How to spot a fixer-upper that's worth the investment
Category Home tips
Buying a property that's a bit rundown or dated is a known trend amongst bargain-hunting buyers looking to get the most return on investment. Mike Greeff, CEO of Greeff Christie's International Real Estate says that finding the correct property ''is imperative to the success of this buying trend''. He cautions that a ''poorly chosen property'' could easily cost far more to renovate and might not yield as much of a return as you initially had hoped for.
We all know that the ideal fixer-upper is one that everybody wants - just not right away. The key to purchasing a quality ''flipper'' is looking past the peeling paint, the worn carpets and cracked tiles - it's looking at a property and seeing its potential.
When looking for a potential fixer-upper, you need to bear the following mind to ensure that maximum return on investment.
- Location
There is one guaranteed thing you can't change about a property and that is its location. If the house is in an undesirable neighbourhood, it doesn't matter how many renovations you do, it will still be a struggle to sell.
There is a popular misconception that there are no fixer-uppers in good areas. There might be fewer homes that need a face lift in trendier areas, but you will find a few that would make for the ideal ''flipping'' project.
Look out for properties that are within school catchment areas, close to the CBD and are easy access for freeways and necessary amenities. If you are able to find a property with attractive views - even better for your sale!
- Layout
The layout of the home should not be ignored. Not every design flaw can be solved by knocking down a wall here and there, unfortunately. If the kitchen is in an awkward spot, for example, it's going to be difficult to solve that problem in a cost-effective matter. The same goes for the bathrooms.
It is suggested that you look for homes with convenient room ''clusters'' i.e. a bedroom wing, a central kitchen, living areas (dining room and lounge) and practically placed entrances, garden access and bathrooms. By looking for homes with these ''clusters'', makes it easier for changes to be done to the design, for example, breaking down a wall to open up the lounge area or to extend a bedroom.
- Structure
Ensuring that your have a property with a sound structure is essential in order to keep your renovation costs as low as possible. Of course, you need to spend money to make money, but you do not want to be spending thousands of Rands to redo the structure of the home.
Homes with serious structural faults i.e. unstable foundations and worn-out roof beams, can cost a fortune to repair and it very seldom works in the investor's favour when re-selling for a profit.
If you are not certain about the structural condition of the home you're wanting to buy, Greeff suggests getting an inspector to do a thorough check.
- Predictable renovation costs
This is the last, if not the most important one to look out for when wanting to buy a fixer-upper. Renovations are infamous for being unpredictable because there is always something that needs to be done but it is important that you have a ballpark on what the renovations will cost you.
Greeff advises that you try to ''set budgets for individual projects'' and stick to it. When you're in the throws of renovating, it's easy to get caught up in the process and you end up making decisions with your heart and not your wallet, which in the long run, will not work in your favour.
There are two areas in a home that often require the most repairs and are usually the most expensive to renovate - the kitchen and the bathroom. When looking for a fixer-upper, it is important to find one whose kitchen and bathroom only require minor repairs - this will save you both time and money. Upgrading these two areas of the home needn't cost an arm and a leg - small touch-ups can make the world of difference.
Minor kitchen upgrades include:
- Focus on colours and textures when making upgrades instead of breaking the bank for brand new appliances.
- Upgrade countertops
- Paint your cabinet doors
Minor bathroom upgrades include:
- A fresh coat of paint can completely transform the bathroom and it does not have to cost a lot
- Adding stainless-steel taps will give it a classy, upmarket look and feel
- Remove and replace silicone around the shower, bath, and toilet areas
In order to make a profit on your ''flipper'', the purchase price plus the total cost of renovations needs to be low enough so that you can get a return on your investment and then some. If you do not plan as accurately as possible, your fixer-upper might cost you more than what it's worth.
While most of the renovation costs might be going towards design or maintenance, don't forget to allocate some budget to the garden/landscaping areas. This section of the home is often neglected and can be a deal breaker if the rest of the home is modernly-renovated but the garden and outside areas are looking a bit 'worse for wear''.
At the end of the day, the most important thing to do is go into a ''fixer-upper'' project with your eyes wide open. Be prepared to spend money, but make sure you are spending it on things that are worth the investment. Do your homework, consult with experts and know what you're getting into. It can, and will ultimately, be a rewarding and profitable strategy for property investment.
Author: Greeff
