Episode 125 Ask Kevin Young - Buy & Hold Or Renovate & Sell

In this week's episode of Ask Kevin Young, Kevin answers Yadav's great question about whether to buy and hold a property or add value and sell the property.

"Lots of people say, buying and holding a property is an old method of investment. The new method is adding value to the property (renovating, subdividing, and developing). Is this true?"

This is a very popular question at the moment for property investors in Australia, and to answer the first part of the question, it can be what works for your situation. At Property Club, we run a free workshop for the public on this topic which identifies the tips and traps if you are looking to add value to the property.

There are certain things in the property that you can improve to add value to it, such as adding air conditioning. This allows you to receive a quote upfront and also your letting agent can tell you what the return on increased rent will be. In contrast, renovating your home can place you in some property traps if you're unaware, which a lot of 'property seminar experts' won't tell you. Take this situation for example:

1. Decide to renovate your home.
2. You have to kick your tenants out - no rental return being receive at this time
3. You still pay your monthly expenses - mortgage, insurance etc.
4. Receive quotes for building, it's in your budget.
5. Potential accidents happen while building or you change your mind during the build, the costs go up.
6. Property finished - risk of not receiving a return higher than the cost of adding value.

While this situation doesn't always happen for everyone, it could happen to you if you're not smart about your budget and the potential value the property will be worth after finishing. This is an example of over-capitalisation.

To avoid this, come and see your mentor in the club to speak with you free of charge.

If you've had experience with this in your property, comment below on what's been successful for you so far!

Regards,

Kevin Young