Profit potential – picking the right property to renovate

It’s a common misconception that any old property you pick, give a slap of paint, some new light fixtures and maybe some light renovations means you’ve unlocked a treasure trove of profit potential. But spotting an ugly duckling property with swan potential takes practice and requires research.

Generally speaking, you need to research which suburb to invest in, locate the right street and then find the right house in that street. While most suburbs have many properties in dire need of renovation, there are ways to recognise which ones are likely produce a good return.

Find the right suburb

Start by looking for ‘price disparity’ – this is where there’s a wide range of price points for similar properties. Do a bit of research and list the prices different properties sold for in your chosen suburb. You will be looking for two things – what renovated properties are selling for and what unrenovated houses are selling for. Renovated properties in your selected suburb need to be selling for roughly 30 per cent more than unrenovated houses for price disparity to occur. Now it’s time to pay your diligence!

Due diligence

This sounds similar to the above tip and while it is, it’s just as important only a little more focused. Due diligence means spending time attending open homes and monitoring the purchase prices of sales in your selected suburb. Make sure you have an accurate idea of what both renovated and unrenovated properties are selling for. This knowledge will ensure you’re aware whether a listing price is fair and give you an indication of what your renovated property is likely to sell for.

Floor plan focus

Would you believe that a property’s basic floor plan can be one of the most influential selling points? Well it is! So, make sure floor plans are considered in your selection process. Good floor plans are functional, practical and provide enough room to allow efficient flow. Take note of how each section of the house is separated, they shouldn’t be overlapping or clashing, and bathrooms should be easily accessible from both the bedrooms and living areas.

Who is buying

To ensure your renovation will tick all your buyer’s boxes, it is vital you understand who is purchasing in your selected suburb. Most suburbs and areas have a signature housing type, whether this is federation or Queenslander style homes or a combination, you need to know what type and style of properties are in demand.

Avoid buyer objections

There are things buyers will always object to that no matter how good a renovation, they won’t consider the property as a viable purchase. This can include things like a highway over the back fence, powerlines near the property or a nearby noisy train line. Look for buyer objections and steer clear of them!

Renovation requirements

When choosing your property, you need to know what renovations will be required and whether they’ll be structural or cosmetic. Avoid structural repairs and instead look for homes with solid foundations and easily updated kitchens and bathrooms. Also pay attention to the local council’s building restrictions as these may hamper your plans.