What Should be on your Renovation Radar?

Looking for that renovator’s dream to turn into profit? You might have to fine tune your renovation radar. Renovators – especially those new to the game, should beware! Don’t be fooled into thinking that to get rich you can revamp just about any property. Successful renovators understand that not all dwellings are a viable candidate for renovation. Here are some tips from the experts.

What Should be on your Renovation Radar?

Looking for that renovator’s dream to turn into profit? You might have to fine tune your renovation radar.Renovators Beware

Renovators – especially those new to the game – should beware! Don’t be fooled into thinking that to get rich you can revamp just about any old property.

Successful renovators understand that not all dwellings are a viable candidate for renovation; only some can reasonably be expected to turn a profit once fixed up.

You need to take some time to familiarise yourself with the qualities that make up what the real estate agents label a ‘renovator’s dream’. Failure to do so could turn the process into a renovator’s nightmare rather than a profitable project!

Weeding out the good from the bad will come down to more than just assessing the property’s condition. That’s only one step in the process – and it’s not the first one.

In fact, it’s just as much what you do before the physical renovation that will determine whether you turn a profit. That prep work includes researching the location, demand for and then the condition of a potential renovation target.

Choose your Target

Once you have pinpointed the areas you want to invest in, spend between 12 and 16 weeks attending open houses to get a clear idea both of what renovated and unrenovated properties are worth in the area. This should help you decide whether you will be able to purchase and turn a profit in a given location.

You will also need to research the local culture and demographics of the area so you can be sure to renovate in line with the suburb’s overall ‘vibe’. For example, a cottage style won’t suit an ultra-modern suburb and vice versa.

You’ll also want to include features in your property which suit the local demographic. For example, if it’s a family area, you’ll want to include a bath in the bathroom.

Your research may take a few months to complete, but it’s much better to spend time getting to know your market than to risk renovating a property for no profit at all.

The best suburbs to focus on will be the ones in which property values range from high to low because, as a renovator, you will need to buy low and sell high to realise a property’s full potential.

Suburbs where the land has been built out and the only option is to renovate will offer the most scope for renovation work. You should keep your eyes peeled for properties within close proximity to public transport, infrastructure, shops and schools as these are generally features that most buyers seek.

These are all qualities to look for; but there are also locations that for a renovator are definitely a ‘no no’.

You should avoid suburbs where new housing or new estates have been established since a brand new house will always outperform a renovation.

Steer clear, also, of suburbs where there is a significant amount of land available as a new house could be built there for less than it would cost to renovate an existing property.

How to Unearth a Diamond in the Rough

The more boxes you can tick for a property, the better your chances of making a profit from a renovation.

Some qualities your renovation checklist should include are:

  • Desirable, well-serviced location
  • Good floor-plan and a layout that can be easily adapted
  • Structural soundness and in good condition – helps you avoid extra expenses and headaches!
  • Room to extend – the addition of extra rooms can add significant value to a property
  • High demand – you want to renovate a property where there are plenty of buyers
  • Sufficient scope of work – there needs to be enough renovation opportunity to increase value

Property Investing Steps

9 Steps to Property Investing

Are you looking to buy an investment property, but not sure where to start? Here are 9 steps to assist you through this important process.

Review your Personal Cash Flow and Budgets

An important step is understanding how much cash you have to invest in property and whether you can afford the cash flow impact on owning an investment property. This can be as simple as listing all your assets including incomes and working out your expenses. Work out how much you have as a deposit (making sure you don’t over commit), or how much you will need to save for a deposit. Normally a lender likes you to have 20% deposit.

Contact Our Home Loans Offices and Get Pre-Approval

Once you understand your personal cash flow and budget the next step is to talk to Home Loans Agent to find out how much they would be prepared to lend you and what the interest rate would be.

It is recommended that you get pre-approval for an amount so you can go searching for a property with certainty based on how much you can spend. This will also dictate where you can purchase and what type of property you can purchase e.g. a house or apartment, new or old.

Also you should consider how you will structure your Loan, should you go for interest only or principle and interest? Should you lock the rates in on a fixed term or leave it variable or go half/half? The answers to these questions may depend on the economic environment at the time and as always, seek counsel from the professionals before making a commitment!

Set Your Goals

What are your goals? What are you looking to achieve? It is important to be clear about these and talk to experts such as your accountant and financial advisor. You need to consider your short and long term goals. For example if you are looking to retire in 10 years, perhaps start with a 10 year plan then break it down to 5 yearly, yearly, bi-annual, monthly and weekly timelines. This will help clarify what you need to achieve through your investments.

Talk to your accountant

You need to understand the tax implications of buying an investment property and your accountant is the best person to talk to about this.

Find a Conveyance or Lawyer

Most property investors enlist the services of a conveyance or solicitor to handle the purchase process on their behalf. While you are able to act on your own when making a property purchase, the process of documentation and settling can be complicated – and may seem daunting. Bringing in support and assistance from a qualified expert familiar with legal documents and legislation can make the process easier. Conveyancing is available in NSW, VIC, ACT and WA and are experts in understanding the requirements of property purchases and sales.

Create a Property Evaluation Model

By now you have clarity around how much money your lender will give you, your accountant has verified your budgets and you have the legal support team ready to go…but you don’t know exactly the type of property you are after.

This step is all about creating a property evaluation model – to identify what criteria in an investment property is important to you. To do this you need to rank your key investment criteria such as the location – does it need to be near public transport, schools, shops, work and what is the walk score? What do you value as important for the exterior and interior of the investment? Such as type of building, size of complex, parking, number of bedrooms and bathrooms, flooring, the properties aspect, quality of kitchen, backyard and outdoor entertaining and whether you want to renovate or not.

These steps help you clarify exactly what you are looking for and will enable you to assess potential investment properties against your must have criteria.

Searching for a Property

Doing your own research is important, after all it is your money and knowing about the specific market you are investing in is a good idea. Talk to a local agent and find out about the local market you are considering buying in, what are properties selling for, how long are they on the market etc, gather information on the demographics of the suburb, its location to important amenities such as transport, shops, universities and schools and information on the recent sales and history of the area.

Plus keep an eye on the real estate portals such as realestate.com.au, domain.com.au and ljhooker.com.au to see what properties are for sale. But make sure you don’t become emotionally attached to the property, it’s an investment, and your focus should be on maximisng capital and rental.

Engage a Property Manager

After purchasing your investment property, the next key decision you will need to make is whether you will employ a property manager to help you, or whether you’ll manage it yourself.

Although many investors are financially-savvy, when it comes to finding tenants, dealing with day-to-day property issues or legal jargon they are left in the dark. Our team of experienced property managers can help make sure you receive a reliable income stream, excellent capital growth and the best returns possible – as well as a guarantee of exceptional customer service. You will receive regular and thorough property inspection reports, copies of all important documents and regularly review rent rates and the local market to help you achieve the best outcome.

A property manager costs approximately 7-10% of your total rental income, however the services and expertise offered by a good property manager is worth much much more than this fee, plus in many cases the agents service fee is tax deductable.

Manage Property Investment Compliance and Accounting

Hopefully your investment property is being managed and you have reliable tenants paying their weekly rent. Now you need to revisit your accountant and provide detail of the rent you receive, the interest you pay the bank and any depreciation benefits so they can lodge a PAYG variation. This will hopefully translate into a little extra in your pay packet.

Your property manager will keep a record of your monthly income and expenses and be able to provide you with a report for your end of year accounting. There are a few other accounting implications and requirements so make sure you discuss this with your accountant.

Make sure you seek professional advice to determine whether property investing is a good idea for you and your individual needs.