Have you been considering buying a property to renovate and then sell for profit? Sometimes it can be tricky to know where to start. There are a lot of considerations, from where to buy, to proper budgeting and ensuring you’re up-to-date with any restrictions and compliance.
Here I take you through the first steps to help you buy, renovate and sell for a profit.
Scope your location
As is the case with buying any type of property, deciding on the right location is usually your first step towards finding the right property.
However, the location of a property you’re buying to rent, to live or to sell can vary greatly.
When it comes to buying a property to renovate and sell, there are a couple of considerations. Primarily, you’re looking for a location that has steadily been increasing in value, or one that shows signs of increasing in value in the very near future.
Some key things to look for:
Investment in infrastructure
Are new shopping centres, entertainment, or recreational centres popping up in the neighbourhood? This can be a sign of investor confidence, and in population growth which could indicate the area is becoming more popular.
New transport facilities
New bus terminals or train lines are a great indication of recent population growth, as investment in major public transportation usually occurs to support or attract a growing population.
Some areas increase in value quite substantially when new public transport facilities reduce the time it takes commuters to get into metro areas.
Quality schools and childcare
Families are willing to move and pay top dollar to be within the catchment areas of quality public schools and childcare facilities. Several Australian news articles ran recently stating some parents were willing to pay a premium on a home if it meant their children could attend the best local public schools.
Decide how long you’ll hold the property while you renovate and sell for a profit
If your plan is to renovate and sell the property, then the question becomes, “How long do we hold it for?” The answer really depends on your local market. So do your research.
When looking for properties, ask real estate agents about the local market and how it’s been tracking over the last few years and their thoughts on what’s contributed to any increases in property values.
Go online and check out any data you can find on your desired locations. There are lots of sites out there that now provide sales history on properties for free.
If you’re buying a home that requires a lot of work, but is in a great area, it might make sense to sell as quickly as possible after renovating, especially when considering holding costs.
If you buy in an ‘up and coming’ area, it may mean you need to factor into your budget the time it takes for the area to increase in value.
Understand any government restrictions and compliance
Once you’ve found and bought the perfect property, the next thing to do before you even consider possible renovations is to get familiar with any codes, restrictions and compliance involved in renovating the property.
Most government websites will have sections dedicated to information on building restrictions, so make sure your plans comply.
Plan your costs
Like any renovation, costs can blow-out really quickly. That’s why it makes sense to budget not only for the cost of the purchase and renovation costs, but any potential holding costs and any costs which may be unforseen. A good rule of thumb is to budget 20 percent more than you believe the renovation will cost.
Decide to do it yourself or employ contractors
Doing a lot of the work yourself will certainly save money initially, but make sure it’s something you can realistically take on. If it’s something you’re not confident you’ll be able to complete to a high standard or on time, it will only cost you more when you need to hire a professional to come in and redo the work.
The best scenario is one where you break tasks into those you’re positive you’re able to do yourself and those best left to the professionals.
Note also that some things need to be left to the professionals by law, like any electrical work for example, so make sure you’re across these restrictions before starting.
Lots of risk goes into buying a house to renovate and sell for a profit, but with careful planning, research, and budgeting, it can also come with some pretty great rewards.
This article first appeared on Harcourts International Blog: http://international.harcourts.net/category/blog/