Renovate for a Profit or Flipping
There are basically two types of renovation strategies: Cosmetic and In-depth renovations. A popular type of renovation which you find on most TV renovation programmes is cosmetic renovations. Simply put, a slightly neglected property is purchased, given a coat of new paint often updating colour schemes, a garden makeover and any other simple inexpensive renovations. The property is then put on the market at a higher price. If done well, the new look property can provide significant profit in a reasonably short time, often as little as a few weeks. Once completed, the renovators then move on to the next property and repeat the process.
Although this can lead to significant profit, PPBA highly advise that significant due diligence and research should be conducted into renovation procedures well prior to purchasing any such property. There are many pitfalls in renovation that, if not handled well, can lead to monetary loss.
Renovate to Rent
This strategy is similar to renovating for profit, however the property is held for rent rather than renovated for quick sale. It is a strategy whereby a negative geared property may be turned into a positive geared situation.
It is likely that the property may have been initially a negative geared property. Once upgraded, the property can be used to command increased rent turning it into a positive geared property. In this calculation, costs of purchase, renovation and tax claims etc should be considered.