10 tips when buying a renovator property

Many of us put effort into our physical health and wellbeing by maintaining healthy eating habits and exercising our bodies, but what are we doing to ensure good mental health?

Have you ever thought of buying a fixer-up-er and transforming it for a profit? Do you know what to look out for so you don't end up with a money pit?

Over the past few years, I've had the opportunity to be involved in two real estate communities and witness some really inspiring 'before and after' transformations.

More recently, my husband and I decided it was time to invest in a project together, with me having some property development experience and knowledge gained in real estate training courses, and he, a builder, using not only his practical skills but experience gained through many years of building and renovating properies for his clients, most recently through his business Pure Envy Building Services.

What we've learned is that taking on a project, especially one that takes time, is really taxing – physically and emotionally, and it does bring up 'your stuff.' Some days there seems to be no end in sight! Be prepared for that, and make sure ahead of time that your partner(s) on the project agree to keep communicating and working through any issues calmly and mindfully. Hearing each other out can help you process things and work through whatever comes up.

Here are 10 more things we've learnt along the way:

  1. Get a building and pest inspection: Most buyers will be relying on what comes back from a building inspection before having the confidence to make an offer on a renovated property, and feel comfortable about a price. Make sure you're aware of any building-related issues before you buy, and address them during your renovation. For example if, as we did, you choose to re-spray 'dated' roof tiles, start by replacing any damaged ones first. A roof that appears to be in disrepair could put off a buyer entirely, or result in them making a low-ball offer, using the roof as a bargaining tool.

  2. Thoroughly research the location to be sure you have a good buy: Learn as much as possible about the area that you're purchasing in. Is it considered high demand? A property too far away from schools, public transport and other services isn't a bargain just because you can secure it at a low price. Look for a property in a location with all of these features, or risk having your updated property on the market for a very long time. Balance this with knowing that the biggest part of any profit comes from purchasing your reno property at a good price.

  3. Know what kind of re-sale price is possible before you decide to buy and add value: First, look at the kind of price you could get in that area if you can update the property. Then, consider how much potential 'uplift' you could expect by adding, for example, a bedroom or bathroom. In some cases an extra bedroom can increase the value of a home by upwards of $50,000. In our case, we decided to add a bathroom and build on an outdoor entertainment area and carport.

  4. Before you put in an offer, prepare a thorough feasibility study for your proposed renovations to ensure your hard work is adequately rewarded: Determine the changes you intend to make, and cost them. Don't forget to include a contingency amount in your budget too! Add into your calculations all buying and holding costs, such as stamp duty, council rates, insurance, water rates and interest on borrowings, then deduct these from your expected sale price. You should make sure your likely profit margin is worth the time you invest in the project. Costs can quickly add up if, like ours, your project extends for six months or more.

  5. Have your financing for both purchase and renovation in place so that you can efficiently complete the project: In recent times, financing has become harder for both buyers and developers, so ensure that you have your money sources approved before diving in. A good loan broker can help provide different funding options.

  6. Consult an accountant so that you're aware of all relevant tax requirements, and to ensure you have set up an appropriate legal structure for the project: Unless the property you're renovating is your principal place of residence, there will be tax implications, such as GST and income tax, so you will need to keep good records. Even when you're renovating your own home, if a sub-division of land is involved, be aware that you will be triggering tax obligations. I repeat: always get professional advice so you are clear on your tax and legal obligations. Carrying out a 'flip' project will generally also require you to consider using a separate legal entity (e.g. trust and trustee company) for asset protection, as well as to allow for income splitting, should you make a healthy after-tax profit.

  7. Understand what activities require council approval, and ensure you have appropriate approvals in place before you carry out any work: Getting approvals can be a drawn-out process and in some council areas, are mandatory for even simple changes like replacing fences and garden sheds. These days, they can all generally be done online. But make sure you build approval times into your schedule when planning your project timeline – and get in early for those likely to be time-consuming, such as converting garages to living spaces or adding a carport. These types of activity often have a myriad of building rules compliance conditions attached – including termite protection, smoke detectors, etc – so be ready to meet them, and build them into your reno budget.

  8. Make it pretty: Many people lack imagination. I would never sell a property without professionally staging it with furniture, adding window treatments and creating curb appeal to get potential buyers through the door and make it easy for them to see all of the benefits it has to offer. A big thank you to Brad of Eco Urban Gardens for helping to make every garden I've asked him to help with, including our latest projects, look so good!

  9. Do what's essential. Leave out what's optional: Forget all of the nice added extras you would include if you were renovating the property to live in yourself. This will help keep your renovation budget in check. For example, ensure you've invested in good airconditioning and indoor curtains and blinds, but leave out the home security system and outdoor cafe-style blinds.

  10. Work with a real estate agent who has your back: Find an agent who really does want to get the best possible outcome for you. Don't choose someone whose main interest is using your property as an opportunity to promote their business with flash photos of themselves. If you live in Adelaide, I've got a tip for you – speak to Anna Martaki of Harcourts Sharoglazov. She's my agent and she's brilliant!

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