A renovation property is something you buy with the full intention of renovating. It’s not a home you move into right away; it’s a project, something you intend to spend a bit of time on. When it’s finished, you can either move in, flip the house for a profit, or rent it out to some tenants.
The possibilities are diverse, but it’s all for nothing if you don’t get your hands on the right renovation property.
What do we mean by this? Well, some properties are much better for renovations than others. For instance, buying a brand-new home is not a good renovation property. It was literally just built and probably includes all the modern home comforts someone could need. Plus, it’s most likely very expensive already, so you necessarily have the budget to renovate it.
So, how do you find the perfect renovation property? Here are some crucial things to keep in mind:
The Renovation Potential
We’ll start with a little something called the renovation potential.
It sounds fancy, but really we’re just talking about the property’s potential to be renovated. Are there ample ways you can take a house and make it better? Think about the home renovations you may be inclined to do. Is there room to turn a small kitchen into something much bigger? Can you extend the house into the yard, or is there a lack of space?
Look for properties with flexible floor plans and plenty of room for renovations. Going back to the example of a brand-new house, this has very low renovation potential. The chances are there’s no need to renovate the kitchen or bathroom as they’re already new. In fact, the whole property is too fresh to even bother thinking about renovations.
By contrast, imagine you stumble upon a much older home. The kitchen can be done up, the bathroom needs improving, there’s room to add more space to the home, and so on. Here, you have a property with high renovation potential, so it could be a great investment.
At the same time, there are properties with too much work to be done. Everything is so old and outdated; you’d need to knock it down completely and start from scratch. Here, the renovation potential could end up being bad as too much work is required. So, it’s quite hard to find the balance, but look for houses that could do with a new lick of paint and some extra loving, but don’t require excessive renovations.
You find a home that looks great and has awesome renovation potential, but does that automatically mean you should buy it?
No. You must take other things into account first – like the building’s structural integrity. Some big warning signs to look for include:
- Massive cracks in the exterior walls
- Sagging floors
- Large areas of water damage
- The home slopes to one side
- Significant damage to the roof
All of these issues indicate there are structural issues with the property. Most likely, it has some serious problems with the foundations. Yes, you can fix these problems, but they’re usually very expensive and sometimes don’t last for long. In extreme cases, you’d need to knock the home down and rebuild the foundations. Understandably, this is a massive job you’re not willing to undertake.
Alongside these problems, there are other structural issues to be aware of. For example, what materials is the building made from? In older homes, there could still be some asbestos in the building materials. This is a huge problem as it’s proven to be toxic and can cause a whole host of health conditions. You’d need to completely remove all materials with the asbestos present, which is another complicated and costly job.
Ideally, you should spot homes without any major structural problems. Be sure to hire a surveyor to check the property from top to bottom, making you aware of the structural integrity and foundation health. Likewise, companies like G3 Environmental can be used to check buildings for any signs of asbestos or other dangerous chemicals present in the materials. You need the property to be structurally sound and safe or it won’t be ideal for renovations.
Budget & Costs
In some cases, the property’s location can impact your decision to buy it. But, if you’re looking for a renovation property to live in, the location may not be as important as you think.
Instead, you could find a dream house that has no structural woes and plenty of renovation potential. What’s stopping you from snapping it up right away? The teeny tiny issue of money!
Fundamentally, you need to know the answer to two questions:
- How much will the property cost to buy?
- How much will the renovations cost to complete?
Each of these things can impact the other. If the property is really expensive, it could mean you don’t have enough room in your budget to carry out all the renovations you hoped. In this case, you either settle for fewer renovations or find a more suitable property.
Or, a house could be reasonably affordable, but the sheer number of renovations sends your budget through the roof. It ends up being way too expensive overall, so you have to back out.
Before you begin your property search, set an overall budget. This will include all the money you’re willing to spend on the house and renovations. Then, find a property, check if it has potential, and make sure there are no structural concerns. If everything looks great, work out a rough idea of how much all your planned renovations would cost. This won’t be easy, but you should be able to get quotes from contractors in the local area. Now, you’re left with a rough idea of how much is left to spend on the house. If the asking price fits your budget, you’re good to go!
Finding the perfect renovation property is very tricky. The stars need to align and everything has to be ideal. However, knowing what to look for in a great renovation property is easy! You just need something with lots of renovation potential, no major structural problems, and a good price that fits your budget.
(Disclaimer: This content is a partnered post. This material is provided as news and general information. It should not be construed as an endorsement of any investment service. The opinions expressed are the personal views and experience of the author, and no recommendation is made.)