Construction Essays - Brand New Property

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Economically, is it best to buy a brand new property, a used property in sound condition, ora dilapidated property for renovation?

To determine how buying a dilapidatedproperty for renovation is more efficient than buying a new property or a usedproperty in sound condition.

In recent years property renovations havebecome more and more common as people see the possibilities of making a dreamhome or great economic turnover out of what had been seen as a dilapidated site.What makes renovation so attractive is that the average builder once completedwith the renovation will have increased the property value some twenty tothirty percent over the cost of the project depending on the area you live in. Establishingthe project's cost, and the expenditures you have and are willing to put forthare vital in preventing one from over committing and end up spending more thanyou can afford.

When renovating an existing structure it ismost important not to over capitalize, especially when you are planning onreselling. Finding out the prices paid for property in good standing by peoplein your area, you can establish the price you need to pay that along with theexpenditures needed for renovation will still leave you with a tidy profit inthe end.

First and foremost the most importantdecision facing the purchase of the property is to make sure the house orbuilding, as run down as it may be, is structurally sound. Secondly, the buyermust determine whether the area will sustain the higher value of the renovatedproperty. Comparing recently sold pre-owned properties in the area is onemethod in determining the value capacity the renovation can hold on theproperty. Once these determinations have been completed, a calculation of thenecessary work to be completed and the cost of materials necessary for therenovation will lead to a decision on purchasing. Also, the amount of work thebuyer himself can complete is also an added value to the renovation process.

The glory of renovations of dilapidatedproperties are that these properties can often be brought at purchase pricesthat are much below the replacement costs, leading to the potential high profitresell once renovation is complete. Signals of properties with upgradeablevalue are those with easily replaceable design features. Also, search forproperties with only minor structural problems that can be corrected at a costthat's below the property's replacement cost. Therefore the cost of repairs isless than the cost to demolish and rebuild the use of renovation as a profitgain is lost.

Seeking out problem properties that havecorrectable problems that only seem complicated but just require somespecialized attention is key to maximizing profits. The general sense of aproblem scares off most buyers regardless of the simplicity of the problem,leaving the more educated buyer an opportunity to gain a sound piece ofproperty with fixable problems at a reasonable price.

Problem areas that generally scare offbuyers that allow a knowledgeable investor the opportunity to make a profit offa cheap buy are as follows. Industrial and commercial properties whereredevelopment is hindered due to environmental problems; properties that havehad some horrific event occur on the premises and thus have had a stigmaattached; properties that face some kind of contamination, whether it be moldor rodent infestations; and properties that have been condemned by thegovernment for building, health, safety or fire code violations.

Areas that are very popular for renovationare small, neglected run-down physically obsolescent commercial properties thatcan quickly and inexpensively be cleaned-up. Finding these commercial buildingsthat are structurally sound but have an appearance that is a turn off can turnout to be a steal as small renovations as easy as a quick cleanup can reshape aproperty and increase its value in no time.

A profit of twenty to twenty five percenton the renovation is necessary to make the purchase worthwhile. However, thereare ways to diminish your profit potential during the renovation process. Theseinclude spending money on the wrong improvement, an unsuccessful growth invalue of the property, overlooking problems that prevent the property sellingquickly and easily, overpaying the work and for the renovations, choose poorworkers who do a bad job and end up costing you money and running over on time,the occurrence of unnecessary delays and cost over-runs, and lastly a failureto plan the project efficiently.

To prevent these problems during therenovation process a number of different steps can be taken. First a fullstructural survey should be made with a price set before the entire processbegins. After the survey process, the buyer should get quotes from two to threebuilders to establish a sense of the cost of the project. Certain projectswhile nice to complete, do not add the necessary value to the property and aremost costly than useful. Improvements that add the most value to a property areusually fitting central heating, double glazing and fitted kitchens.

Once you have found the property you desireand the renovations suggest that the increase in property value will beworthwhile, the next step is to find ways to secure cash for the purchase. Ifyou have the cash to begin with no problem, if not borrowers must understandthat most lenders lend money based on how run down the property is and itsprojected future value once the work is complete. It is common for 75% of theproperty value to be paid when each stage is completed, and up to 95% of theprojected future value of the property. To facilitate payments it is viable topresent a schedule of the work to be done to the lender, but do notunderestimate the value of each section of the work, and then the lender willmake a structural inspection of the property, as and when required during thestages of construction.

There are a great number of reasons torenovate. First and foremost the property can be resold at a higher value. Ownerswho are in the market to acquire and immediately or in a short time resellapartment properties can gain a substantial increase in the capital gains onthe property just by renovation alone. Most specifically renovating theinterior is the single most important step an owner can take to increase theresell value of the property. Many times the difference in the sale price ofproperties before and after renovation can be as great as fifty percent withthe value increasing at least twenty to twenty five percent as soon as the workhas been completed.

Aim: Tocreate a position that establishes the most economically feasible opportunitybased on the three conditions provided above.

Objectives:Establish reasoning that makes renovation of a dilapidated property moreeconomically feasible than buying a new property or a used property in soundcondition. Establish biases against the latter two options and the setbacksthat may occur within these choices.


What economic components should be mosthighly scrutinized when deciding the feasibility of these three options?

How can buying new and used property behazardous?

What positive effects can buying adilapidated property have?

What must be taken into consideration whenconsidering buying properties?

How can profits be maximized when buyingproperty?

What key factors must be examined about theproperties (i.e. location, place, expenditures, cost methods) to determine howto evaluate the options?

What are the most common and most seriousmistakes made when investing in property?

Outline Methodology:

Title, Proposal of Topic, Stance on Topic,Supporting Information for your Position, Opposing Information to Counteractthe other Positions, Examples relative to the Topic, Summary, Conclusion,Ethics Statement.

Work Plan:

Through references create a log ofinformation for each buying option. Take into consideration the pros and consof each choice. Find examples of each option both positive and negative. Make adetermination into which option is most economically feasible. Create a theorybacking the choice and display facts and examples supporting the choice. Createcharts and diagrams to show the plus and minus of each approach and why oneapproach simply outperforms the others. Explain from your point of view whythis would be the best approach to buying property and how you came to such aconclusion. Conclude with evidence to display the opportunities that come withusing this type of property buying.


Working Title: Renovation Provides an Opportunity to Maximize Profits from MinimalExpenditures.

Purpose of Research: The renovation and remodeling process has become so popularpresently due to the historically low mortgage rates that it has become a $176billion.

For starters, you must buy just the rightproperty, determine which repairs you can do yourself, obtain permits andestimate whether it will all pay off in the end. Next you must determine thenecessary expenditures needed to return a nice profit. If the intent is to buy,renovate and quickly sell or "flip" a home as an investment,purchasing one with cosmetic rather than structural or mechanical problems maysave you from pouring money into general contractors, plumbers andelectricians.

A key factor to maximizing profit from yourrenovations is buying efficiently. The key is not to overpay to begin with,figure all your costs in including remodeling, carrying and real estatebrokerage costs, and make sure there is enough room to still make a profit. Alsorenovators who realize their limits are also most efficient in maximizing ontheir profit potential

Critical factors in turning a dilapidatedproperty through renovation into a profitable success are: finding a propertythat is undervalued due to cosmetic challenges rather than structuralchallenges. Structural challenges that can be extremely costly to fix are leakyor rotting roofs, sloping floors, necessary rewiring or replumbing, and pestdamage. Creating a renovation system that controls time and cost is veryimportant. Many times the profit that seemed so inevitable at the project'sbeginning becomes diminished near to nothing due to project delays and costoverruns. Budgeting costs is one effective method to prevent this fromhappening.

Overall buying a dilapidated property,renovating and selling can return a great deal of profit in a very short time.Going about it efficiently, however, is most important to making the most outof that profit. The more effort you place into the planning the less risk youtake one once you begin the project and the more capable you will become atkeeping to your forecasted expenditures and creating the most return on yourproperty.

Aim: Tosummarize the key points throughout the dissertation making the selected optionknown with viable references, facts and figures to support the choice.

Objectives:Establish an overview of the piece that will allow readers to understand thepurchasing options and what makes each option an attractive choice or a choiceworth passing on. Allow for figures that will support using each method but infinality support the option that was chosen to be most economically viable.


How can purchasing a dilapidated propertycreate a greater economic wealth for the buyer in comparison to buying a newproperty or a used property in sound condition?

Outline Methodology:

Title, Proposal of Topic, Stance on Topic,Supporting Information for your Position, Opposing Information to Counteractthe other Positions, Examples relative to the Topic, Summary, Conclusion,Ethics Statement.


(1)   Home Renovations: The Complete Renovations; Paul Hymer. September30, 2004

(2)   Buy It, Fix It, Sell It...PROFIT; Kevin Myers. 2003, DearbornFinancial Publishing, Inc.

(3)   Profits in Buying and Renovating Homes; Lawrence Dworin. 1998,Craftman Book Printing.

(4)   How to Make Money from Property: The Expert Guide to PropertyInvestment. Adam Walker. October 1, 2000

(5)   Fix It and Flip It: How to Make Money Rehabbing Real Estate forProfit. Katie Hamilton. November 2003.

(6)   Investing in Fixer-Uppers: A Complete Guide to Buying Low, FixingSmart, Adding Value, and Selling (or Renting) High. Jay P. DeCima. March 2003.

(7)   Successful Real Estate Investing: How to Avoid the 75 Most CostlyMistakes Every Investor Makes. Robert Shemin. December 2003.

(8)   Renovating Old Houses. George Nash. 1992. The Taunton Press Inc.

(9)   The Complete Guide to Flipping Properties. Steve Berges. 2004. JohnWiley & Sons, Inc.