At Milk Chocolate, a huge proportion of the properties we purchase are in need of a facelift – be it a light cosmetic renovation or a structural one. This approach applies to both family homes (where our clients are looking to design the home of their dreams) and investments (where they’d like to optimise the value of the property for improved rental yield or greater equity).
But not all doer-uppers are created equal. There are certain things we seek out in these kinds of properties that make them worth buying.
Here, our National Head of Acquisitions, Brad Purcell, runs us through the advantages of renovating a home, along with what he looks for in a property when renovating and what he avoids.
What are the benefits of buying a doer-upper?
Brad says there are numerous advantages to purchasing a fixer-upper. These include:
You can create equity in the property or secure a greater rental yield
You can use more of your purchase budget to secure a property that meets key asset fundamentals like location, aspect and land size
There may be less competition for the property, as other prospective buyers can be deterred by the additional costs of renovating
By starting with a very strong blank canvas, you can undertake a smart renovation to create a superior asset
Instead of inheriting someone else’s work, you can dictate the final product – ensuring the renovation is properly optimised to reach its financial goals (be they around rental yield or manufacturing equity)
What to look for in the property
So, what does Brad look for in the property itself? There are two key things he assesses, as well as a few red flags that can make it a poor purchase.
The block
Brad points to a few key real estate fundamentals the Milk Chocolate Purchasing team applies to all purchases, including those that need to be renovated. These aren’t focused on the property itself, but on the block it sits on: land size, aspect and location.
The Purchasing team prioritises properties with above-average land size for the area, which offer more flexibility. More land means we have the option to extend, build value-add features like a granny flat, or even subdivide.
Aspect is also crucial, as it’s an element the renovated property will inevitably inherit. Brad and his team consider whether the rear of the property has a desirable aspect for the location’s climate and, once the renovation’s complete, whether the living and entertainment spaces will receive ample natural light.
When it comes to location, we won’t compromise on certain things. Even if the block and aspect are just right, we’ll only go ahead with the purchase if the surrounding streetscape and immediate location are desirable.
The build
When it comes to the building itself, there are several non-negotiables for us.
First of all, the stucture of the building still needs to be sound, because if it’s not, you might find yourself overcapitalising on something that adds no value. Using your renovation budget on rectifying the structural integrity of the building only returns it to a neutral starting point. Instead, you need to maximise your budget on aspects of the renovation that will deliver the best ROI.
We also avoid properties with extensive or unacknowledged termite damage, roofing and/or considerable moisture issues and, depending on the renovation budget, those that require significant plumbing work.
Luckily, we’re very adept at avoiding these kinds of pitfalls. We take our purchase due diligence very seriously, which means ensuring our building and pest reports are undertaken by our own vetted and trusted inspectors. We also arrange additional pre-purchase inspections, including electrical safety assessments and invasive plumbing reports.
If we intend to renovate the property, we engage and consult with the Milk Chocolate Construction team prior to any unconditional exchange. This may include outsourcing further specialist reports and inspections to reduce the risk of issues arising after the purchase, and to minimise unnecessary spend from the renovation budget.
If you’re looking to purchase and renovate an investment property, we’d love to hear from you. Get in touch today.
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