Turning key on reno risks
THIS week, I’m quite disappointed in myself as I’ve been inspired by comments made on social media.
Have I succumbed to this clearly addictive medium? I prefer to consider this a temporary blip generated by that naughty Easter bunny delivering way too many treats to our household. All that chocolate can play havoc with your judgment, but I shall continue.
As a real estate adviser, I always emphasise to sellers the importance of the completed package, the finished home.
Top prices and speedy sales are achieved only when everything is in place and as we say “turn key”. When purchasing a renovator, good intentions coupled with a casual plan and hazy funding options are a high-risk strategy and can really cause serious financial woes, especially if you have to sell mid project.
You have a greater chance of hitting top dollar and selling easily if all that renovation funding is in place and you plan well in advance and adhere to the budget.
Common dilemmas occur when funds dry up, work ceases due to partnership issues or, as in many cases, you simply run out of steam.
This is then followed by a classic selling error. For example, say you bought a property for $450,000, which you hoped on completion would be worth $600,000 plus. You anticipate $75,000 in costs, enabling a comfortable profit.
Imagine the quite common scenario then, where you’ve spent $50,000 already, plus countless weekends and evenings of your time, only for the house to look worse than it did when you started.
You now sadly need to sell, so you calculate the estimated sale price by adding your purchase price to what you’ve spent and a little more for your hard work and come up with $525,000.
The purchasing public is a fickle crowd and in this case they hate your half-finished, or should I say, half-unfinished project. Questions are asked about whether the quality of the work undertaken so far is up to scratch.
Speculation is that the seller must be desperate to be offloading a work in progress. Before you know it, the only offers are akin to a forced sale.
This was clarified by a recent post asking about options if you were considering buying an “unfinished home”.
Most responses made it clear that buyers would want it turnkey or not at all; or would, at a stretch, consider buying it very cheaply.
Most would have preferred it in its former un-renovated state, not the midway point.
Understanding that, now consider this scenario from a purchaser’s perspective.
Acquiring property in an unfinished state is high risk, requires considerable due diligence and research and a willing lender on board, but can actually lead to a real bargain.
Here’s why: Purchasing a property that the market shuns equates to less competition to buy, whatever the market conditions.
Only highly motivated, and possibly desperate sellers will be marketing their home in this state.
There is every chance that a considerable amount of the work already undertaken has been completed professionally and to code. No project starts out not to be completed.
It is one of the only chances in a modern-day market to possibly buy real value.
Please, never buy a renovation project or the halffinished house without a plan, funding and the constitution to ensure you can complete the project.
Sometimes the best deals in the market are the not so obvious ones. Of course, this may mean I now have to follow social media for inspiration.
Andrew Winter hosts Selling Houses Australia on the Lifestyle Channel