When it comes to managing your finances and optimizing your cash flow, there are lots of ways to go about it. Being able to save money and also to make some is achievable in all aspects of your life with the right approach. One area where this is very true is buying property to renovate. Many people choose to buy a renovation property to live in rather than a new one or one that is older but still in great condition. However, there are still some things to consider when buying property to renovate.
But why is that?
It all comes down to money and getting a better deal. As renovation properties need work done to them (sometimes a lot of work!), then the price you pay is usually lower than it would be if the property was in good repair. You may, for example, get a $500,000 home for half that amount due to the fact it needs fixing up.
When the renovation work is finally completed, you will have a $500,000 property to enjoy or sell that you actually paid much less for.
Renovating a property can be hard work. It can also be very gratifying once the property is complete.
Before you go rushing into buying a renovation property though, be sure to think about the points below.
5 Things to Consider When Buying Property to Renovate
Renovation properties make it easier to get onto the property ladder in the first place due to the lower cost of buying these homes. If you have managed to save up enough money to buy one without needing a mortgage then it gets even better as you will not be taking on extra debt when buying the property. This is not true in newer houses where a mortgage will usually be required to enable you to buy. So, consider these things before you buy a renovation property.
1) Work Out a Total Budget Beforehand
As we have already noted, renovation properties are often a lot cheaper than other kinds of property. You still need to sit down beforehand though and work out a budget for what you can afford to spend.
Failure to do so could:
- see you spending beyond your means or
- be forced to take on extra debt to buy a property
It is much better to identify a sensible budget and stick to it in order to avoid this. When setting a budget, remember to take into account all costs for the renovation work. Be realistic and always overestimate the costs by as much as 20%.
Don’t forget that you will typically need to pay tax when you are purchasing or investing in a property like this as well. You can use a land transfer tax calculator to find out exactly how much you should expect to pay here and guarantee that it does fit your budget.
2) Take Out Home Warranty Cover
A home warranty is a wise investment to make when it comes to these properties – if you have never had home warranties explained you might not know exactly what they are for and what they cover. Basically, they are a cover plan which protects your home systems and appliances if they break down or need replacing.
This cover can come in very handy in any renovation property which has older working appliances included that you plan to keep. As older appliances may fail or need replacing at some time in the near future, it gives you peace of mind that they are covered. A home warranty plan is also worthwhile if you fit entirely new systems and appliances as part of the renovation. In that case, it will safeguard your investment on new items that could be damaged or break down in the future.
3) Check Out Local Building Regulations
Another good tip when buying a property to renovate is having a good look at local planning and building regulations in your area before beginning the restoration work.
There are 2 things you don’t want to waste during your renovation project:
This is because you can spend a lot of your time and money on restoring a property, only to find local laws dictate you have to tear it all down! By taking time to research this (or employing professional architects or project managers to do so), you will avoid any nasty surprises further down the line and know that what you plan to do to the property is allowed.
4) Expect the Unexpected
Another one of the things to consider when buying property is that the unexpected can always happen. This applies to most renovation projects – even with the best planning in the world, unexpected things will often come up to flummox you. Older properties can have a variety of hidden secrets underneath floors or in ceilings – the problem is that you don’t know about some of them until you have bought the house and started work.
The key here is to have:
- enough room in your budget
- a sensible enough timescale to deal with any unforeseen issues
In addition, a great idea to help avoid this in the first place is to commission a full building survey before buying so you have prior knowledge of any easily identifiable issues which might crop up.
5) Buying a Renovation Project Makes Financial Sense
If you are looking to get the best value you can when buying property, then purchasing a renovation project is worth considering. It will not only cost less than a normal house but can also make you money if you sell it on when revitalized. Before getting involved with this though, it is necessary to first consider the above points.
Buying a Property to Renovate – In Conclusion
Renovating a property is a huge deal and can prove to be a great investment. However, you still need to consider your options before jumping in headfirst. The process is time-consuming and you want to be sure you will be ready for this beforehand.
After taking these things into consideration, are you ready to find your next renovation property?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.