The ultimate dream for many property investors is to buy a property at a rock bottom price, redecorate and redevelop and then sell on for a large profit. It would be foolish to suggest it is easy to crystallise a large profit by effectively flipping a property but that does not mean it is not possible. There are many ways to maximise the potential profit on a property which we will cover below.
The more work required the better
As long as you have the skills, or access to third parties who can help you, there is significant potential in buying a property which needs a lot of work – but the structure must be sound. When you bear in mind that the cost of building a new home will factor in commercial rates for different tasks, you may start to see the cost savings on offer. In effect you could argue that each stage of redevelopment creates a premium over the cost of the work. So, in theory, the more work required on a property, the more stages of redevelopment and hopefully a greater premium over the underlying cost of the work.
Forget first impressions when buying to redevelop
When you are buying a property to live in we all know that first impressions are vital and can make or break a deal. The situation when looking to buy to redevelop a home is very different because you need to look beyond the cosmetic, often challenging look, of a distressed property. As long as the structure is sound then it should be fairly straightforward redeveloping the property and changing the layout where required. It is a skill to see beyond the cosmetic distressed look of many properties on the market but if you can learn this skill then it could come in very useful further down the line.
Controlling your budget
Those who go into home redevelopment projects on a wing and a prayer could potentially get burnt by overspending and unforeseen difficulties. If you are looking to buy a property ensure you have done all of your research on the building, you have come up with a realistic budget and timescale and you have also given yourself a buffer. The buffer may be in terms of money/time or both and will take into account unforeseen delays or overspending. This buffer should not be enormous and you should not really aim to use it but if you work on a worst-case scenario this should help with your calculations.
Know your market
There is no point spending tens of thousands of pounds redeveloping a property if the ceiling for property prices in the region is less than your combine purchase and redevelopment costs. Do your research, speak to estate agents, look online and make sure that you know the price ceiling in the region for the type of property you are looking to redevelop. If you break each stage of property redevelopment down into specific tasks this will make it much simpler, less daunting and allow you to focus on one area at a time.
If you look at a property, consider what you may need to spend to redevelop it and then worry about selling the property, this is just too much pressure. Take one step at a time, remain focused on individual tasks while keeping an eye on the long-term goal of redeveloping the property, within a certain timescale and budget, and then selling for a profit. Sounds easy?