In real estate, the term “renovator’s dream” is taken to mean as a “run down mess”, but those properties, believe it or not, have unrealised potential.
When looking for property, we tend to set our sights on a property in excellent condition that is ready for you to move into. However, there are times when you have to overcome your initial doubts and be a little more imaginative in your property hunt.
Why buy the worst house in the best street?
Property developers suggest looking for opportunities to boost the value of a property instead of being dependent on the market to do all the work for you. The old “worst house in the street” belief is the ideal illustration of a case where this can be applied. Using your own sweat and blood can boost the value of a home, by undertaking either a cosmetic or structural improvement, or maybe even an extension.
If you’re still not convinced, consider this: purchasing a home in an overly-developed neighbourhood is not a very safe investment, as buyers are usually enticed into purchasing newly built homes with offers of incentives, freebies (such as new ovens and brand name white goods) and first home buyers schemes.
The features in overly-developed areas are actually special and can easily be found in any location, which means investing in these high volume developments will not succeed compared to investing in more tightly-held areas.
The projected population growth in the country indicates a low supply of properties in major capital cities and this trend will continue in the foreseeable future.
Purchasing property with a solid foundation, even if in bad condition, in a promising, popular street that is in high demand and insufficient supply will offer higher capital growth than an investment where there are many properties of the same features.
Things to consider when hunting for your “renovator’s dream”
Your goal is to find a solid investment, so look for a home where the things you can change, like the floor plan, built-in appliances, etc., aren’t perfect, but the features you can’t change like the location, block size, etc., are advantageous.
However, it is important to differentiate between a fixer-upper and a money pit. Before you make an irreversible purchase, hire a building inspector to look at the property to ensure it has no hidden flaws that you cannot afford to fix.
Avoid being overly confident with your renovation skills and the value you’re adding to the property. Do your research to make sure there is sufficient pricing gap between the property and the rest of the street to gauge the value you’re aiming to add.
For example, you might want to rethink your decision if you’re purchasing a home below the median price in the street but the cost of your planned upgrades is $80,000.
Property specialists also recommend that you hire a licensed builder to be in charge of any home upgrades you do. The thought of saving money by doing things yourself is nice, but most states require that a builder must supervise projects that reach a minimum dollar value of work.
You can still do the work yourself, but the completed project must be signed off by a builder. This is to certify that the building is safe, is of a suitable standard and fit for purpose. If this is not done, the works may be considered not legal, thus nullifying your insurance or possibly putting lives in danger.
Purchase property that will stand out and endure for a long time. Check historical evidence to see future gains.
Carry out due diligence and research the market carefully or do it with the help of a professional real estate agent like myself.