Sure, buying a property with a “twist” – with renovation potential makes good sense in today’s more mature stage of the property cycle.
It’s a way of forcing appreciating or “manufacturing” capital growth at our current (more mature) stage of the property cycle when we can’t really expect the same strong capital growth that has been enjoyed by some of our capital cities over the last few years.
But unless you have the experience and the skills don’t be tempted to do a D.I.Y renovation.
Of course it looks easy on The Block, but remember reality TV isn’t real, so here are my thoughts on the pluses and pitfalls of DIY renovating.
If you’re willing to do the work, you can save some serious money – but only if you have the skills and knowledge to achieve the right outcome, otherwise it could cost you much more than you bargained for.
You can save on the builder’s margin and you can save shopping around for materials – the trade off is the time you spend doing this
In my opinion, if you want fun and excitement go bungee jumping or trail bike riding – your property investments should be treated like a business – they should be boring so that the returns you get form them can make your life exciting.
- It’s likely the DIY project will take longer than you planned.
- Your costs are likely to blow out, but you can avoid this somewhat with good planning
- You’ll possibly have difficulty finding good tradespeople for the jobs that require licensed trades. They tend not to like working for owner builders.
- If you’re not an experienced tradesperson (or a little clumsy like I am) you’re at risk of injury because you’ll be dealing with power tools, heavy materials and chemicals.
- You’ll need more cash.
Banks will often lend 80% of the cost of a fixed price renovation contract provided by a builder, but won’t lend you the money to undertake a DIY renovation.
- You don’t know what you don’t know– maybe it’s worth you starting off with some simple DIY jobs like painting.
The Bottom Line…
Renovating your investment property is a great way to:
- Increase it’s value,
- Make it more appealing to a wider range of tenants, thereby shortening vacancy periods
- Increase the rent, and
- Increase your depreciation allowances.
However unless you’re experienced, it make makes sense to leave the renovation works to a registered builder, rather than try a D.I.Y reno job.