When looking to acquire a new property it is obvious that both the area and the quality of the property will be uppermost in your mind. Looking back in the world of real estate some of the more successful investors have acquired “low quality” property in high-value areas and made significant returns. There is always the temptation to “beat the market” and buy a high quality property in an area which will “become sought-after” but how often does this actually work?
Room for improvement
If you are looking for a long-term steady return on your property investments then there is nothing wrong in acquiring quality property in highly sought after areas. You will ride the wave of supply and demand from day one and depending upon the type of deal you agreed there is potential for significant long-term returns on your investment. However, acquiring property that needs significant work, in a sought after area, offers potential for a short term return on investment.
Have you got the time?
The greatest return on property investments which need renovation is achieved when you are able to do as much of the work as possible. The likelihood is that very few property investors are able to carry out property renovations although there is potential to help those employed to do the work. The issue of how to fund any work also needs taken into consideration because while it is likely the valuation of your property will increase after the renovations have been completed, how do you finance the cost of the renovations?
The real estate market is littered with investments which were bought to renovate but still remain relatively untouched years later.
Everybody wants a shortcut to riches
There has, and always will be, significant potential returns for those willing to work on renovating properties in need of modernisation. More so than ever before the vast majority of real estate investors want to find that shortcut to riches which involves minimal work, minimal investment and a quick turnaround. These opportunities are few and far between but there are numerous examples of properties in need of tender loving care to be brought back to an acceptable standard. This is where many successful real estate investors make their returns.
Limit your risks, maximise your rewards
If you acquire a property which needs significant work the likelihood is that you were able to negotiate an attractive price taking into account the risks involved in renovations. In many ways this limits your downside, to the cost of the property before any renovations, and maximises your returns after additional work has been carried out.
In theory, if you are able to acquire these often unloved properties at rock bottom prices then what is your downside? If they are priced as needing considerable work then surely this places a floor on the value of the asset in the short to medium term. There are many property assets around the UK in need of tender loving care and significant renovation but finding the best deal for you, the best area and the asset with the best prospects is where research, research, research comes in.