Buy low, renovate cheap, and add substantial value is the aim of the game.

It sounds simple enough, right?

While there is always a strong demand for renovated properties – as there are always people wanting to move into a property that has been renovated and looks fresh and finished – there is a strategy involved in profitably transforming a ho-hum dwelling into something spectacular!

First of all, it begins with deciding why you want to renovate in the first place.

At these times of lower growth in some markets, renovating is a solid strategy to manufacture capital growth.

But it’s how to plan to harvest that growth that really matters.

Many people believe they’ll be able to renovate for a profit with a buy, reno, sell strategy, but as most property flips flop, I’m not a big advocate of this technique.

Instead, I prefer the strategy of ‘buy, renovate, rent out, refinance and repeat’…

If you renovate with the intention to retain the property, then you stand to retain all the benefits you’ve created in the renovation.

This includes:

  • Low vacancies – As your newly-refurbished property is now attractive to a wider range of potential tenants, who are generally willing to pay a premium for better quality housing.
  • Higher rental returns – Receive higher rental as your newly improved asset shines against its competitors.
  • Depreciation benefits – Second-hand properties may attract fewer deprecation claims since the Federal Budget in 2017, but once you renovate you gain the tax benefit of extra depreciation allowances.

Using this strategy, you can essentially build your asset base, create capital growth and increase your overall wealth.

This is distinct from a flip or renovates to sell approach, which involves losing big amounts of money by potentially paying Capital Gains Tax, plus stamp duty on the next property.

With this in mind, the next few blogs in the days ahead, I believe will help you on your way to a profitable renovation strategy.

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Jason Gwerder
Tuesday, 3 May 2022

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