Money Magazine's three page spread on The Insider’s Guide to Renovating for Profit

Money Magazine's three page spread on The Insider’s Guide to Renovating for Profit

Beware the profit killersIn this edited book extract, experienced investor Patrick Bright shares his tips for finding, buying and renovating residential properties for a quick windfall.

Renovating residential investment property is a great way of building wealth quickly. It’s a relatively low risk strategy if executed correctly and will allow you to manufacture capital value and increase rental returns without relying solely on market conditions.

Back in 1999 a friend of mine wanted to sell a house his parents left him when they passed away. Since he knew that I knew a bit about real estate he asked for my help. The house had been neglected for 18 months and was in very poor condition. A few local real estate agents gave him valuations between $320,000 and $340,000.

I did a little research and was confident my friend could get more if he tidied the house up but he couldn't be bothered and just wanted to sell it as it was. So we made a deal. I would fix up the house and when he sold it we would split whatever profit we made, based on the average of the initial valuations less the renovation costs. So I got stuck into it, working 12 hours a day for a week.

I cleared out all the junk, filling two jumbo skip bins. I had the floors sanded and polished and touched up the interior paintwork. I tidied up the gardens, trimmed some trees that were overhanging the roof, had some stumps removed and put bark on the garden beds. I washed the outside of the house and touched up the paintwork, replaced the cracked roof tiles, cleaned the gutters and painted them as well as the eaves.

The cost of the makeover was just over $10,000 plus my labour. Only two weeks after their initial valuation, we asked two of the original selling agents (plus another one) for a fresh valuation. They all valued the house between $390,000 and $410,000. It sold for $395,000. So for an outlay of around $10,000 plus one week of my labour we had increased the value of the house by $65,000.

In essence, I had converted a little imagination and one week of my time into $27,500, which I used – yes, you guessed it – to buy some property to renovate. Now that you can see what's possible, here are my top three reasons why renovating residential property is one of the best investment strategies: Click here to read the full article.

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Categories: Renovations