MAIN IMAGE: Richard Gray, CEO of Harcourts; Carol Reynolds, Pam Golding area manager for Durban Coastal; Bernie Muller, Leapfrog Edgemead.
In a buyer’s market fixer-upper homes could yield fine investment results to homebuyers. Property experts share advice on how to list such properties so buyers can recognise their potential.
The September FNB Property Barometer confirms what the industry knows, that the property market, in general, is underperforming in line with the country’s flailing economy. While this is not such good news for sellers, especially owners of upmarket properties, it does hold promise for bargain hunters.
On the positive side, according to FNB financial analyst Siphamandla Mkhwanazi there has been a slight improvement in the second quarter of the year in the balance between demand and supply and he attributes this to increased bargain hunting amid attractive pricing, favourable lending conditions and a lower interest rate.
This is where so-called fixer-upper homes come in because a home in need of a little repair that’s located in a desirable location could be just the bargain a first-time homebuyer or property investor is looking for. Finding such bargains are currently trending in South Africa as well as in the US and in Europe.
“In the current market, there are a lot of opportunities to invest in properties that show scope. The value leans toward the buyer in the real estate landscape at present and a fixer-upper presents amazing long-term return on investment,” comments Richard Gray, CEO of Harcourts South Africa.
Carol Reynolds, Pam Golding Properties area principal for Durban Coastal agrees saying a fixer-upper is a great buy for many buyers, “because homes that are in need of repair generally sell under market value and thereby enable the new purchasers to start with a clean slate and transform these properties into their dream homes.” She adds that homes that require TLC also presents a commercial flipping opportunity, which homes that are perfectly presented do not. Simple upgrades like making a home open-plan, upgrading kitchens and bathrooms and a fresh coat of paint all can make an enormous difference.
Tips when listing a fixer-upper
Gray offers the following tips for agents on how to present properties of this nature to the market:
- Be as honest as possible from the start. Ensure the prospective buyer understands all the elements of the home to present a true holistic picture.
- Identify the unique appeal of the property and showcase homes in the local region that represent the possibilities. This way the buyer can gauge accurate long-term growth.
- Agents should identify target demographics that align to the investment opportunities of the property. Go beyond the local scope and distribute the listing to multiple target markets.
- Beyond the home. It is the agent’s responsibility to create the dream. Often buyers can’t see past the problems, show them what the property can be.
Top estate agent Bernie Muller from Leapfrog Edgemead points out the important role that the visual appeal of a property plays in whether the potential buyer takes a second look.
“The best is to do a bit of styling and staging before you take the photographs – hide the clutter, switch on the lights, make sure the dishes are washed, that sort of thing – so that the pictures reflect the potential and not the pitfalls,” advises Muller.
Muller continues that while it’s important to be honest in the write-up when listing the property, you want to go for ‘softer’ descriptions such as “a little TLC will turn this large property into your dream home” or even “a coat of paint, some basic DIY skills and an open mind is sure to turn this house into a home for you”.
“When you’re excited about the potential of a property, buyers are likely to also be,” she ends.
Not all DIY’s offer good investment
On the flip side, it is also true that not all homes in need of repair offer good investment value. The reality is instead of a ‘clean and fun DIY project’ it can be expensive and stressful. Bruce Swain, CEO at Leapfrog Property Group, highlights four factors that play a key role in the potential and suitability of a fixer-upper.
Location, location, location. No amount of renovating, fixing or improving on a property can improve the neighbourhood. Location is always key, so buyers need to make sure the fixer-upper is an area that they like and that meets their lifestyle needs.
Professional opinions. It’s always a good idea to get a professional opinion on the structural integrity of the property. Particular attention should be paid to the foundation, the roof, the plumbing and electrical work, as well as the condition of the kitchen and bathrooms as these are all key to the effective improvement of the property, as well as the most costly. Buyers also need bear in mind that if they are planning major structural changes that they will need to get planning permission from the authorities.
The right flow. Minor structural changes and cosmetic improvements are one thing – it’s easy and cost-effective enough to do – but it’s something completely different if a buyer don’t like the way the property has been built. Something like the kitchen being upstairs, or the main bedroom being on the opposite side of the house to others, or the property facing south, for example, are major design factors which will be very expensive to change.
Money matters. When buying a fixer-upper it’s a given that the buyer is going to spend money on improving the overall look and feel of the property, therefore it’s important to plan and budget for this. To avoid a situation where the renovations end up costing more than the purchase price, it is important to advise the buyer to set attainable goals and a realistic budget.
Keeping all of the above in mind, a home in need of a little repair in the right location, holds the potential to be someone’s dream home and will eventually yield a good return on investment. As observed by Lanice Steward, head of training for Pam Golding Properties: “This kind of property represents a great opportunity for a buyer to get into a more expensive area and fix it up over time. Very often a cleaned out and re-planted garden, a sanding of floors and repaint will transform a property. There is an old saying in property ‘buy the cheapest house in the best area you can afford because you will not over-capitalise’”.