Buying an overseas property in need of renovation. Pros, Cons, and Considerations
As a company Global Investments Incorporated have been selling in Cleveland for over 5 years and have sold over 1000 houses in the city. As stated in previous blogs, for investors the clock is ticking. Prices are continually on the rise and the issue still seems to be the gap between supply and demand. Finding good tenanted properties in good neighbourhoods is getting tougher as each month passes. The simple fact is that It is rare to find the perfect property in the exact location you desire within budget. This applies to a home you are looking for to live but also for a buy to let investment property overseas. However, if you are open to buying a house that needs renovating, the options can vastly increase. Taking on a renovation can be a slightly more time consuming commitment, so it’s best to be well-informed upfront as to the potential pros and cons of embarking on such a project. In this post, we explore these pros and cons so you can make the right decision for your investment property. Pro’s 1. Capital Appreciation Finding a property for a reasonable price that has yet to reach its full potential provides maximum scope for capital appreciation. Upgrading kitchens and bathrooms, knocking walls through to create open-plan living areas, adding extensions, or completing loft or basement extensions are just some of the ways that you can add significant value to a property. However, renovations needn’t always be massive undertakings. Sometimes, the right property in the right street just needs a little TLC to bring it up to scratch. Typical minor renovation repairs include repainting and decorating, resealing wet areas, retiling, replacing old flooring, fixing broken windows, repairing cracks in walls, etc. With our experience, Global Investments have the best suppliers finding the best property options available. In partnership with some of the best contractors in the City we will find you the perfect fixer-upper ! 2. Rental stability Maintaining a stable profitable income is the key to obtaining that high ROI everyone wishes. The Net ROI does not take into consideration 2 factors. Maintenance and vacancy. The main benefits to owning a newly renovated property is firstly the management company can place a brand new tenant on a fresh contract which has been vetted and personally approved by the landlord. Tenants moving into a clean, updated property are less likely to wish to move on giving you a steady rental income. Secondly, a newly renovated property will rarely require maintenance, of course there can be the odd unanticipated eventuality but generally speaking there should be no reason why each month you obtain the full rental income less of course the management companies 10% fee Cons 1. Understanding the budget of a renovated property. While it is easy to get carried away with lofty redesign ideas, it’s important to remember that the majority of any profit gained is dependent upon the initial purchase price. Finding a property with potential that has not yet been realised and then making sure that you don’t overspend on your renovation work concerning the area’s market values is key to maintaining the chance of healthy profits. However, before you purchase a property from Global Investments that is in need of some renovation work we obtain an official quote from the contractors. With all of the costs factored ( purchase price / renovation costs / rental potential ) You can make a sound decision before you go ahead with the purchase. 2. Vacancy Due to the high demand of rental properties in City’s like Cleveland obtaining a freshly renovated property ( ready to go ) is obviously harder than we would like. When available they sell in a matter of hours leaving many buyers keeping a keen eye on our stock disappointed they missed out. The majority of Global’s renovation projects ( And often the best deals ) The works are completed after the new owner closes on the property. This means the funds to complete the renovations are held in Escrow by the title company and transferred to the contractors after closing. Of course in this situation the new owner must anticipate this and appreciate that it will take a matter or weeks and sometimes months depending on the scope of the renovations before the house will be ready for a tenant to be placed. Investors will need to factor this into their financial plans and understand that the rental income will not be made available immediately. Of course the benefit of this is that the investor will have the option to many more properties available and in fact potentially find the best deals. If you are interested or wish for a call and for more detailed information on the latest renovation properties Global Investments can offer then please email us today at : invest@globalinvestmentsincorporated.
