It’s easy to find a home that is in need of a facelift, but there are a few things to consider when looking for a home to renovate and sell on for profit. Greeff Properties offers advice on how to pick a fixer-upper to put on the market.
LOCATION, LOCATION, LOCATION
Look for a suburb that comprises similar properties at widely varying prices. Research selling prices of both renovated and unrenovated properties of similar size and accommodation within a defined pocket of the suburb going back at least 24 months. This will reveal if there are seasonal peaks and troughs in prices achieved. You will hopefully find that renovated properties are selling for more than unrenovated ones of a comparable size and type. A qualified agent with experience can be invaluable in assisting you retrieve this information.
STUDY YOUR TARGET MARKET
A suburb that is already home to parks and populated by families with young children is obviously a good location for a family home. The same is true for an area close to schools and sporting facilities.
If you are targeting young executives, you should be looking in a more urban location with a predominance of apartments and easy access to public transport or motorways.
Go with your gut on potential buyer objections. If you think the main road that the house under consideration is positioned on is too busy and will put off buyers, it probably will. Renovating in such a location might be a waste of time and money. A home in the shadow of power lines or cellphone masts is also likely to be a slow starter.
KEEP AN EYE OUT FOR EXTRAS
Take any additional features that may add value and push up the selling price into account; for example, a swimming pool or tennis court. Other extras that add significant value to a property include self-contained flatlets with separate entrances, garden cottages and garages.
GET APPROVAL FOR BUILDING ALTERATIONS
Having settled on an area, you need to search for a home that can be cosmetically renovated within the current rules and regulations. Always check with the local council whether or not approval is required for renovations. Adding another storey might create a remarkable new home, but finalising approval could impact on timing issues. Plus, if the area is not already proliferated with multistorey homes, you are unlikely to get a significantly higher price for yours.
OPEN UP THE SPACE
Old homes invariably have a number of separate rooms. Ask for the original blueprints and seek the advice of an architect before making a decision on which wall to demolish to create a more open-plan design.
Ensure that you have the property inspected from the start of the renovation. Work with reputable plumbers, gas installers and electricians so that compliancy certificates are available at the time of sale. You don’t want to complete the renovation only to find that wiring or piping is not compliant and has to be completely redone, costing you way more than your budget permits.
KEEP A RECORD OF COSTS
When calculating your projected profit, consider the purchase price and renovation budget and include council scrutiny fees for approval of plans, compliance certificates, the estate agent’s selling commission, and Capital Gains Tax.
Remember that the cost of any enhancements will be offset against the Capital Gains Tax you will ultimately be required to pay, so ensure that you keep a record of all services acquired and products purchased.
PUT IN AN OFFER
Calculate your budget in order to sell for a profit. This is a subtle balance though, since seeing amazing potential in a property can lend an emotional element to an offer to purchase. If you do the research, though, you are likely to come up with an informed decision on the right price for your offer to purchase.
Greeff Properties specialises in Cape-based residential property. Contact 021 763 4120/www.greeff.co.za