Buy low, renovate cheap, and
add substantial value is the aim of the game.
It sounds simple enough, right?
While there is always a
strong demand for renovated properties – as there are always people wanting to
move into a property that has been renovated and looks fresh and finished –
there is a strategy involved in profitably transforming a ho-hum dwelling into
something spectacular!
First of all, it begins with deciding why you want to
renovate in the first place.
At these times of lower
growth in some markets, renovating is a solid strategy to manufacture capital
growth.
But it’s how to plan to
harvest that growth that really matters.
Many people believe they’ll
be able to renovate for a profit with a buy, reno, sell strategy, but as most
property flips flop, I’m not a big advocate of this technique.
Instead, I prefer the strategy of ‘buy, renovate, rent out, refinance and
repeat’…
If you renovate with the
intention to retain the property, then you stand to retain all the benefits you’ve
created in the renovation.
This includes:
- Low
vacancies – As your newly-refurbished property is now attractive to a
wider range of potential tenants, who are generally willing to pay a
premium for better quality housing.
- Higher
rental returns – Receive higher rental as your newly improved asset shines
against its competitors.
- Depreciation
benefits – Second-hand properties may attract fewer deprecation claims
since the Federal Budget in 2017, but once you renovate you gain the tax
benefit of extra depreciation allowances.
Using this strategy, you can
essentially build your asset base, create capital growth and increase your
overall wealth.
This is distinct from a flip
or renovates to sell approach, which involves losing big amounts of money by
potentially paying Capital Gains Tax, plus stamp duty on the next property.
With this in mind, the next
few blogs in the days ahead, I believe will help you on your way to a profitable renovation strategy.
RealRenta has all the tools that a property manager has but for
less than ¼ the cost of a property manager.
Join now and the cost is less than a cup of coffee a week to manage your
rental property
RealRenta also has a free vision, so why not check it out
Jason Gwerder
Tuesday, 3 May 2022
