Real Estate Investor Magazine South Africa September/ October 2019 | Page 23

F
inding the right property is integral to the success of
this strategy – a poorly chosen project could easily cost
far more to renovate than it could ever recoup in a sale.
Before purchasing a property, it is important to spend time
looking at what is available in one’s desired area and analyse
the market thoroughly. Buyers are advised to engage with
reputable estate agents in the area and brief them on their
requirements in order to find their ideal property.
Cape Town Regional Sales Manager for the Rawson Property
Group provides a list of elements to look out for when finding a
fixer-upper which is worth the investment and time.
1
LOCATION
Mott explains that the location of the property
is crucial to a lucrative turn-around sale once the
house is renovated. This is a factor that cannot be
changed and affects the value of the property. “If a house is in
a bad neighbourhood, an inconvenient position, or too close
to an undesirable structure like a cell phone tower or ugly
apartment block, you can do the most spectacular renovation
and still struggle to make a favourable sale,” he said.
Ideal locations:
Within popular school catchment areas
Close to central business districts
Located in a trendy neighbourhood with convenient
access to freeways and other amenities.
A north facing aspect, mature trees on the property
and attractive views are an added bonus.
Mott adds that not all trendy or popular neighbourhoods
will have ‘fixer-uppers’ on the market. “You often find elderly
people moving out of up-and-coming suburbs who are selling
homes that make perfect renovation projects,” he said.
2
STRUCTURE
Having the ideal location doesn’t always make a
property a good fixer-upper. Mott explains that
a sound structure is essential in order to keep
renovation costs down.
“Homes with serious structural faults, like unstable
foundations or weathered roof beams for example, can take a
huge amount of money and expertise to repair,” he says.
Mott adds that if a structure has issues with its foundations,
investors cannot expect a quick turnover in sale. “This is seldom
worthwhile for buyers hoping to resell for a profit in the
short to medium term. If you’re not sure about the structural
condition of a property, I’d highly recommend getting an
expert inspection performed. This is not the kind of issue you
want to discover halfway through a renovation.”
3
LAYOUT
A solid structure is certainly an important part, but
Mott says layout also can’t be ignored.
“It’s a mistake to assume you can solve every design flaw by
knocking down a few walls and opening up the layout. If the
kitchen or bathrooms are in a weird location, or the bedrooms
are all in the coldest, darkest part of the home, it’s going to
be difficult to solve that problem in a cost-effective manner,”
explains Mott.
Mott recommends looking for homes with convenient
room “clusters” – a comfortable bedroom wing, a central
kitchen, dining and living area with logically placed entrances,
garden access and bathrooms. “This enables you to remove a
few, non-loadbearing walls to open things up if necessary, and
you won’t end up with a family bathroom in the middle of your
living space,” he says.
4
RENOVATION COSTS
Building work is notorious for being unpredictable,
but Mott says it is vital to at least understand the
renovation cost ballpark you’re playing in before
buying a fixer-upper. He advises that investors set budgets
for individual items or sections of the home, for example; set a
price per m2 for flooring and stick to it. Investors are advised to
choose home fixtures and finishes with their budget in mind.
“To make a profit on a fixer-upper, the purchase price plus
the total renovation cost needs to be low enough that you
can recoup your investment – with a healthy profit – not too
far down the line. If you don’t fully understand the renovation
costs, it’s all too easy to end up with a money-drain rather than
a money-spinner,” Mott explains
First time house flippers are advised to consult with a
construction expert before making a purchase possible.
“If you are planning on contracting all the building workout,
make sure you have chosen a reliable contractor with great
contactable references. Don't choose a builder based on the
lowest "thumb suck" pricing, you will regret it in the long run,”
said Mott.
Mott advises investors to assign a portion of their renovation
costs to the garden or green areas as this is often overlooked
and can be a deal breaker if the building is beautifully
renovated and the external areas are left unattended. Mott
adds some adds of wisdom for those looking to purchasing a
fixer upper. “It’s all about going in with your eyes wide open.
Naïve optimism has no place in a fixer-upper project, but if
you do your homework and make sure you know what you’re
getting into, renovating run-down homes can be a rewarding
and profitable strategy for property investment,” explains Mott.
SOURCE Rawson
SA Real Estate Investor Magazine SEPTEMBER/OCTOBER 2019
21