How to find the perfect “fixer-upper” for a profitable resale
It’s often easy to find a home that is in need of a facelift, but there are quite a few things to consider when looking for a home to renovate and sell on for profit.
The first step should come as no surprise, given that it is the mantra of real estate hunting – location, but there’s more to this in the context of renovating to sell. The suburb in which you ultimately buy will have a huge influence on whether or not you’ll make a profit on resale.
Look for a suburb, which is known to comprise similar properties at widely varying prices. A qualified agent with experience will be able to help you with research to reveal the selling prices of properties in the suburb you’ve pin pointed. Research selling prices going back at least 24 months, as this will also reveal if there are seasonal peaks and troughs in prices achieved.
In order to get specific data, you need to research the selling prices of both renovated and unrenovated properties of similar size and accommodation within a defined pocket of the suburb – this will usually cover a few streets. Again, an agent can be invaluable in assisting with this data. (FIND AN AGENT NOW). Getting to grips with the data will help you to understand if there is in an evident disparity in prices in that suburb. You will hopefully find that renovated properties are selling for more than unrenovated ones of a comparable size and type.
Greeff Properties offers the following checklist to assist in clarifying the property comparison process.
*Compare properties with the same number of bedrooms, bathrooms and reception rooms.
*The erf should be of a similar size, as should the area under a roof.
*Take into account any additional features, which may add value and push up a selling price such as swimming pools and or a tennis court.
*Significant value adders are self-contained flatlets with own entrance and garden cottages as well as garages.
Study your target market if you’re going to sell.
A suburb that is already home to parks, and populated by families with young children is obviously a good location for a perfect family home. The same is true for an area close to schools and sporting facilities.
If you’re targeting young executives, you should be looking in a more urban location with a predominance of apartments and easy access to public transport or motorways.
What to do before putting your renovated home on the market
GET APPROVAL FOR BUILDING ALTERATIONS
Having settled on the area, you need to search for a home that can be cosmetically renovated within the current rules and regulations, so always check with the local council whether or not approval is required. Adding another storey might create a remarkable new home, but you’ll need approval, which could impact on timing issues and you’ll need to weigh up the cost against the possible profit you’ll make. If the area is not already proliferated with multi-storey homes, you are unlikely to get a significantly higher price for yours.
BE COMPLIANT
Your renovations will have to be compliant. Ensure that you have the property inspected and from the start of the renovation. Work hand in hand with reputable plumbers, gas installers and electricians so that compliancy certificates are available at the time of sale. You don’t want to complete the renovation only to find that wiring or piping is not compliant and has to be completely redone, costing you way more than you budgeted for.
Update the floor plan by making it more open plan
Old homes invariably have a number of separate rooms. Ask for the original blue prints and seek the advice of an architect before making a decision on which wall to demolish to create a ore open-plan design.
Go with your gut on potential buyer objections.
If you think the main road that the house is positioned on is too busy and will put off buyers, it probably will. Renovating in such a position might be a waste of time and money. A home in the shadow of power lines or cell phone masts is also likely to be slow starter.
TIME TO PUT IN AN OFFER
Calculate your budget in order to sell for a profit. This is a subtle balance though, since seeing amazing potential in a property can lend an emotional element to an offer to purchase, but if you do the research as suggested above, you are likely to come up with an informed decision on the right price for your offer to purchase.
KEEP A RECORD OF COSTS
When calculating your projected profit, consider the purchase price and renovation budget and include council scrutiny fees for approval of plans, compliance certificates, estate agent’s selling commission and Capital Gains Tax. Subtract from your selling price. (Remember that the cost of any enhancements will be offset against the CGT you’ll ultimately be required to pay, so ensure that you keep a record of all services acquired and products purchased to that end.)
If you’re buying at an auction, you need to keep this calculation firmly in mind and know that there is a ceiling beyond which you will not bid.