Renovating isn’t just about painting, and renewing, and new kitchens. Renovating’s also about buying the right property at the right price, conducting heaps of research and analysing the target market and the best strategy.
BY JUSTIN ESLICK
As a prime example, one of our clients bought a cracking renovator at a great price. It was also zoned as a development but the land was too small for this to be a viable option.
It was recommended that they talk to the neighbour to see if they were willing to sell, because as a combined site it was suitable for development and was potentially worth more.
They ploughed on with their renovation, transforming the home, only to then have the neighbour approach them about selling.
The result? Approximately $50,000 profit after all costs… with the buyer planning on knocking down the house and developing.
The truth is she could have sold it for the same price without a renovation!
This isn’t a one-off story. Another investor made a 100 per cent profit margin (yes, you read correctly!) on-selling a development site, which they’d just spent $40,000 renovating. Within three months of the sale, the building no longer existed!
You might be wondering why they renovated if they knew it was a development site? The reason is they had multiple strategies – they’d obtained approval for the site but had no intention of building themselves. There were also some flats on the site, so it had the potential for good holding income if he chose not to sell.
He renovated to hold, which was the right move if he didn’t sell, but it may have been a better option to test the waters selling prior to renovating.
Another example involved only the changing of words on a plan.
A client came to us wondering why the rental appraisal for their house was so low.
It was being marketed as a two-bed-plus-study home and the rental appraisals being received were reflective of the market for a two-bedroom house.
However, the study looked large enough to be a bedroom to us. Why was it being called a study, we wondered? Perhaps it didn’t have legal head height?
No, that wasn’t it… the answer may surprise you.
The room was a study… for the current tenants, so that’s what the rental manager called it as well. No! A bedroom is worth more than a study every day of the week.
We changed the word “study” to “bedroom” on the plan and received new rental appraisals that compared the house to three-bedroom homes. That’s worth an extra $50 per week! The lesson is, it pays to do your research and explore all options.
Sometimes we can get fixated on renovating (thank you, reality TV!) and can miss other, more profitable, or easier opportunities.