Is renovating property still a good strategy

Posted on Monday, January 5 2015

I recently came across one of the worst houses I have ever seen which due to the death of the tenant was up for sale. Having made an unconditional offer I felt confident that the vendor would accept my offer and I could renovate it ( as I’m in the game and an expert having done over 400 renovations now) and make some reasonable profit on it when re valued and either sold or rented out and re valued for future borrowing purposes.

Well to my surprise the vendor within 24 hours had received seven offers and the best one was $45k more than mine and the worst $40k below mine (pretty much my profit) … So I asked some questions and sure enough they were going to trade the property and it wasn’t an un savvy first home buyer who didn’t know what the costs were.

It left me wondering what figures they had used ( if any ) and how on earth they would make any profit after taking into account selling cost , legal and holding costs if appropriate. It seems whatever the stage of the property cycle people are prepared to overpay for property and that so called do ups have a high attraction especially to newbie investors and traders.

My tip would be that things always cost what you budget and usually more when the project is all wrapped up so be careful what you pay and do your budget accurately every time and you should be fine especially in the first home buyer range that continues to show good sales especially across Auckland with current interest rates and high rents.

So is renovating property still a good strategy – very much so just make sure you know what you are doing!

Mark Trafford is a Director of:

www.maintaintoprofit.co.nz


Reno 1

One Response to “Is renovating property still a good strategy”

  1. dollster says:

    Hi Mark. Good article and advice. I’ve been in a few similar offer situations (in Hamilton) where people have paid silly money for do-ups. I’m wondering if my reno budgets are right? I have the following budgets for the things normally needed in average 3 bedroom house:
    Kitchen – $10k (average kitset with someone installing)
    Bathmroon – 5k (new bath, shower, vanity and plumber install)
    Painting – $10k full internal prep and paint (this is for really old do-ups with a lot of work required) This is using a painter.
    Carpet – $4k

    With your experience, does this seem reasonable?

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