Renovated or not Renovated Home
There have always been 2 camps for whether to buy an unrenovated or renovated home as an investment. Which one will give you more return on investment?
Buying a home is an exciting time. It’s a time that promises change, opportunity, and the ability to make something as important as a home your very own. When looking for a new home, consider buying one that needs major renovation.
Here’s why: A home that requires repair and renovation can save you a ton of money. Most home buyers love to walk right into a home that is ready and waiting for them. They don’t want to have to do any extra work to make the home a nice and comfortable place to live. Many aren’t even willing to change the paint colors. They want it “move-in ready.”
Property Investment point of view
The unrenovated apartment has value because sellers have to lower their asking price significantly to compete with those move-in ready homes. Often you can buy an unrenovated unit in a good neighborhood and save 10, 20 even 30% on the home relative to the other homes in the neighborhood. As a buyer, more cash stays in your pocket and your bank account.
An unrenovated property also gives you the unique opportunity to make money on a home. You’ve probably heard the term “Flipping.” This is a term for people who buy old unrenovated homes, fix them up, and then sell them for a profit. If you buy a home in a good neighborhood and fix it up, you can often make thousands, sometimes hundreds of thousands, of dollars in profit.
Well, this was before the Singapore government introduced Seller’s Stamp Duty. This means you cannot “flip” as much as you want. However, you will still get good returns if you renovate it to stay or rent it out, then 3 years later start selling it for a profit. Now, even if you’re not a professional home flipper, you can make money on your home. Buy it at a low cost, fix it up, and you instantly increase the home’s value. You can take an equity loan for your next investment with the new value. Alternatively, you can sell it at a profit.
As an investment home
If you are buying for your stay, buying an unrenovated home also means making the home uniquely yours. Moving into a move-in ready home means you’re likely going to have beige walls, beige carpet, and beige tile. Sure, it goes with everything but it doesn’t have much personality. Updating the house to your personality will make it a more enjoyable place to live.
Renovating a home is rewarding. We’ve talked about money and comfort but we’ve yet to mention that renovating a home can be emotionally satisfying. There’s just something very rewarding about improving a home. Turning it from drab or downright ugly to a place you can be proud of.
Woes of an old apartment
When choosing an old apartment, check that the unit structure is still in good condition. Generally, you want to find a home that needs cosmetic improvements, not a complete overhaul from the foundation up (if it is a landed property). Structural improvements and major renovations can get expensive, and you may find you’re over your head.
In Singapore, buildings are required to go through periodic checks. Here are the guidelines published on BCA website.
Search for your home for investment carefully. Evaluate the pros and cons. And don’t neglect the homes that need a bit of repair, they can offer great bang for the buck and tremendous satisfaction.
In Conclusion
After reading this, if you are still convinced that it is better to buy a well-renovated home. I would say that it is still viable, just not maximizing per-dollar investment returns. Why be on the other side of the market when you can be a smarter property investor?