you need to know when looking for a house to cosmetically renovate.

Find the right suburb

If you buy in the wrong suburb, your profit could be down the toilet before the ink is even dry on the contract.

What you’re looking for is a suburb which has ‘price disparity’ – meaning there is a wide range of price points for similar properties. Do your research on what different properties in your target suburb have sold for and make a list of sold prices.

You need to look for two things specifically: What are un-renovated houses selling for and what are renovated houses selling for?

Renovated houses in your target suburb need to be selling for approximately 30% more than the un-renovated ones for there to be price disparity in that suburb.

Top tips:

• Make sure you’re looking at comparable properties – the same number of bedrooms, block size, brick vs non-brick, location, parking.
• Only look at houses that have sold within the last 6-12 months. The more recent the sale the more closely it will reflect the current market.
• Sit down with the local real estate agents in that area – they could have the perfect property for you.

Finding the right house

To attract the most number of buyers, look for a property that will suit the mainstream demographic in that area – if it’s a suburb dominated by prams and parks, look for a house that you can turn into the perfect family home.

The best houses to buy and renovate have a great footprint that don’t require a major extension, like a second storey, to add value. Importantly, the whole house should be able to be cosmetically renovated under “exempt” or “complying” development from the local.

Usually the properties will have dated floorplans (lots of separate rooms with not much open living) and an original exterior (think ugly red brick).  These homes can be quickly transformed by opening up the floorplan inside, cosmetically changing the outside (spraying the brick and new timber balustrade) and adding a modern alfresco space in the backyard.

Top Tip:

• Avoid houses that could have major buyer objections like a main road, powerlines, or zero backyard. Even corner blocks and battle-axes can be a turn-off to many.

Finding the right price

Even if you’ve ticked the “right suburb, right house” box, you’re still a fair way from the finishing line in the property race.  Getting the house for the right price is now your challenge – and it’s no mean feat.

We often miss out on properties to emotional buyers who are willing to pay “overs” because they see intrinsic value in the home that we don’t.

But for those of us looking to make a profit, it’s a business decision and we often have to walk-away because we’re not willing to pay a penny more than our profit calculator tells us we can.

To calculate your projected profit, look at your purchase price, renovation budget, other costs (don’t forget interest and tax) and the subtract from your sell price.

This calculation needs to become your new best friend before you start bidding at auctions – otherwise how will you know what you can afford to pay?

Top tip: 

• Remember, this is a business transaction and you need to nominate a walk-away point ….. and more importantly, stick to it.

Source: www.realestate.com.au