Hi Everyone:
I need expert advice, as I am very unsure about this property:
My better half wants us to embark on a new property investment career, but wants to stick with cheap housing.
This is as cheap as they come at 105k. Blocks of land cost more than this in the same town.
It is an aluminum clad 1960s bdrm railway house. It is solidly built, but the kitchen and laundry and bathroom are in all original, but deteriotated order. The double hung wooden windows were not replaced when the cladding went on. THe roof is original too – iron, but in need of a cleaning. Work needs doing, but he feels he can do much of it himself at a cost of a few k.
The agents tell us that a neighbouring railway house rents for $130 pw.
The land is over 15 x 40 m, but there is no shedding or garage. There is next to no garden. The back fence needs repairs.
Location is good, opposite a park, close – of course – to the station, a new Safeway complex, the main street, senior citz centre etc.
So basically, it is a nice house in need of a good spruce up – I just wonder if it is better left to the first home buyer? Is that too much to invest on such a modest rental return?
All else suggests that the town is booming – eg. there is a shortage of rentals, new industries are coming to the town and district etc. We certainly think it is the town to invest in, but we disagree on whether going for the lowest end of the market is the way to go?
Be brutally honest…..tell me do these figures stack up?
W
One thing to think about is your travel time. Do you live in Melbourne and have to travel to Camperdown each weekend to do work on the property. Is it just a few simply touch ups that are needed like maybe paint, carpet, ect it sounds like a reasonable proposition.
There is employment also at Colac which is 20 minutes drive up the road from memory.$130 per week = $6760 = 6.4% return on the $105,000
Can you afford an additional $30,000 for renovation works as what happens to beginners is the renovation costs end up more than they budgeted for.
It really depends on how much renovation work is required and if you can afford it or can get away with borrowing it from the bank.
Getting trade people to do the work may be difficult in that location also.You need to look at the likely hood of getting a property for say $130,000 in Camperdown that you could rent out instantly as opposed to this property that might take 3 to 6 months to complete the reno on and what will the interest costs be for holding the property for 3 to 6 months.
see
http://www.realestate.com.au/cgi-bin/rsearch?a=o&id=104744872&f=0&p=10&t=res&ty=&fmt=&header=&cc=&c=7705525&s=vic&snf=rbs&tm=1220928551you would be getting a 5% yield if you need to spend $30,000 extra on it.
Thanks Duckster:
I had better hide your comments from him….as you make it sound a more attractive proposition than I would have thought! Ugh!
Certainly, the work is minor (so I am reliably informed!) so there is no chance of over-capitalisation. A bit of carpentry and tiling will deal with the bathroom/kitchen/laundry. The windows can be partially restored, the worst couple can be replaced with second-hand frames. We have a band of tradie nephews on hand to do the more skilled work, they have ways of shoe stringing this.
This place will rent for $130 without anywhere near 30k of work. Original but neat would be fine.
We are located less than an hour away, so travel is not a problem. We are certain this is the place to invest, because of the low local unemplyment rates, the re-opening of the dairy company site, the headquarters of the new natural gas company, and the near by energy farm opening up shortly. It seems to be largely undiscovered by investors out of the district. Plus it is a gorgeous, historic town, with amazing crater lakes, and is situated on a major highway.
I suppose the part where he and I disagree is the age/type of property. The next available properties are all 120k – 140k all ex-govt, but in less desirable locations, often only 2 bedrooms & often built from fibro. These rent for up to $150pw.
I am wondering about skipping that segment of the market, spending more and going straight onto a basic brick veneer, with less upkeep. This of course is influenced by my hope of us using this property – in the long term future – as our holiday house.
Perhaps I just have difficulty with going with the lower end of the market……
Hmmmmm………
hey wobbles, im allso from south western vic. let me know if you want to network
Thanks Adld:
We are just getting ready to put our offer in for this property….looks like he's won this particular argument.
So we'll see how it goes…if we become property investors…and then contact you for a chat?
W
it is a good place to live . I used to live in Timboon . Left 2 years ago for Melbourne.
wobbles wrote:Thanks Adld:
We are just getting ready to put our offer in for this property….looks like he's won this particular argument.
So we'll see how it goes…if we become property investors…and then contact you for a chat?
W
sure mate, im about to settle on my 1st IP and I have a 2nd in the works, looking for a 3rd! but i'm still new at the game! im interested to know how the camperdown property goes!
cheers adld
Thanks Adld:
Some weeks on, we are still undecided…methinks property investment takes more decisive action than we are capable of…d'oh!
Anyway, he still thinks all the numbers stack up well on that particular property and that it will soon be off the market, if it hasn't already been snapped up.
We have resolved to move more quickly next time!
Best wishes for your search for your 3rd IP!
W
Wobbles,
Better to start at the bottom end and work upwards.
Get some trades people in and get them to quote you on fixing the place up including the time it would take.
This then gives you a ball park figure on what you may need to spend and how much time.Can you find tenants that would move in whilst the rent is cheap and who will also allow you to come every weekend and tidy the place up. You can have an agreement with them to increase the rent by X amount of dollars when it is all finished.
Finally, be careful of what agents tell you in regards to what rents you can get.
Hey C2:
Thanks…all great ideas…especially 'bout the cheaper tenant during the fix up.
C2 wrote:Finally, be careful of what agents tell you in regards to what rents you can get.In this case I was certain, as I am familiar with the small group of identical houses along that particular street and what they attract for their weekly rental….so in this one instance I can actually trust the agent.
Thanks!
W x
Well it looks like I was right!!!! We didn't follow up on this 'renovator's delight' property and months on it still sits on the market. BF might never hear the end of this from me…that it was unlikely to have been the brilliant property deal he thought it was.
I note that eventually the agent's updated the listing, mentioning that is has aluminum cladding, and is opposite parkland. They also recently dropped the price to under 100k.
I feel vindicated in my opinion…thanks for your help everyone!
W
we went to see this. solid house – but needs work. might be perfect for tradie prepared to put in hours. price now dropped.
lionel
Thanks,
It's good to hear the opinions of others because there is always a better way to do things.
Especially if you don't have experience dealing with these situations.
Gud Luck!!!!!!_________________________
Miami Airport Mia limo service watch for tax implications.
if you renovate before renting, and even if you renovate during tenancies, the tax dept. consider this to be a capital expense.
which means you can't claim it as a deduction against your income or against your rent.
30 grand on a reno could probably be instead spent as deposits on 2 – 3 more properties.
or a better property.
having said that, … i have found bargain properties with a neat 5 – 10 grand spruce up that rent very well.
good luck – regional areas have great rental yields,,,, easy to own…
Surely if this had potential – as a small scale or larger reno for future IP (or quick turn around) it would not have languished on the market for so long, nor had so many price reductions?
If it was vaguely suitable, wouldn't a investor have snapped it up by now?
Anyways – probably a moot point. Last communications we had with agent, owners were looking at taking off market to do fix up themselves.
W
Wobbles also look at what your aim is.. do u want to get into investment properties for capital gain or rental income. is your goals to sell up in years for double what you bought for or to build up steady rental income . some houses get good rent but dont go up in value alot.
wobbles,
Although it might appear to be a good deal for those that know the area others may reject it because of not knowing the area or too far to travel to inspect or do reno's.
If you think the numbers are starting to look good and the price has come down then offer (80-85K) about 20% less than current asking price and see what happens.
The 30K you thought you had to spend may now make the overall price around 110-115K.
If this is your first investment then maybe better to find something a little easier. This could also be a good learning curve and a way to find out if you can handle reno's or are better suited to buying non reno's.
Hi Wobbles,
On the surface, this looks like a property I would buy if I didn't live so far away (I'm in QLD). Of course more due diligence than just looking at photos would be required, but if it were to pass a building and pest inspection, it seems like a sound investment. Strictly from looking at the photos you might spend $10k to tidy it up (paint outside and roof – small tidy up on the inside, new curtains etc), but after that you should have a sound rental property. Just because someone else hasn't bought it doesn't necessarily mean that it's not a good property! Sounds like you are trying to talk yourself out of it. The fact that no-one else has bought it is actually a good opportunity to go in and snap it up at a good price. You also mention that rental properties are in demand in that area and that demand will increase due to the new industries that are opening up, which will only increase your rental yield and the value of the property!
Don't use the excuse of "it's been on the market for a long time so there must be something wrong with it", or "they must be someting wrong with it if they're selling it". Those are dumb excuses. You list many good reasons to invest in this property, but still you hesitate. Why? Do you think that old cheap housing is not a good investment? I have four 40-year old houses in country QLD that I purchased for just over $100k each. After a little renovation here and there they now earn me a total of over $300 per week in positive cashflow! (And for all those who say that the days of positive cashflow properties are over, I bought them all in the last 12 months). 2 of them are rented and 2 of them are on lease-option/wrap arrangements.
Of course I am not telling you to go out and buy the house tomorrow, but if you are not going to buy it, find yourself a sound reason not to, rather than speculating. Check it out, do some building and pest inspections, find out how much it will cost to fix up (I don't know where the $30k figurecame from that's been splashed across this thread – I think $10k is more realistic) and then get a proper rental appraisal from a different agent to the selling agent as to what it would rent for after it's been fixed up. After doing all these investigations, if you still do not have a sound reason not to buy the property – BUY IT!
Thanks everyone!
Whoops…I think I started something here……
Originally I posted looking for some expert advice to use on bf about why this wouldn't be a good investment. Basically, I think property investing is a wonderful thing, but was against him spending how many weekends off working on a place that needed the work…..we have enough unfinished jobs at home without him spending his 'spare' time fixing up another property.
We won't be purchasing – but I had to use force to stop him from proceeding. Plan is now to find a property with less need for a fix up in the new year.
To scamp: the reasons the property is cheap are all apparent – eg kitchen and bathroom on original order, windows needing restoring, proximity to the railway and general neglect etc. Without these issues it would be selling for the standard local FHO entry level of 120k+
BF is a carpenter and inspected with a builder mate, there are no hidden nasties – conclusion being that these Victorian 1960s railway cottages where well built and are quite solid.
An earlier poster speculated on a 30k fix up – but that is unnessary….way too much.
All things considered, it probably would make a good investment – but only for someone with the time to do the necessary work – possibly someone without small children and a nagging partner!
W
PS; In reference to future growth in the area here is a link to one of the industries set to expand locally…this isn't the only one either…hence the reason our future IP will be in the area:
Sorry Wobbles,
We just couldn't find a reason for you that it would be a bad investement
good luck in your future ventures though!
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