If you are good with your hands, an option for creating money from property is to buy a cheap house in a poor state of repair, renovate it and sell it for a profit. Like many of the other techniques discussed on this page, whether this is a suitable strategy for you depends on a lot of things. And like some other techniques on these pages, if you are on an extremely low income, do not dismiss regional properties. There are some very cheap houses to be found in regional towns that may not return you a fortune if you renovate them and sell them, but they will still earn you some money.
If you already have a large sum of money, there may be an option to buy a house outright, renovate it and sell it without moving into it. If you don't, which is far more likely, a very effective way for a low income earner to make money from property is to simply renovate the home they live in, sell it, and do it again.
Renovating the house you live in has the added bonus of being free from capital gains tax, provided you not doing it purely as a business for the profit.
The problem with renovating is it can turn into a "how long is a piece of string" undertaking. You might buy a house thinking it only needs a coat of paint, and before you know it you've taken out a wall and are about to replace the roof. On a low income you are going to want to restrict cost blow-outs as much as possible, and avoid overcapitalisation. While it is not possible to avoid all unexpected money sinks while you are renovating, you can still set yourself a budget and start with the most important renovations that will create the most benefit.
The things that add the most value, either in rental return or increased sale value, are:
- Neutral paint
A good neutral colour choice is Dulux hog bristle or half strength hog bristle with gloss white trim and white ceilings. An entire house can be painted for a few hundred dollars worth of paint and paintbrushes.
- New window dressings
Modern venetian blinds, particularly wide-bladed ones or timber ones, are very cheap and can really lift a room.
- New floor coverings
The cheapest option for new floor coverings is likely to be cheap laminate timber flooring, which can be had for as little as $10 a square metre if you install it yourself. While it won't last in the long term, it looks great on a house you are likely to sell quickly. For a more durable finish, invest in more expensive laminate timber, carpet or tiles. Tiles can also be quite inexpensive and can be laid yourself.
- Updated kitchen
The older and sadder the original kitchen is, the bigger value increase you will get. If the kitchen is solid and reasonably new, try painting the doors gloss white and replacing the handles with something new and modern for a budget effect. If the kitchen is in very poor condition, a full new kitchen can be purchased from a flat pack supplier for a few thousand dollars, plus appliances. If you don't need a top of the line modern kitchen, for example if you have a cheap regional property, try and find a second hand kitchen on eBay.
- Updated bathroom
Similar to kitchens in that the worse they are to start with the better return you'll get. However bathrooms can be far more expensive to upgrade, mainly because you will need to involve a licensed plumber and also the sheer amount of tiling that can be required. If the sink and bath or shower cubicle are sound but have ugly tiles, retiling or even painting the tiles with White Knight paint will make a huge difference. Even new taps, towel rails and a good clean will do wonders on a bathroom that is only slightly dated. However if you are trying to keep to a tight budget, avoid houses that look like they need a full bathroom refit.
- Landscaping the garden
A house with a tangle of half-dead weeds will always be worth less than the same house with a nice garden. On a low budget the ideal way to improve a garden is to do it over a reasonable length of time while you are living in the house. Growing your own plants from seeds or cuttings is the cheapest way to get a garden going on a budget if you aren't in a rush. Bulk plants can also be bought cheaply from eBay if you want to compromise between time and budget.
There are many other things you can do if you want to renovate a house, but these ones are the simplest and highest return, and are most suited to people on a a low income or a tight budget.
Renovating and then selling is used as a strategy by many people whether they realise it or not, as they gradually trade their house upwards every few years, improving each house as they go. The difference between doing it accidentally and planning for it is simply that you weigh up the figures, and make a point of buying a house that needs work and will return a profit. If done right, it is an excellent technique to pay your own home off faster than staying in one house and simply paying down the mortgage. Most people using this strategy are likely to stop once they are in a house they like that is fully paid off, simply because living in a half-renovated house and moving frequently isn't always an enjoyable experience.
Continue reading to building to sell.
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