Hong Kong's obsession with the shiny and new is not a universal truth, at least on the property front. Old buildings are proving a gold mine for do-it-yourself investors not scared of rolling up their sleeves and getting their hands dirty - literally. Renovating to resell at a profit - known as 'flipping' - has become increasingly popular as investors try to make the most out of their purchases. For Jo Gray it proved so lucrative that she gave up a successful career in retail fashion and home wares in Britain to start her own Hong Kong property business, Grovens Living. 'It started as a hobby for my partner Jeff and I, but now it's really become my own business,' says Gray. Gray, who has lived in Hong Kong for eight years, decided that she'd had enough of 'throwing money away paying landlords, instead of paying a mortgage'. So, five years ago, she and Jeff made their first purchase of a property in Mid-Levels - a 750 square foot, two bedroom, one bathroom flat. 'We lived in it for one year before we realised we could make some profit - it sold within two weeks, at 20 per cent more than the bank valuation and 45 per cent more than the purchase price,' explains Gray. 'You can make money [from renovating and flipping] if you're savvy with your purchase and do a quality renovation,' she says. But some renovations fall short of the mark. 'There are a lot of properties on the market which do not sell or rent, but when you see the renovation, you understand why. Not everyone has the vision or time and many leave it up to their contractor to decide.' Habitat Property real estate agent Amy Ng says it's important to find a qualified contractor who comes recommended through word of mouth. 'This really is the key, especially for expats who need to communicate with the contractor,' Ng says. 'Secondly, there's often a discrepancy between standards and expectations. The quality is usually much higher where the expats are from, and most of these contractors have not lived abroad and so have nothing to compare their standards against.' Arnold Leung, who has built his entire retirement plan around renovating and selling flats in Hong Kong, agrees. 'Renovating can get tiring as you constantly have to watch the contractors. I do this in my spare time so, if I have a tough day at work, the last thing I want to do is go check that the contractor is doing his job. But it has to be done on a daily basis, otherwise mistakes could end up costing you money.' Leung has made his money by starting small - with his first 300 sq ft flat purchased four years ago in Happy Valley. Since then he has bought and sold so many times that he has lost track of every property. But he now owns three 700 sq ft flats. 'I want to just sit back and collect the rental income, then I can leave Hong Kong to retire somewhere more relaxing and this will pay for all of my living expenses.' From a small walk-up studio in SoHo to a 1,250 sq ft family home in Kennedy Road - a total of five flats - Gray says she has realised an average of 40 per cent gains on all sales inclusive of renovation costs. 'Admittedly, some of the profit is down to the market appreciation, so we always use the sale price above bank valuation to determine profit gained through effort, rather than an uptrend in the property market,' Gray says. Gray says she realised there was a niche market for creating beautiful homes for potential buyers. 'Property here is viewed as just an asset and you see a lot of terribly maintained properties that have been left to fall into disrepair,' she says. 'This lack of well-renovated homes created a niche to focus and build on. Secondly, in a mass market, selling a home which is different to all the others garners more interest, and a higher-than-average selling price.' Habitat Property's Ng says her mainly expat clientele will pay a premium for flats which have kitchens and bathrooms renovated to a high standard. 'These are often the main dealmakers - especially open-plan kitchens and outdoor spaces such as rooftops and balconies which really push up the price.' Gray steers clear of newer, less space-efficient buildings that tend to have oddly shaped rooms or bay windows which waste space. 'All of our properties have been square in shape and have a good flow to the layout,' she says. 'When we walk into a space we can visualise if it will renovate well or not - an instinct which we've developed over many a project and one that keeps me in business as many people struggle with this initial step.' The obsession with living in a brand-new building does not apply so much any more, particularly in the Central area, says Gray. 'People are realising they want character - rather than the latest fad. This is reflected by banks regarding older buildings, or tong lau, as reasonable properties on which to lend.' Gray says in 2005 getting finance on older buildings was difficult. Now, it is much easier. But not everyone is as optimistic. Anita Wong from Century 21 says she has noticed a drop in the number of individual investors renovating older buildings because of the increasing cost of buying. 'Now it's not individual developers - it's the big guys like Li Ka-shing or New World buying up older buildings,' Wong says. 'Their strategy is to take over the entire site, demolish and then build something new.' Wong says most smaller investors are focused on flats which cost less than HK$8 million, as prices have increased exponentially in recent years. 'There's just no stock and the market is high.' Wong says expats are more conservative when it comes to investing in certain areas, whereas locals will buy because they know the area. As for mainlanders, they are just plain 'crazy, crazy, crazy' because of their willingness to take risks. Wong says smaller investors have been driven further out from the centre of Hong Kong Island to areas like Tai Koo, or Sheung Shui or elsewhere in the New Territories, where small second-hand flats around 15 to 20 years old are cheaper. 'But you have to be careful - if you renovate and then rent it out there is not much profit unless it's a good area people want to move to,' Wong says. Gray has maintained her focus on Central and Mid-Levels, due to the high rental yields available, the proximity to the financial district and affordability. 'There is still a lot of potential in these areas in particular to renovate older properties and achieve very high yields,' she says. Ng says investors such as Gray are meeting a demand in the market from end-users who don't want to deal with renovations and see the value in getting a well-renovated flat, as well as those who buy and rent out for good yields. So how much does it cost to renovate? Gray says do the work yourself and manage the whole job to a high standard of finish - with good quality European-standard fixtures and fittings. That way you can account for this with 10 to 15 per cent of the purchase price, depending on factors such as rooftops which can increase the cost of a job. 'What we have found is that this relationship stays quite linear over time - as property prices rise, so do labour and material costs,' she says. 'As far as amazing profits are concerned, one of our places made us 50 per cent in eight months - from getting the key to signing the sales and purchase agreement, plus a lot of hard work in between. Again, some of it was down to market conditions, but this unit is still the highest sales transaction in the building, despite our sale being over two years ago.'