Top 5 tips on renovating investment property
This article is not intended to be financial advice – you should not rely on this as being financial advice, we accept no responsibility for people who rely on anything I write in this article. Everyone’s personal circumstances are different and you should get independent, professional financial advice before making any financial or investment decisions.
Renovating Investment Property
When it comes to renovating investment property, most people tend to focus on a quick makeover and then throw it back on the market. This practice of ‘fix and flick’ was very popular during the property market boom in the early 2000’s.
Certainly, good money was made using this approach back when the market was booming with so many potential buyers looking for a well-renovated home, but is this still the best approach?
Investing in Property vs. Property Investment
Well as I said right at the start of this article, I can’t advise you on what is best for you, but my feeling is that the market has now shifted so much that buying, renovating and renting it out is now the better way to go.
So with that in mind, let me tell you the 5 golden rules of renovating investment property that I always adhere to:
1. Keeping each property separate
Banks tend to like lots of security on loans in these post-GFC times, however, I personally have moved away from using the equity in one property to purchase the next. Instead, I like to have each property’s finances kept separate giving greater peace of mind in a tough market. It also allows me, long-term, to invest more in each individual project. So rule number one for me is to not let the bank push me into placing security over other properties.
2. Look beyond your own backyard
From my experience, most people tend to purchase investment properties within a small radius of their own home. Now there could be a number of reasons for this, perhaps people like to feel close to their investment so they can keep an eye on it, but more than likely it’s because they feel they know their own local area well.
But what if your local area is a great place to live, but not the best place to purchase an investment property?
dion seminara architecture does a lot of work in a lot of different suburbs across Brisbane and as such we have a lot of knowledge of a range of different areas. This has proven to be particularly advantageous to many of our investor clients who take advantage of our Pre-Purchase Advice. When it comes to looking at the better areas for capital growth and rental returns, it often pays to cast a wider net.
3. Have a property strategy
I believe that to make money from investment properties you need to have a well thought out plan, a strategy that will help you get the very best returns for your investment. Part of formulating that plan involves getting sound financial advice from accountants and/or financial planners or advisors. The other part of the plan is to get advice from people who understand the building market, which is another area where our Pre-Purchase Advice is of such great value.
Understanding what needs to be done in terms of renovating a property and what level of investment is required is crucial when it comes to choosing one property over another. We can guide investors in terms of costs and whether their investment will, in our opinion, leave the property over or undercapitalised.
4. Positive vs. negative gearing
There was a time when seemingly every investment strategy involved putting money into a negatively geared property, however nowadays more and more people understand that the cash flow from a positively geared property can also be a good thing and often be preferable.
Now obviously we are not in a position to advise you on whether you should personally look at positive or negative gearing, but what we can do is use our wealth of experience and knowledge to give you a better understanding of what you will need to invest to renovate your investment property, which will, in turn, allow your financial advisor to give you more accurate advice.
5. Profitable Advice
Highly wealthy people don’t get that way by chance, they become wealthy and stay wealthy by investing in the very best possible advice.
When investing in property it is important to get the best financial advice from your accountant or other financial advisors, but it is also important to get the very best advice on the particular property that you are looking at investing in and that is where our Pre-Purchase Advice is invaluable.
Trying to go it alone to save a few dollars might seem like a good idea at the time, but ultimately it can lead to very costly mistakes. Our Pre-Purchase Advice service should form part of any due diligence when looking to buy a property.
So there you have it, my top 5 tips when looking to buy an investment property. But I feel like I should give you some practical examples of how renovating investment properties can be a profitable decision, so in my next article, I will give you some real-life examples of profitable, rental renovations.
For further advice give Dion a call on 07 3899 9450 or fill out our contact form.