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Hi, my fellow reno buddies! It’s Naomi here and today I want to talk to you about your renovation strategy.
But, first – have you worked out what your property patch is? Have you honed-in on the suburbs that fit your goals?
If you have, that’s fantastic and you’re ready to move onto the next step. If not, have a look at my last blog post to help you figure out your patch.
So, you’ve figured out your patch – the neighbourhood is perfect for your market, the properties are within your price range… It’s all looking well and good.
But which property do you choose?
If there’s more than one property on the market, how do you know which one is the best pick? It’s like a game show: do you choose door #1 or door #2? Door one could hold the ultimate island getaway, or it could be a new microwave. Both are nice, but the first prize definitely takes the cake.
In today’s post I’ll take you through your variables, to help you work out your best renovation strategy.
But before we dive in, I just wanted to remind you.
This is all about what works best for YOU.
Not anybody else. So throw those “guru” tips in the bin.
Oh, and one more thing on that note. Once you have decided on your patch and your strategy, it’s totally ok to change it later down the track! You don’t have to be locked in to the one strategy forever – it’s not a lifelong ball and chain.
Plus, it’s only natural for your strategy to shift over time – especially if your patch goes into a different direction, or you start house flipping more and more often.
As long as your changes aren’t something you’re doing on a day-to-day basis, then you’re good. Because if you constantly changing your mind about your strategy, it might not be the actual strategy that’s the problem. In this case, you might have to take a step back to re-assess what it is that is giving you grief. Otherwise, if you don’t, you’ll be left pulling your hair out from all that indecisiveness.
Alright, now that that’s out of the way, let me ask you something.
What sort of properties are you wanting to focus on?
Is it a normal house? An apartment? Or maybe a duplex or some villas? Are you looking to go all grand-designs or to stick with cosy-budget-friendly housing?
There are many different types of properties out there. Of course, if you’ve already found your patch, there is probably a particular type of property that is dominant there.
Last time I used a young professional as an example of the kind of market you could be selling to. If that’s the type of person you’re targeting, you want to make sure that property you choose reflects that. Does Mike the young accountant who lives on his own want a four-bedroom house complete with an added games room? Probably not.
Would Mike prefer a modern and upbeat one bedder overlooking the Maribyrnong river, complete with a dedicated bike path an easy 15-minute ride from the CBD? You bet.
Sally and her three boys, on the other hand, would LOVE that four-bedroom option – the games room would mean entertainment for the kids, and some much need quiet time for Sally to catch up on the latest episode of The Bachelor.
So as you can see from these examples, the property you choose will rely on who your target market is.
On top of this, there are four variables that will affect what sort of strategy you put in place.
Master of property
The first of these four revolves around how much you know. This has nothing to do with how many property guru articles you’ve ready or how many time’s you’ve won a game of Monopoly (without cheating).
Do you know what walls you are and aren’t allowed to knock down in a unit? Are you aware of the rainwater tank rules in your area if you’re planning to add a granny flat? Have you looked into the costs and legal side of subdividing that potential property?
So many questions and rules surround different types of property. You may be an expert on one type of property like houses, but units could be a completely different ballpark. That’s why you need to be aware of these things and how they could affect your renovation goals.
Money, money, money
What’s a renovation project without money? That’s why this is the second variable on my list.
You might be itching to buy that big block of land and subdivide it into six villas, but do you have enough money for it?
When deciding whether you have the right amount of dough for a project you want to do, you have to remember all of the money aspects, not just how much it will cost to buy. Don’t forget to include things like stamp duty, subdivision costs and legal fees. All of these are on top of all the labour and construction costs you’ll be forking out during the renovation.
If you realise it’s a bit of a stretch for your budget, you might have to leave that project idea for later on down the track, once you’ve smashed a couple of smaller house flips first.
What’s the time, Mr Wolf?
Another one that pops up over and over again is time. Why? Because time equals money.
When you house flip, you’re playing a game against time. The longer you hold the property, the more it will drain your budget. This is because of those sneaky mortgage repayments and council fees and what not.
And if you hold it for too long, you’ll also eat into your potential profits – and there’s really no point in trying to get to the end of the rainbow if there’s no pot of gold waiting for you when you get there.
Time is also a handy variable to consider in my previous example of the subdivision – a large project like that would take up a lot more time than a simple renovation. And you might find that although your original budget covered it, the delays and time it takes will just add stress, not money, to your life.
Sorry, that’s been sold
The last variable I wanted to share with you is availability. No, this isn’t about how available you are to work on the project.
This one is about what’s available in your chosen patch.
Great, you’ve decided that you want to buy an old one-bedroom apartment because the patch you’re looking at is full of young professionals like Mike. There’s just one problem. Most of the old stuff has been knocked down to make way for new high-rise development, and nobody is willing to let go of the old stock.
Do you just sit around and hope that someone, someday, will sell up? Of course not. Your time is valuable, and the money won’t make itself – not without a renovation project. So you can either look at other property types that your patch might have that will suit the young professionals, or look in another patch that might have more stock for you to choose from.
So these are the four variables you should be considering, to help you decide what sort of strategy to go with. They’re not the only variables you should be looking at, but they’re a great place to start.