6 Things To Consider When Buying A House For Renovation

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At Pumped On Property we help more than 120 people per year to find the right property to meet their strategic requirements from an investment perspective.

When looking for an investment property it is hard to know where to begin. The best way to increase the equity in your investment property is through manufactured growth and future renovation.

When inspecting properties and buying an investment that is going to need future renovation, it is important to understand what that property can deliver for you in the future, and the costs associated with a renovation project.

Today we are helping you on your investment journey by outlining 10 things to consider when buying a house for renovation:

  1. Basic Renovation vs Major Renovation

When inspecting properties and going through open homes deciding which property is going to best serve you from an investment perspective, it is important to understand if the renovation required is a basic renovation or a major renovation.

We consider a basic renovation to include things such as:

  • Paint interior / exterior
  • New Carpet
  • Spray roof
  • Replace bathroom vanity
  • New kitchen bench-top
  • Landscaping / yard maintenance

A major renovation is things like:

  • Replacing bathrooms
  • Replacing kitchen
  • Ripping up flooring and polishing back timber or replacing throughout
  • Removing asbestos sheeting and replacing with gyprock
  • Replacing the roof
  • Adding extensions / changing up the floor plan

It is important to understand, from a preliminary level during the inspection stage, whether the project you are getting into is going to be basic or whether it is going to need a full renovation.

It is also good to understand if the work required needs to be done immediately, or if it can be left in original condition, with a coat of paint and a few minor upgrades to get a decent tenant in.

  1. Cosmetic vs Structural

Cosmetic renovations are renovations that are going to add to the street appeal and increase the value of your property from a tenants perspective and an owner-occupiers perspective, similar to the things outlined above in the basic renovation.

A cosmetic renovation is going to help you get better returns from your investment property, and also increase the value of that property from the banks perspective. It doesn’t always need to be a major project, but enough of a change on a superficial level that will get the attention of the broader market.

A structural renovation is something that may be required, but may not actually increase the value of your investment property.

It is important to take note of structural issues when you are inspecting properties, and to always have a building and pest inspection done on any property of interest.

Structural renovations can include:

  • Replacing concrete stumps / piers
  • Fixing water damage to wooden posts / beams / ballustrades / etc
  • New hot water heater
  • New gutters
  • Fixing cracked brickwork
  • Engineering and maintenance issues

These issues need to be addressed to maintain the condition of your property and to keep your property safe for tenants, but will not add value to your house from a re-sale perspective.

Keeping an eye out for structural issues is going to save you from purchasing a property that will become a money pit in the future for all the wrong reasons.

  1. Cost

When buying a house for a renovation it is always important to consider the cost involved with the project.

Calculate the small changes that can be made in the short-term, i.e. paint, carpet, etc. Also factor in the major renovation costs that may arise in the future when it comes time to do a full reno.

Remember to factor in maintenance costs that may pop up along the course of owning that property – like replacing down-pipes, new fences, general up-keep, and more.

It is important to understand the costs involved in holding that investment property, and whether those costs are actually going to increase the value of your property.

  1. Manufacturing Growth / Adding Value

When purchasing an investment property with renovation potential you must understand how that renovation can actually add value to the property in the future.

At Pumped On Property we specialize in buying property that is liveable with renovation potential, meaning that the property is in good enough condition that it can be tenanted and maintained initially, but that you can add value down the track.

Adding value through full cosmetic renovations is one way to manufacture growth, as a general rule of thumb the money put into a renovation should generate a minimum 30% uplift on top of what you have spent.

Looking for properties with workable floor plans, where there is the ability to convert the house from a 3 bed, 1 bath to a 4 bed, 2 bath house is the ideal type of property.

Having the ability to add extensions, enclose garage spaces, add granny flats, add decks, change the internal walls around, etc, are going to give you the best value adds in the future.

  1. Owner Occupier Appeal

Buying properties in areas with a high percentage of owner-occupiers means that the value of your property is going to be driven up faster, as emotional owner occupiers tend to pay more for properties and drive up median prices in any given suburb.

When working out what work to do to a property from a renovation perspective, making changes that is going to appeal to the broader market of owner-occupiers is going to ensure your property does not polarize the market when it comes to re-sale.

Large decks, paved outdoor entertaining areas, knocking out walls and creating open plan living, large functional bathrooms and kitchens, these are all additions that are going to add to the re-sale value of your property and appeal to emotional owner occupiers who tend to pay a premium for good properties.

  1. The Right Time

Any renovation needs to be done at the right time to ensure you are adding value to your property in a smart and calculated way.

Making small changes when you first buy a property, like a few cosmetic upgrades to get tenants in easily, and then look at doing a major renovation 2-5 years after your purchase.

Wait a few years after you buy your investment property for some natural capital growth to occur, then undertake a full renovation to go for re-valuation so you can re-draw on your loan and use the equity from that investment property to continue the cycle.

Timing is everything, renovations should not be done to increase rental yield but should be done to add value and increase the capital growth.

Thinking smarter when it comes to a renovation is imperative. Ensuring every dollar spent on the property is adding value not fixing problems is going to make sure you have a profitable investment.

Knowing what to look for in the early stages of property inspections means that you are identifying properties that meet your investment goals. If you can eliminate properties that are going to become too costly in the future, or that you cannot add value to through a renovation, then you will save yourself hours of work and thousands of dollars.

FROM HUMBLE BEGINNINGS PUMPED ON PROPERTY HAVE GROWN TO BECOME ONE OF THE LARGEST BUYERS AGENCIES IN AUSTRALIA, WITH OFFICES IN SYDNEY AND THE SUNSHINE COAST.

Our expert buyers agents are passionate about delivering a world class real estate experience.

By offering a complete suite of buyer’s agency and buyers advocacy services in Sydney, Newcastle, Wollongong, Brisbane, the Gold Coast and the Sunshine Coast, we ensure that we help our clients achieve their lifestyle goals faster.

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