Buy-to-renovate can be highly profitable

"Among our clients," said Rawson, "we have a small number who have constantly achieved 20 to 50% value increases on properties by buying, improving and then reselling them in quick in-and-out operations."

So how do such investors go about buying to renovate?

Firstly, said Rawson, they identify the high demand suburban areas of Cape Town, Johannesburg and Durban and the homes that have upgrading potential. They then, in many cases, re-plaster and repaint the façades, install new fittings, such as aluminium windows and patio/verandah doors, fit marble or Caesarstone countertops, put in state-of-the-art ovens, hobs and extractor fans and lay down wood or wood laminate floors and/or carpeting.

They also, said Rawson, install more sophisticated lighting and efficient wood, coal or gas burning fireplaces. If their budgets allow it, they also put in solid wood doors, brass and stainless steel door knobs and easy-sliding cupboards and drawers. On the exterior, they often improve the appearance of the home by installing powder coated aluminium gutters and downpipes.

In addition to these measures, said Rawson, buy-to-rent investors attend to faulty wiring and plumbing and any signs of rising damp. They also often install new geysers linked to heat pumps or solar heating.

Improvements of these kinds, he said, can cost up to R500,000 in a typical suburban 150 m2 home - but they will usually add at least R1,5 million to the resale price. What is more, he added, they can almost always be completed in two or three months unless a roof has to be installed. In these cases, said Rawson, the time "off" may be as long as five or six months and the total outlay might approach R1 million.

Obviously, said Rawson, the big challenges in this type of operation are, firstly, getting bond finance on what many banks might regard as a high risk venture. But they are likely to be more amenable if a 40 or 50% deposit is laid down - and if good artisan teams are identified and employed.

"In my experience, those renovators who have been most successful have usually built up strong relationships with reliable artisans who are prepared to work long hours and to take pride in good finishes," he said.

One secret of success, said Rawson, is to get an architect or designer to create attractive computer graphics of how the finished product will look. This will enable the investor to appoint an agent early on to start advertising and selling the property and to achieve a sale and transfer either simultaneously with or shortly after the work is completed.

"I do not want to encourage amateurs to go into this field," said Rawson, "but I can assure those who are practical, sensible and financially stable that renovations can be a highly profitable and enjoyable way of investing in residential property."