How to Find the Perfect Property to Renovate and Turn It into a Lucrative Asset
The idea of giving a run-down house a makeover just to sell it and make money off of it later on sounds appealing to many. Although house-flipping can be a lucrative business, finding and turning a fixer-upper into a lucrative asset ready for sale is no easy task.
Fortunately, there are some strategies experienced house-flippers use that can help make the process go much smoother. Here, five essential tips property investors should keep in mind when hunting for a perfect property they can fix and flip.
Look for a fixer-upper in the best street
When searching for the perfect property to invest in, many investors get so invested in the idea of the renovations they want to make that they tend to forget about the one factor that they can’t really change about the house they choose – location. Finding a fixer-upper in the best street is a strategy that many experienced investors rely on, and for a good reason. These properties are often ignored by a majority of investors, which translates to lower competition and better chances of purchasing the property in question.
As a rule of thumb, look for a home with “good bones”, and keep in mind all the major renovations (e.g. roof and windows) you’ll have to tackle before you can move on to finer details. That way, you’ll be able to eliminate the costly projects from the get-go and secure a property that is worth the effort. The more freedom and control you have, the higher the return on investment you can expect once you work your magic on your fixer-upper.
Work with experienced property investment experts
When you are still new in the real estate world, or any business for that matter, working with those who have experience and knowledge can surely make things a lot easier. This is why consulting specialists with extensive property investment know-how is always a good idea for novice property investors.
Since maximizing investment returns is the main goal here, you want to find a company that specializes in real estate investment services and whose experts you can work with closely and ensure your financial goals are met. From home design and finding the best mortgage deals to taxation advisory and selecting the right moment to sell, by leveraging their expertise and industry experience, these professionals will cater to your needs while helping you avoid costly rookie mistakes.
Know which projects increase the resale value most
Renovations can get quite costly depending on the work that needs to be done, and spending your hard-earned cash wisely should be one of your top priorities when renovating a fixer-upper. With a number of upgrades available, it might be difficult to decide which ones are going to bring the highest return on investment and which ones you are better off avoiding altogether.
Generally speaking, bathroom and kitchen remodels are wise investments with high ROI, and so are room conversions, given that the available space allows for them. The key is to invest in projects that boost the value of the property the most while avoiding splurging or skimping.
Consider your target buyers
Keeping in mind who you are renovating for pays off later on, which is why you want to take some time and do a little bit of research on the area where your property is located. This will give you a general idea of which renovations would be fitting for your target buyers and what they’re looking for.
For instance, your property might be located in a suburb where it pays to preserve the original features of a heritage home and play them up a bit, or it can be situated in a street where you will need to keep up and invest in more contemporary upgrades in order to appeal to buyer demand. Similarly, if your target buyers are families, your renovations will be more about utilizing the space cleverly and ensuring plenty of storage rather than investing in extravagant flooring and fancier features.
Determine your renovation budget
Now that you know which upgrades are worth the money and the best ways to appeal to your target market, it is time to get the renovation rolling. But before you can actually roll up your sleeves and start putting your renovation plan into action, you have to consider a major factor – your renovation budget.
While selecting a house with good bones that doesn’t require any major works (e.g. rewiring, fixing the roof) is a great place to start, you will need to consider all the renovation expenses which you will have to work into your budget. A good approach would be to estimate the house value after all the renovation work. Then, take away the approximate renovation expenses and the original price you paid for the property. What is left is how much you will make, and generally, you should be looking at a 10-20% profit.
Spotting rough diamonds to fix and flip can be a tricky job mainly because not everyone can recognize the potential that comes with a property in shambles. However, if you manage to learn the basics of property investment and train your eye enough to deduce which properties are worth the investment and renovation hassle, you will set yourself up for success in the real estate business.
About the author: Mike Johnston is an avid freelance writer and blogger. He’s a regular contributor to numerous blogs and online magazines, where he writes about home improvement (his specialty!), interior design, real estate, family life, green living and many other topics. Mike’s goal is to create interesting and compelling content and then share it throughout the online community.
