While the Australian metropolitan property market may be running hot, there are still ways to buy real estate 'trash' and turn it into real estate 'cash', according to celebrity renovator queen Cherie Barber.
Most people believe you can make money on property, but it's usually through capital growth, which you often have to wait for the market to deliver.
"Buying property and giving it a quick cosmetic transformation to sell quickly (flipping) can manufacture your own property growth," The Living Roomrenovator, Ms Barber says.
"It's important to pick the right style of property, in the right location and know your limits to your renovation budget if you are considering flipping properties," she explains.
"Ideally, you'll be buying properties to maximise your money. Flipping, that is selling quickly after renovating, is not always the best way to do this. Buying, renovating and then renting for yield is often a good way to establish a property portfolio. The extra value you create by renovating your property can be used as equity to borrow more money from the bank and invest into your next property."
The renovation queen's tips are below:
Looking at a range of Australian architecture there are a lot of ugly houses, so the opportunity for transformation is real. From the choice of Victorian, Old Colonial, Inter-war, Federation, Post-war, Late-20th Century and Contemporary, it's the Late-20th Century that offers the greatest opportunities. Houses from the 60s, 70s, and 80s which are typically red or blonde brick are the best targets for flipping as they don't often need structural renovation.
Check your margins are good
Cosmetic profit margins can net $20,000 to $80,000 in 6-10 weeks. You need to know your numbers, your costs, your margins and some tips on what realtors (and buyers) look for when valuing a property. It's not a free road to wealth, you need to put in effort but if you are looking to flip properties, don't try to win design awards. The outer metropolitan suburbs (around 20-75km from the CBD in Sydney and Melbourne) offer the best opportunities with the Late-20th Century houses.
Know the right formulas of renovation
After doing your property due diligence, you need to make sure your sums add up.
- Your cosmetic renovation budget is 10% of the property price you paid (not the price you expect to sell for
- You need to sell for 135% of the purchase price to make it a â€œflappableâ€ success
- Your % breakdown of expenses should be as follows:
Top 10 tips to jack up your property value
- Add a bedroom
- Update a kitchen
- Update a bathroom
- Add wardrobes
- Remove walls
- Install air-conditioning
- Replace floor coverings
- Replace window furnishings
- Improve lighting
Top 5 tips to improve your property externally
- Cement render
- Add carport (but only if that's the norm in the suburb)
- Add fencing
- Improve landscaping
This information is current as at 26/12/2013.
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