Real estate agents might say it’s all about the location, but how do you know when you’ve found the right house to do up?
While the potential profit of buying and restoring a house, then swiftly selling it – house flipping – may appeal, it’s wise not to rush into it. Research into the market is paramount, but so is selecting the right house. While the first property you view might seem suitable, it may not be the best buy.
Determining whether the house is worthwhile is more likely to pay off in the long run. In contrast, buying one that requires more work than it’s worth could be a decision you regret.
Where to buy?
Let’s start with the location, as this will impact the type of house you buy. When choosing an area, look for local amenities – are these the type that will attract a specific type of buyer? If it’s a safe neighbourhood, close to good schools, parks and attractive retail, this will likely suit young families ready to settle.
Suburbs near an airport or motorway, however, distanced from schools and community facilities, may not appeal. Study an area and list the factors that work for and against it; this will give you a sense of what type of person or family it would appeal to. Keep the potential buyer in mind when you redo the house.
Find out if many houses sell in that area. You can buy and create a beautiful home in any suburb, but if there is no demand for the location it will be hard to sell.
“Be careful about where you buy,” says Tyge Dellar, owner of Demo to Reno, who emphasises the importance of buying in areas you know. “It might seem you’re getting a deal when, in fact, you aren’t. I learned that I had bought properties that seemed like a good buy, were under the CV, but ended up being hard to sell. I then made a call to buy in areas I felt comfortable with and knew, rather than shopping all over the show and just getting a feel for what seemed like a good buy.”
Wellington’s Ana Ochkas-Hulena, who has flipped multiple houses with her husband Nigel, suggests house flippers find out as much they can about an area. This includes getting in touch with real estate agents and analysing recent house sales. The couple seek advice from their agent before taking on a renovation, getting predictions on how much they might receive from a sale depending on the work they take on. “That way we can work out what work to do – simply paint or add bedrooms.”
To identify your target market, track sales in your area so you aren’t left in the dark. Look for sales of houses similar to your property in size and features, noting what they sold for and over what timeframe.
Consider what property type you’ll be applying for a mortgage on, and whether your lender has specific criteria they lend against. Emma Boyd, mortgage adviser from Loan Market, says bank criteria can differ on an apartment: “Generally, banks will want an apartment to have a footprint of at least 40sqm, excluding decks and balconies.”
Martin Elliott, general manager consumer products and insurance partners at BNZ, says the bank treats house flipping equally regarding their assessment criteria. “We understand that every customer’s needs and goals are unique, and we don’t believe in imposing one-size-fits-all lending rules. Instead, we evaluate each home loan application individually to ensure that lending is well-suited to each applicant’s needs.”
What is the ideal type of house to look for?
When it comes to choosing a certain type of house, Ana says the worst house is the best house. She and Nigel are currently onto their sixth house flip. “The more value we can add to a house, the better,” she says. “We bought a house once, which had cracked stucco falling off the exterior. Inside, the skirting board had tape on it, which we pulled off only to find it was dust, it just crumbled. The whole place was rotten.”
But they embraced the opportunity to turn this into a quality home. “Don’t be scared, you have to take a leap of faith and you’ve got to get in quick,” Ana says. “We often don’t look at a house in person. One might come on Trade Me and we put in an offer that night. Good houses sell quick, so we get in quick to take everyone else out of the equation. The first house we bought came with a self-contained unit at the back of the section, which we didn’t realise was there. We’ve been very lucky.”
The couple aim to buy three-bedroom homes, which seem to appeal to most people. They say a target market depends on the area and they work in one location. The couple buy their houses there because they know that market well and what people are looking for. “We bought one outside that area, but it cost more money and required more work. We work with a real estate agent and have a good relationship with him. We find out what houses are selling for through him.”
House flippers generally look for an outdated property, Tyge says, which offers more flexibility with remodelling. Mainly the ideal houses have been owner-occupied for 30 years, and then suddenly, due to changes in circumstances, can be picked up. “House flippers look for something that needs some TLC and hasn’t had any love. Always ensure the bones and timber are good, not rotten or falling apart,” he says.
Keep choices straightforward, avoiding any situations that could lead to anything complex. “Generally, aim for a freehold property, not a cross lease, or a duplex or connected townhouse, which can get complicated,” Tyge says.
He says freehold and freestanding properties with a bit of a section are ideal, as they give you more freedom to do the work you want. “Preferably buy three-bedroom (or more) homes that cater for families. Your market changes when you start buying two-bedroom homes, the buyers are different. You might get a professional couple or someone downsizing looking for something smaller.”
But Christchurch resident Ami Muir (@mypropertydiary_) says she isn’t ever set on a type of house, but rather what property has the biggest pool of buyers at the other end of the process. “But that can be mitigated by price,” she says. “I used to only buy according to a strict criteria, but then I expanded my knowledge and capabilities. I’m restoring a burnt-down house now, learning as I go.”
For Ami, it’s less about finding the right house and more about finding the right price. “Knowing the market is really important, understanding what houses are selling for, and even getting a good idea down to the street level. Half of the street may be appealing whereas the other half may not be. Ideally, the target market is that with the biggest amount of people in it.”
What sort of features should you look for in a house?
“If you can find a property that still has a retro kitchen and bathroom, those are the gems you are looking for,” Tyge says. “Properties I look for are those that need paint and fencing, and have no indoor-outdoor flow, which you can easily create by whacking in a set of doors to replace a window.” A lot of those houses are quite compartmental, with separate bedrooms, so they have non-structural walls that can be taken out in living rooms and lounge areas, Tyge says. “By removing these walls you can open the interior up, and suddenly you have a nice, flowing entertaining space from the kitchen to the lounge and the dining area.”
Words by: Catherine Steel
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