There’s a fine line between a refurb strategy and a flip strategy that often one gets mistaken for the other.
But there’s a clear distinction between the two, and that’s what we’re about to clear up.
A refurb strategy is perfect if you want a hands-on project but you also want to keep hold of the property and benefit from capital growth in the future.
If you’re time poor, but you’re planning on buying a property and holding onto it for the long-term, then you might want to consider a buy-to-let strategy instead.
Or if you’re a handy/tradesperson who’s familiar with pulling apart a property, making it look pretty and you want to reap the benefits quickly, then you should take a look at a flip strategy.
And if you think you’re in the middle of the two of those, then a refurb strategy might just be the one for you.
What is a refurb?
A refurb, put simply, is taking a property and improving it’s look to try and get an improved value at the end of it.
How much of a refurb a property needs can widely differ. Sometimes it can be as simple as painting and decorating, cleaning the windows and tidying the garden.
Other times you might need to completely rip out a kitchen or a bathroom, or take the walls back to brick and replaster everywhere.
It all depends on what kind of project you want to take on.
And, like flips, the bigger the project and the more value you add to the property, the more of a reward you’re going to get.
Advantages of a refurb strategy
The biggest and most obvious benefit to a refurb strategy is, as we’ve touched on, being able to add value to a property and making more profit.
Of course that’s if you actually sell the property.
If you decide to keep the property for yourself and rent it out, then there’s plenty of advantages.
Naturally, if you’ve carried out a refurb on a property and it’s done to a good spec and a nice modern design, you’re going to attract more tenants. A highly desired property is a winner!
If the property is done up to spec and in high demand, you’re also more likely to have the type of tenants who will look after the property and potentially stay long-term. Another winner.
But before you go and purchase a property, you’re going to need to do some research into the area. Start with Rightmove at current and past listings in the area so you can get an idea of what rental income you’ll achieve and the competition.
And by checking out the competition data, you can evaluate the supply and demand. If there are a number of properties sat empty and available to rent, then this will affect the rentability of yours.
If your property stands out from the competition, you stand a better chance of securing a tenant (and that rental income) quicker than if it sat on the market for weeks/months.
And finally, because you’re refurbing it to hold (i.e. keeping hold of it and renting it out), you’ll be benefitting from that long-term capital growth. You wouldn’t tend to get that growth with a flip strategy because you didn’t hold on to it long enough.
Disadvantages of a refurb strategy
The main disadvantage is the cash and the time. Refurbs require both.
And if you can’t carry out the renovations yourself, you add another (sometimes complex) layer to the situation – tradespeople!
You also need to fully understand the scope of what you’re dealing with and consider the timing of works being carried out. For instance, the electrics and the boiler. These two jobs are big ones – and can be messy. So if something isn’t right, you want these to be looked at before you smooth out the plaster and apply that final lick of paint.
So before you even start your refurb, make sure you’ve got a full handle of what you’re dealing with. Don’t run with a deal just because it’s a good price. There’s a handy video on why we’d walk away from a deal which we’d highly recommend watching.
Regardless of whether you decide to sell or keep the property and let it out, you should always err on the side of caution when it comes to the numbers. Don’t allocate every penny you have to a refurb because you’ll have no wiggle room if things go wrong. You need a contingency.
Make sure the financials stack up. Make sure you know how to calculate a property’s yield before you commit to anything. By using this tool, you’ll be able to get a clear idea of what costs are going to be involved and if it’s going to produce your ideal return.
Is a refurb strategy the right one for me?
As you can see, there’s a lot to take into consideration before you commit to a refurb strategy. You need to research, research, research.
If you decide to go down the route of keeping the property for yourself and renting it out, you’re going to want to make sure that it ticks your tenant’s boxes. This is where knowing the fundamentals of an investment property comes in handy.
Think of it as a little checklist of things to look for when choosing the perfect investment property.
And, similar to a flip strategy, you’re going to need the money to fund this project. If this is proving problematic, this video gives you six different ways to raise the cash to invest in property.
So, now you have everything you need to get started on your refurb strategy.
If there’s one skill you should have with a refurb strategy, that’s the art of negotiation. Because the cheaper you buy the property, the more income you’re likely to make. Take this free course on how to bag yourself a good deal when buying a property which will give you some great tips.
If you’re still a bit unsure about what to do and you need a little bit more advice, our team is here to help.
Maybe you’re not sure if a flip or a refurb strategy will fit best with your goals as they’re both so similar. Why not book yourself a free strategy meeting and talk it through with a member of our team?
They’ll be able to clear up any confusion and set you on the right path. You’ve got nothing to lose and by the end of it you’ll be on your way to building your property empire.