Making Money When Buying
Have you heard the expression “you make your money when you buy!”
It makes sense doesn’t? When you sell a property you are not going to be giving it away at a ‘below market value’ price, are you? But when you buy, you do have the opportunity of finding a seller who, for whatever reason, has to sell quickly, and has to sell at the best price they can, which may or may not be market value.
So it makes sense, doesn’t it, that the only time you are going to make money (apart from normal property increases and clever renovations), is when you buy.
If you are looking to renovate a house, this is more important than ever. You most certainly do not want to buy a house at $425,000 (market value), do a reno of $45,000 and put it back on the market under approx. $490,000. $490,000 covers ingoing costs, reno costs, taxes, commissions, financial costs etc.
For you to really make a good profit, you need to have bought this property at about $335,000 or less.
From this scenario, you can see how doing 3 month renos is good when the market is moving because if the market is moving up at $10,000 a month, you go to contract, do your reno plans, settle ($10,000 extra value already in the house), do 3 months reno, and sell quickly (say another $40,000 in property increases) with your reno profit and your property increase profit.
If you really have money at your disposal, you could put another deposit down on a 2nd reno as soon as you settle the first, with a 60 or 90 day settlement. This is really aggressive money making, and you would need to know what you are doing, and be very organised, but it is quite conceivable.
Just something I thought you might like to chew over!
Filed Under: Property Investment • Renovations
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