If done well, property renovations can significantly improve your return on investment but before you start, it is highly advisable to do some serious planning about ‘the when’, says Richard Sheppard.
One of the most overlooked aspects of investing in property, including renovation, is the ‘when’. By this, we mean timing the market with good quality economic research to ensure you buy in the best-placed area for short, medium and long term growth. We usually discourage a renovation strategy in your home town if the fundamentals for growth are poor for the short and medium term of three to eight years, particularly if you want to do much of the work yourself.
Market timing was one of the biggest lessons from the recent TV show, The Renovators. The show featured some outstanding renovations, however, few made a profit. This was mostly due to the fact that the renovations were completed during a downturn or plateau in the Sydney property market. This was one of the best demonstrations of the fact, that even with great renovations, you can still make a loss if the research and timing are not done well. Timing is actually not too difficult with the quality of property economic data now available.
If the research and or your advisor are quite clearly indicating that your local property market is looking poor for short to medium term growth while other markets are looking strong, you should consider investing in a different area. You should also consider whether renovation is the best strategy at that time as it can be very difficult and/or costly to manage a renovation interstate. So instead, it can be quite straight forward to invest in property that does not need renovation, and this may be a better strategy for now until your local market picks up.
Richard Sheppard is the Managing Director of inSynergy Property and Finance Solutions. inSynergy is a licensed investment property buyers’ agent that provides professional property investment advice, property market research and specialised mortgage broking services. Visit www.insynergy.net.au or phone 1300 308 808.