Should We Buy and Renovate For Investment ?

Buying a property for investment can be one of the best decision one can make however, just buying the property is not good enough you must know what you want to do with it. For this purpose we spoke to Adrian Wee of Impression Design and Contracts, an interior decorator as well as a property investor who advises investors on the concepts of Buy Renovate and Sell (BRS) or Buy Renovate and Rent (BRR).

It has been a long route of learning for Adrian Wee when it comes to property investments. He has learnt the hard way that investing works only if you do your due diligence.

Hailing from a small town in Seremban, he has been investing in properties and designing show houses for property developers for the past 15 years in and around Seremban town but his first foray into property investing was a disaster.

He exclaims “I didn’t believe in property! I lost a lot of money investing in properties. Fifteen years ago my wife and I,we bought two properties and both of these, we sold at a loss and this loss was not just a few thousand ringgit but almost RM 100,000. So obviously I was scared to invest. Instead I focused on interior design. I designed show rooms and show units for developers.” He further explains “In my fear I let go of a lot of good deals and now obviously I regret. However, I have become a better investor and try not to make the same mistakes again.”

THE TURNING POINT

A few years ago, in 2010,he met a well-known developer who convinced him that property was the way to go if someone wanted to earn their financial freedom. This was a turning point for Adrian, who shakily began investing in properties again and has not looked back since.

This time he armed himself with knowledge and hard work. He attended property seminars, read books and magazines, spoke to property experts than only he delved into investing. However, he found himself having a formula for success, which he shares quite candidly. As he was speaking to a lot of investors and property buyers through his ID work he realised that a lot of people buy properties but do not know what to do with it,
other than plain sell or rent it out, without really maximising their profit. He realised that people could actually buy a property, renovate it and rent it at a higher price (BRR) or they could buy,
renovate and sell (BRS) again at a higher price.

To achieve this profit the renovation must be done accordingly. Some investors do not know anything about renovation, they hire an ID and leave it to the ID. The issue is a lot of IDs are not investors, so they do not renovate for profit but for aesthetic values instead.

WHAT TO LOOK OUT FOR WHEN RENOVATING

Another important consideration to take when renovating the property is the lifestyle of the people around. Is it a family oriented area, or are there many young professionals etc? Understanding the area and the lifestyle of the people there is key to the renovations. For example if its family then do structural changes, like adding an extra room or extend the kitchen, add a bathroom etc. These would bring up the price of the property, banks actually value properties based on the number of rooms available etc.

The profit potential in the secondary market is tremendous, for those properties that are between 15 to 20 years old you can get back whatever you invested in renovating. As an example for a RM 180,000 property (single storey terrace) if you do the proper structural renovations you can sell the house at RM 250,000,making a RM 30,000 profit based on the 10% renovating cost.

You can also increase the value of a property by creating a perceived value, this means simply by renovating it nicely and getting a tenant, the perceived price of the house will go higher. Investors can also buy shop houses and partition the place into smaller rooms and rent out. That way constant rental income can be generated.
One has to be creative when investing and know the differences and be sure of what they want to do with their investment. If it’s for selling than make the property attractive, people are willing to buy if something is attractive, so the idea is to make your property attractive!