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Outdated property: Hidden opportunities for handy buyers
Buyers who are willing to invest time and money in a fixer-upper can secure the best bang for their buck.
While the idea of investing time and money in an outdated home can seem like a nightmare, those who do it right can end up with a hidden gem and make a profit.
According to LJ Hooker Terrigal director Matthew Farrugia, the Central Coast has no shortage of outdated dwellings, such as old weatherboard properties built in the ’60s and ’70s, many of which have become obsolete over the years.
“A lot of them became quite dilapidated over time, with no maintenance or money spent,” Farrugia said.
“Over the last decade or so, there has been significant growth, but prior to that, they weren’t worth a whole heap, so we didn’t see a whole lot invested into them.”
Farrugia said the most common issues that make a property unattractive to buyers are structural issues, which are typically quite obvious to spot.
He said that issues such as unusual or undesirable floor plans, inconveniently located structural walls, and drainage problems can cause headaches and drive potential buyers away.
“Ultimately, anytime there is a floor plan issue, the property becomes a hard sell,” he said.
He said that buyers were typically happy to come in and spend money on updates they could see, such as a kitchen facelift, but were reluctant to spend on hidden repairs.
“It’s all the invisible repairs that buyers don’t want.”
“When you start to spend money on areas that are hidden that you don’t see a visual return on, that's when buyers generally start to shy away.”
He said that as long as buyers carefully considered their position before purchasing a home in need of work, they could build the asset’s value over time.
“If you're a sensible buyer and you want to buy into an area that you really love, then you're taking on those properties that have challenges.”
“You’re getting in at the right price, and you’ve got time as long as the repairs are things you can put up with and aren’t a ticking time bomb.”
Farrugia said that sellers often underestimate the impact a few touch-ups can have on a property, particularly one that is currently presented quite poorly.
“Give it a full fresh coat of paint, update a few of the smaller things like the flooring, paint, a big clean-up of the gardens and external house wash, and just get it presented as neat and tidy as possible.”
He said it gives buyers the opportunity to assess the property as a “blank canvas”, and to judge it based on what it could become.
Farrugia said that outdated properties are often priced to attract plenty of interest, but competition often eases once buyers see the work required.
While outdated properties may be a potential growth asset for a long-term portfolio, Farrugia said those looking for a quick profit should look elsewhere.
“I think there's definitely more challenges there for an investor, and I think that's why we generally see home buyers buying those older properties that need work.”
“I would avoid them purely on the way the legislation’s getting around rental properties and standards for rental properties,” Farrugia concluded