One of the best things you can do when buying a property to renovate for a profit is to buy under value to begin with. Why pay retail when you can help a distressed seller (buy their property at a discount), renovate it well and make a tidy profit. Buying at or over value just makes the renovate for profit scenario that much more difficult.
Here are some great tips for finding a hot deal.
- Select a couple of suburbs (no more than 2 or 3) and get to know the property prices really well in those areas. Spend at least an hour or two every week researching the internet and visit at least two or three open homes every week for two-three months.
- Attend lots of auctions and when you can easily guess what a property will sell for (and it sells within $10k of your predicted amount) then you should be able to easily spot a bargain in your suburb when you see it. You don’t need to buy at auction – but auction prices will give you a good indication of current values in the area.
- Be sure to buy under value (at least 10%, if not more) to give yourself a head start on your renovation profit. You do really need to buy under value, as well as renovate well in this market to ensure you make a decent profit. Ensure that there are other similar properties in the area (number of bedrooms, land size, style of property) that have sold/re-valued for significantly more than what you are buying for. You need solid proof that your property is going to be worth much more once it’s been renovated. When working out your feasibility, make sure your ‘numbers’ include at least: Purchase price, legal fees, renovation costs, holding costs (mortgage repayments while property is not being used/tenanted) and definitely a contingency (an amount of money set aside just in case you spend too much!).
- Ask for a delayed settlement so you can organise your reno before settlement. You’ll need to make sure you have an early access clause in the contract (for the purpose of planning your renovation, getting pricing and organising your trades-people).
- Plan/organise your reno before you settle (as above). A Renovation Action Plan is perfect at this point if you want to guarantee yourself a profit.
- Start your reno day after settlement if feasible
Good luck with the bargain hunting!