Look for 'ugly ducklings': Experts reveal their advice on how to renovate for profit

The concept of “renovating for profit” has reached new levels of mainstream appeal in recent years, with many Melbourne buyers adopting this practice as an investment strategy.

The rise in its popularity can be largely attributed to reality television programs where contestants achieve massive returns on renovations completed in as little as 10 weeks (with the convenient assistance of a construction crew, unique product and production budget).

Outside of television programs, however, renovating for profit is a huge undertaking, requiring a careful balance of market knowledge, finances and style.

According to Hocking Stuart director David Wood, there are two types of house flips for Melburnians to consider. The first is a modest and largely cosmetic renovation, and the second is a substantial makeover or rebuild completed over a few years.

Wood says this latter strategy is becoming more lucrative as competition increases for older properties than can be quickly updated.

“With the high costs involved, including stamp duty, finding suitable properties that you can buy for $800,000 and resell for $1.5 million is getting harder and harder,” Wood says.

“What we are seeing more of is buyers taking a long-term view, especially in the prestige markets… They’re able to engage an architect and carry out a substantial renovation or even a complete rebuild. In the time that the property has been undergoing its renovation, there is the hope that the market has been kind and they’re able to get a higher price.”

For renovators without the upfront budget to complete a substantial property overhaul, the best strategy is to look for architecturally insignificant homes in up-and-coming areas, not rare finds that will sell for a premium regardless of their condition.

• Related: Which renovations offer the best returns?
• Related: A step-by-step guide to renovating
• Related: The biggest mistakes people make when renovating

“You should look for ‘ugly ducklings’ that have good bones. For example, houses that were built in the ’60s, ’70s or ’80s with solid brick outers that could be rendered, and then you’re able to just build upon the bones without needing to do a full rebuild,” Wood says.

The consensus from experts is that these types of properties are most conducive to a reconfigure of structural elements, rather than adding fashionable extras. Changes to consider include converting a formal lounge into an additional bedroom and removing walls in the kitchen to create an open plan domain.

Architect Amelia Lee from Undercover Architect suggests refurbishing the kitchen and bathroom, then complementing this with fresh paintwork, energy efficient lighting, new floor coverings and natural light.

“Creating better connections to the outdoors, and designing fantastic and functional outdoor entertaining areas that flow from inside, such as a covered alfresco or deck area, is also certainly worthwhile,” Lee says.

Renovations that fail to add value are commonly due to poor market research. Lee recommends renovators liaise with their local agent before starting works to determine what buyers in the area are attracted to and at what price.

Associate at Kay & Burton Andrew Sahhar says a big mistake he often sees are clients who have renovated to their own personal tastes, therefore alienating potential local buyers.

“Using neutral colour tones will appeal to a broader market. This in turn often results in greater buyer interest and increased competition,” Sahhar says.

Remember, not every buyer will share your love of matte white tapware, so keep updates to small elements such as fixtures to a minimum.

“People need an element of exploration and excitement when inspecting a home – they want to day dream about how to make it theirs. Don’t deprive them of that by dictating every small aspect at no benefit to you,” says Wesley Spencer, principal architect and owner of Rara Architecture.

70 Herbert St, Middle Park

Photo: Marshall White

$3 million-$3.3 million
3 bedrooms, 2 bathrooms

The classic Victorian facade at this Herbert Street home masks a modern makeover suited to family living.

Two large bedrooms – with open fireplaces – branch from either side of the entry, the main with a walk-in wardrobe and en suite. A third bedroom is fitted with built-in wardrobes while the separate study is the perfect spot to set up a home office.

A renovation and extension in 2013 saw the addition of sleek kitchen, dining and living areas that embrace our love of indoor/outdoor living, opening to a decked al fresco area.

Albert Park Lake is a short stroll away and the beach only about 800 metres from your door, but if that’s too far, you can dip your toes in your own heated plunge pool.

Auction: 2.30pm, August 19
Agent: Marshall White, Adrian Wood 0404 861 508