Hi all
Just wanted to throw a couple of tricky ones out there, im desperately needing some help/guidance from the more experienced ones.
Couple of quick facts:
I currently own 1 IP and it could probably do with a slight extension and a new kitchen. To be honest im not entirely sure how much id be up for such an extension however i envisage approximately $30k-$40k mark.
IP#1 cost $380k, has approx $100k owing on it and being rented out for $260p/wk. Great tennants.iam thinking of buying a 2nd ip around the $350-$400k mark and fully financing the lot
now for the questions
1) Anyone know if iam budgeting reasonably for an extension job on ip#1?
2) would it be wise to fully finance ip#2? or should i workup some sorta deposit?
3) would you extend ip#1 or invest in ip#2?Cheers and TIA.
Hi Pirate,
It would be hard to tell because we don’t know how large (sqm, etc) your extension will be and also what fittings and kitchen you will be using. A flat pack kitchen can cost $3K and a designer kitchen can cost $20K. Construction costs are around the $1K (at least in some areas in NSW), maybe work out the area in sqm and apply rate and see how you go.
Get a few quotes and work your budget backwards based on what the local carpenter/builder, etc told you. Get 3 quotes at least. Make sure you don’t over-capitalise. It would not hurt calling the tenant and having a chat to him, maybe a reno of this “magnitude” may not be necessary, just some thoughts.
The rent on your IP seems low (compared to purchase price @ $380K), is there any way you can increase this rent, is this the reason why you want to do the extension?
You do have enough equity on your IP, provided that you have your accounts in order and can “afford” the loan, you should be able to borrow for another IP using the equity for deposit and closing costs.
Happy Investing
Option 3, part 2 for me.
Unless the extension is going to radfically improve the rent return, or the value of the property noticably more than the cost of the extension, I wouldn't bother right now.
Better to put the funds into another IP elsewhere and have 2 properties accumulating cap growth for you. Also, you may be able to find a good cashflow property with god depreciation, tax benefits and rent return, and hopefully return a pos cashflow that will off-set the neg cashflow of your existing one.
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