I'd appreciate some advice from those who have experience in purchasing a property for renovation potential, organising the reno and then getting the subsequent revaluation.
What sort of reno would you recommend for someone starting out here? That is in terms of lower risk in terms of costs blowing out & rendering the reno not profitable at the end.
I had in mind a house (good position per normal for growth) in good structural condition but perhaps with kitchen / bathrooms that are old & could be redone perhaps? (in Brisbane)
Any other advice welcome re the process/logistics of identifying/buying an appropriate property welcome. How do you actually get a good handle when you're looking at properties for the (a) cost to renovate, and (b) what potential resale value is. I guess this would come with experience overtime, but for a newbie is there a good way to start here?
thanks
we did our first reno last year, and plan on doing another 2 next year.
we were looking for a house that fit the following criteria. and the house we bought had to have all of the following:
1. floorcoverings needing to be replaced
2. needing an internal repaint
3. outdated window coverings/light fittings
4. because it was our first reno we personally didnt want to do kitchen or bathroom so they had to be of an acceptable standard (didtn have to be new, but just not falling apart)
5. badly presented
6. been on the market for awhilewe chose those criteria because we wanted to make profit in just the purchase alone by buying it under market value, but then also add on even more value through the renos. we wanted desperate sellers.
in the end we got a house in mky for $250, spent $8k on renos (could have been significantly less but hubby couldnt get time off work so we had to get tradies in for painting etc), and got it revalued straight afterwards for low $300s and got a tenant in for $340 a week. It was only vacant for 6 days after settlement and in that time we did all the renos.
my advice would be to be very picky. do up a criteria before u start putting through offers and make sure every house abides by the standard you have set yourself. dont cut corners cos if the house isnt perfect for your purpose you may regret it later. and be patient. i was looking for 3 months and put through a tremendous amount of offers below market value on every house that suited my purpose before we got this one.
hoping to do it again at the end of this yr and then again early next yr.
With Karen here,
Paint
Floorcoverings
Lighting
These are your 3 biggest bang for buck itemsAlso landscaping, amazing what a picket fence, and a bit of landscaping can achieve! Looking for street appeal!
Hi there …
Other than focusing on doing cosmetic renos the other important factors are …
1. You make your money when you buy … so buy extremely well … many people do not buy well and suffer the pain once they have finished and can not recoupe their money when the try to resell it … commonly known as over capitalisation.
2. Remember the discount you get the house for must cover the following costs … [1] purchase costs [2] holding costs (4-6 months) [3] resaling costs [4] renovating costs … do not under estimate this as it has a habit of eroding your profits [5] your safety margin … market corrections etc [6] last of all your profit margin.
3. Therefore spend most of your time buying well … putting in heaps of offers … for example I looked at about 170 houses today and shortlisted it to 21 houses that i would be interested in pursuing.
If you want any more tips just follow us on our website.
All the best.
Property Trader | Boston West Pty Ltd
http://bostonwest.com.au
Email Me | Phone MePrivate money lending opportunities available paying upto 12%, secured by bricks and mortar!
Hey Jason – sounds like great advice – any suggestions for those who are a bit more time poor (re looking) – just limit the search to a particular area, say a few suburbs I’m thinking? By the way are you doing a buy & sell type strategy investor (c.f. buy & hold)? Just wondering if you find that if you do really focus on only purchasing the bargins that it is worth it to sell, re-buy for another reno, etc.
The Property Trader wrote:3. Therefore spend most of your time buying well … putting in heaps of offers … for example I looked at about 170 houses today and shortlisted it to 21 houses that i would be interested in pursuing.
.
Hi, can you clarify what you mean by "looked at 170 houses" means? On the net?
What sort of area are you talking? I would find it hard to find 170 houses worth even taking a look at.
Hi Catalyst,
Sorry, I was doing two things at once and might have not made myself clear in my post.
I have been a full time property trader for 10 years and compiled the shortlist using the net (RP Data, PriceFinder, http://www.realestate.com.au, google streetview, google maps etc) with 3 computer monitors (helps stop alt tabbing all the time). In my earlier days I had to pound the pavement and physically see the properties, agents and only did the Logan area in Brisbane.
I look at buying in South East Queensland from the Gold Coast, Ipswich, Toowoomba, Sunshine Coast and Brisbane. To me it is a definite numbers game and I have taught myself to identify, shortlist and analyse potential properties quickly. According to RP Data tonight there is 37,072 properties (all types) on the market at the moment in my areas of interest.
In the last 12 months we have acquired properties in Kingston, Logan Central, Gailes, Nerang, Wynnum, Strathpine, Crestmead and Rochedale South.
I hope this helps answer your questions.
Property Trader | Boston West Pty Ltd
http://bostonwest.com.au
Email Me | Phone MePrivate money lending opportunities available paying upto 12%, secured by bricks and mortar!
My first reno was kitchen, bathroom, carpets, fencing, metal roofing, window replacement, repointing, flashing replacement, sewer & plumbing upgrade, rewiring, laundry, replace a few ceilings, chimney sweep, demo & replace concrete stairs, ant caps/termite protection, landscaping and a few other little items.
It is correct that you make your money when you buy so due diligence before you sign the paperwork is imperative. Make sure you limit your search to a maximum of 3 suburbs so as not to overextend yourself. You must get to know those 3 suburbs like the back of your hand. Go to open for inspections, talk to the local agents, visit the local parks and supermarkets. Find out what houses are selling for, have sold for and are renting for. Once you know it back to front, if a good deal pops up you will KNOW it and be poised for action.
Then make sure you only renovate what will bring in more dollars for perceived value. Meaning whatever you spend must be worth more upon sale. Hope that helps a little.
Amanda
Great advice from all above,
The biggest thing to take away from this post it is 100% correct when they say you make your money when you buy not when you sell, in this market, where it is a buyers market, your in charge.
Buy right and buy equity
Never, ever pay the asking price
mixedup wrote:How do you actually get a good handle when you're looking at properties for the (a) cost to renovate, and (b) what potential resale value is.In terms of understanding resale value, there are two things that spring to mind:
1. Keep a close eye on the real estate websites such as http://www.realestate.com.au/buy to see what things are selling for in your target area. For instance, you might observe that unrenovated 3 bedroom houses that are clean but dated with brown kitchens and patterned carpet are selling for $280k, while houses of similar size in similar area are selling for $360k if they are clean, with a plain coloured carpet (grey or brown or cream) with a white themed kitchen. You might then observe that a fully renovated house of similar size in same area (with flash new oven, ceaserstone benchtops, new cabinetry, new carpet etc), sell for $380k.
2. Go to heaps of open for inspections. Things look quite different in reality to the picture put on the internet. Also, on your way to the open for inspection, you notice things. For instance, you might think oh, right, ok, this street is actually quite crappy, because several houses have sofas on the porch and people sitting on them drinking beer. So although the house is reno'd, it is worth less than a reno'd house in the same suburb in a different street. Or you might notice there is a cemetery across the road and wonder why you didn't notice this on googlemaps. Or you might simply notice the people wandering around in the street, or at the nearest shopping centre. Are they well presented? If not, it might affect the kind of homeowner that would be prepared to live in the area.
In terms of understanding cost to renovate:
1. Take a photo of a couple of different sized and different layout kitchens and get quotes from a local cabinet maker on the cost to put in a schmik new kitchen. Go to the tile shop and find out how much tiles cost. Go to Bunnings and research the cost of doorhandles, paint and such. Go to the carpet store and understand how much carpet (installed) costs. Won't take long before you work it out.
To give you an idea, I did a reno of a one bedder that involved:
– Ripping out of kitchen and bathroom
– Replacing of some plaster as it was was wet and rotten
– Full repaint
– New security doors to front and rear
– Some new doors
– New doorhandles to all doors and cupboards
– New kitchen
– New bathroom (even the toilet)
– New laundry (including cabinetry from cabinetmaker)
– New taps etc
– Upgrade of electrics to include safety switch
– New floor and wall tiles
– New carpet
– New appliances
– Lightfittings
– Some new flyscreens
– Some new shelving
– New window coverings (ie blinds)
– A bit of a garden rejuve
– Some new skirting boards and door architraves
– New deadlocks to front and rear… all this clocked in at around $20k. Seemed like a lot when I looked at my tracker spreadsheet though I'd bought so well I didn't mind.
Generally speaking I've figured if I was looking at a 3 bedder house that didn't need new plaster or security doors or skirtingboards or door architraves, I could turn the thing into a new looking place for around $15k.
Can't stress enough …. go to the shops and look at products and see what they cost. It will differ from state to state and from town to town.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
ps don't bother doing a DIY kitchen cabinetry thing from Bunnings. It is a simliar price to get a local cabinetmaker to custom-make something that will fit to the millimetre… and install it for you. You can do the easy bit that doesn't matter (ie get a sledgehammer… they are cheap… and remove the old kitchen and chuck it in the skip bin.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Hi Mixedup,
This is a great thread, I've learnt a lot from this one.
Good luck with your reno's.
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