Would a half finished renovation property be a good investment?

Question

Hello everyone! Currently my partner and I are looking to purchasing a place and to get on to the property ladder. I have now read 3 books and many articles and I feel as if I can not learn much more without actually going out there and doing it and with rates being low and the housing market taking a small hit I feel as if we might as well get into it now.

We looked through quite a few websites for a suburb called Hamilton in New Zealand and many of the houses are sitting at $450,000 to $600,000 for 2 - 4 bedrooms and most of the houses already looked like they were renovated with almost no issues besides some of the gardens looking rather horrid.

Untill we came across this property - https://www.trademe.co.nz/a/pr...

Some pictures:

We know that a starter property with minor issues like lose carpets, bad curtains, needing a new paint etc are ideal but it is very hard to find one with issues like that and the property when complete looks like it could be around $500,000 so even with renovation costs of $40,000 we would make profit.

All help is appreciated!

Dean Letfus · Answer

I'm not clear on your question. REhab is very expensive in New Zealand and this place is down to frame so step 1 is to know what the rehab would cost. In terms of generalities, yes fairfield is a decent area and Hamilton gets all the benefits of being commutable to Auckland so capital growth is strong.

Ryan Spearman · Answer

Let us know how it goes

Dale Viljoen · Answer

Thank you both for the input you have put into my question, you have answered my original question as well as many others which I would not of thought/asked haven't you both brought it up. I appreciate the help a lot.

Dean Letfus · Answer

Agree Ryan, you've got nothing till you've got a contract. Then you can use the rehab costs to negotiate final price. I've lost count of how many deals I've offered to go unconditional on on last day of contract with a discount for repairs, and gotten them accepted.

Ryan Spearman · Answer

I have always got the place under contract, then got the professionals in. It does mean you need to come up with a figure that the vendor accepts and signs, but the flip side is you have a lot more time to do your due diligence.It is entirely possible to arrange to have inspectors go through before you have it under contract, you just run the risk of someone else swooping in and pulling it out from under you, after you have committed to pay your inspectors.If you can find a price which is an approximation of what you think it might cost to make the deal work, and the vendor is happy with it you might as well get the contract signed and lock up the deal. As long as you have all your due diligence clauses in place, you can always pull out if the renovation costs are going to run too high, or better yet, you now have a document to back up why the vendor should drop the price for you.Don't be afraid of getting the place under contract. As long as you have plenty of conditions in there you can always get out, but if you don't have it under contract, you won't be able to buy it.Just remember, no matter what your quotes are, your renovations will run over massively. Double isn't unusual

Dale Viljoen · Answer

Hi Ryan, I really appreciate your reply, I was thinking I might be onto something that could make me some money as a flip. However, I have one question. At what point would I be able to get in professionals to quote? Could I just bring them with to the house viewing etc?

Ryan Spearman · Answer

Hi Dale,I bought a block of flats recently where one of the flats was partially renovated, and the rest completely unrenovated.The partially renovated flat definitely came in a lot cheaper to bring to finish, so you might be onto something.If you do like Dean said though and get a lot of thorough quotes you will know for sure and can't go wrong. The more professionals you can get involved before you part with your money the better

Dean Letfus · Answer

Get a tradey in to quote. You have to decide whether you're doing it up to flip or hold as that may affect what quality fittings you use. You can spend 7k on a bathroom or 50k so you need to figure out quality then get it quoted.

Dale Viljoen · Answer

Thank you for that. That is the reason I chose Hamilton, strong capital growth. In fact a house I was looking at 2 years up went up in value by a lot of money. Lastly, how would you try and figure out the rehab cost of this place? I know

Dale Viljoen · Answer

I forgot to say sorry, I am currently living in Auckland and Hamilton is a 45 minute drive. Yeah that was my initial thought, that there will be a reason they abandoned but I came under the assumption it was due to money looking at the bathroom. What would you do in this situation as I am not to sure were to go from here?