Turn­ing key on reno risks

Herald Sun - Property - - OPINION -

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

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