Snapping up an ugly property in a popular street might be seen as the holy grail for property owners. But it’s not necessarily a dream come true for every buyer.
Is it the best street for you?
Buying in a location where properties sell like hot cakes can certainly be a good investment decision. Chances are you can rely on high demand from tenants, and from buyers when the time comes to sell, bringing you a healthy investment yield. If you’re smart about picking a property that needs little more than a facelift, you can add plenty of value with a quick and easy renovation.
But whether you’re investing or buying a home to live in, choosing a street that’s in high demand may not be worth the premium price you’ll be paying, regardless of the condition of the property. Anywhere that’s available in the really desirable streets – ones that have water views, lots of picturesque period buildings or maybe some beautiful old trees – are going to be vastly overpriced based on land value alone.
So before you hunker down and wait for that perfectly “bad” house to hit the market, give some thought to just what you’re looking for in your ideal home. Maybe it’s more important for you to be in the right school zone or within walking distance to shops, cafes and transport.
Just how bad is it?
Sometimes the worst house simply means it’s been built in a less popular style – such as the mass produced brick veneer homes of the post-war period. Maybe the bathroom and kitchen are in serious need of an update, or the whole property has been neglected and just needs some TLC. In most of these cases, it could be worth running the numbers to see if a smart renovation could transform an ugly duckling into a lovely, modern home.
Make sure you pay close attention to your building and pest reports and beware of potential issues with wiring, subsidence and even the dreaded asbestos that could create expensive problems once your renovation is underway. Bear in mind your rental costs, too, if it’s not practical to stay in the house while the building project is happening.
It’s also good idea to speak to an experienced broker during the design and planning stage to make sure you’re not overcapitalising by spending more on the home than you’ll be adding to its value. A broker can also advise you on what’s needed to get a construction loan organised in order to pay for a substantial building project, if that’s what you have in mind.
Taking on a property that’s essentially not fit to live in and never will be, is a whole different ballgame. Demolishing and starting again is really your only option. That’s because lenders will conduct due diligence to ensure properties are in a livable state. For a brand new build on a piece of premium land in an established suburb, you’re going to need pretty deep pockets to pull it off.
What’s the alternative?
If a particular street is desirable but totally unaffordable, maybe you’d be wise to buy somewhere nearby where the homes have a lower price tag, but the same access to amenities and a lovely neighbourhood. Or you could cast your net a little wider and try to identify the next suburb on the rise and buy there in order to get more value now and more growth potential in the future.
Have you bought a property to renovate because of its amazing location? Tell us about your experience in the comments below.