Im curious if anyone is making money in the current Sydney market with the Buy and renovate strategy. Im looking to start investing after in selling my PPR to generate some small funds to use.
Whilst house prices look more realistic each week im concerned that if i buy/renovate and the market continues to fall i may be forced to hold the property or sell with a loss.Any suggestions?
Ron
Hi Ron B.
While I don’t do it myself the theory is such that you can do it in any type of market. What counts is the amount of research you do beforehand and being able to create more value than you spend.There is another strategy in the renovate game: Buy, renovate and hold. In this way you buy a place earning less rent than is typical for the location, bring it up to spec and increase the rent. This is useful where the sale price after renovation isn’t enough to cover purchase costs plus exit cost but is enough to service your loans and maybe produce +ve cashflow.
eg: East Melbourne 2 beroom apartments rent for say $320 /week. You buy a 2 bed apartment earning $250 /week. Renovate and rent for $320/week. Hopefully (in reality you had better plan for it and make sure it happens) the $70/week increase will produce cashflow or at least neutral gearing so you can take advantage of the equity created.
The above numbers were selected at random to illustrate a point. You’d obviously have to figure out the actual figures needed to turn a profit. But that’s the second buy and renovate strategy.
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