A huge proportion of the properties we purchase are in need of a facelift – be it a light cosmetic renovation or a structural one. This approach applies to both family homes (where our clients are looking to design the home of their dreams) and investments (where they’d like to optimise the value of the property for improved rental yield or greater equity).
But not all doer-uppers are created equal. There are certain things we assess that make some properties worth buying.
At Milk Chocolate, our Real Estate Lead, Dylan Thomas, and Construction Lead, Ali Solhjoo, run through the advantages of renovating a home, along with what they look for in a property when renovating and what they avoid.
What are the benefits of buying a doer-upper?
For us, there are numerous advantages to purchasing a fixer-upper. These include:
- You can create equity in the property or secure a greater rental yield
- You can use more of your purchase budget to secure a property that meets key asset fundamentals like location, aspect and land size
- There may be less competition for the property, as other prospective buyers can be deterred by the additional effort of renovating
- By starting with a very strong blank canvas, you can undertake a smart upgrade to create a superior asset
- Instead of inheriting someone else’s work, you can dictate the final product, ensuring the renovation is properly optimised to reach its financial goals (whether they’re around rental yield or manufacturing equity)
What to look for in the property
So, what does our team look for in the property itself? There are two key things they assess, as well as a few red flags that can make it a poor purchase.
The block
Dylan points to a few key real estate fundamentals the Milk Chocolate Purchasing team applies to all purchases, including those that need to be renovated. These aren’t focused on the property itself, but on the block it sits on: land size, aspect and location.
The Purchasing team prioritises properties with above-average land size for the area, which offer more flexibility. Dylan says that as long as the zoning allows, more land means we have the option to extend, build value-add features like a granny flat, or even subdivide.
Dylan also looks for underutilised spaces that have the potential to add, like a garage that could be converted into a home office space.
When it comes to location, we won’t compromise on certain things.
“Homes in poor locations or with limited market demand may not justify the cost of renovations because the value added won’t be enough to cover the expense,” says Dylan.
The build
When it comes to the building itself, there are several non-negotiables for us.
Perhaps most importantly, the structure of the building needs to be sound. If it’s not, buyers might end up over-capitalising on something that adds no value.
“Properties with severe structural damage – think cracked foundations, sinking floors, roof damage or compromised walls – often require expensive repairs before any cosmetic work can begin,” says Ali.
“These costs can easily exceed the potential increase in the property’s value, offsetting the financial gains from any renovation.”
Ali also looks at other features of the home, such as room size, whether large rooms can be split to add value, natural light levels, and the layout and flow between spaces.
Luckily, we’re very adept at scouting out the right property. We take our purchase due diligence very seriously, which means ensuring our building and pest reports are undertaken by our own vetted and trusted inspectors. We also arrange additional pre-purchase inspections, including electrical safety assessments, invasive plumbing reports and a Dial Before You Dig check to examine infrastructure both overhead and underground.
If you’re looking to purchase and renovate an investment property, we’d love to hear from you.
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