Choosing your renovation strategy; rent or sell? Jo Chivers

As property developers, Property Bloom has a range of development strategies most commonly involving building new dwellings and land subdivision.

But, we also offer two house renovation strategies. One is to maximise rent and depreciation benefits, which is our most common strategy and recently we’ve decided to offer a service to renovate houses to sell them.

There are certain times in the property cycle that the renovate-to-sell strategy offers opportunity. You need to use this strategy when the sales market is rising, so timing is crucial.  If you buy, renovate and sell in a stagnant or downward trending market, even though you are adding value to the house, you are likely to lose money.

Outside of the renovation costs, you must consider costs such as stamp duty, legal fees for the purchase and sale, holding costs during the renovation and sales process and selling costs.

You may also need to include capital gains and land tax, so it’s important to seek good accounting advice and make sure you’ve included all costs in your feasibility analysis.

So you need the help of an upward moving market to supplement the renovation and selling costs. Bearing all this in mind, we think perhaps the time is approaching for a buy-renovate-sell strategy.

Property Bloom’s original renovation strategy to add value to increase rent is all about maximising the yield.  We are currently renovating a house for this purpose where we are also building a granny-flat so our client will have two rental incomes from the one property.

With this house renovation, we are bringing the house up to good rental standards, we are very conscious of all costs and continually ask the question of any changes – will they add rental value?  If not, we don’t do them.  So street appeal takes a step back and safety takes a step forward.

Creating a third bedroom or second living area is high on our list. No bells and whistles are needed, just a safe, clean and functional dwelling that meets tenant demand in this location.

It’s a different kettle of fish with our strategy to renovate to sell. The sole purpose of this renovation strategy is to create as much profit as possible for our client.

For this strategy, our has shifted from properties that have larger land and development potential, to property very well located and close to CBD and facilities. These properties are more likely to have a smaller land component, which won’t matter as long as there is some low maintenance and well presented private outdoor living areas.

The potential owner occupier buyers don’t want a granny-flat in their back yard and would prefer a home with a garden they can tend, a double garage or garden shed for storage, some good quality features to the home like stone benches, ducted A/C, good natural light, a quiet location and a pleasant neighbourhood.

Property Bloom looks for different features in a property to renovate and sell to what we may look for in a property to renovate and rent.

Tired property in need of help with good bones is what we need. Large homes – four bedrooms is a bonus - with some nice, original features that we can enhance and restore. The location is of high importance.

All of a sudden the house, not the land, is our focus.

Funny after all these years of looking at a house as a development site, now we are looking at a house for all the features of a warm, attractive home.