Hi all
Firstly sorry for the length of this post.
I just received the building inspection report for a property I have a contract on. The report looks pretty bad, but being my first deal I could definately use some feedback if anyone has some. I have until tommorrow to pull out or re-negotiate the deal.
It is an almost 100 year old 2 bedroom + sleepout house on a 500 sqm block. Here are the numbers I worked out using Steve’s Quick Rental Yield Calculator:
Purchase Price – $51,000
Deposit – $5,100Total cash in the deal – $8,160
Total return – $1,672.48Here are the comments on the building inspection:
TIMBER FLOORS
Half of the dining room floor is out of level and sloping towards the back wall this is because it was originally the back verandah and is now enclosed as part of the living area.WINDOWS
The bathroom window and one window on the driveway side of the house are cracked. The latch is broken on the small window in the walk in pantry.DOORS
The laundry door and the sleepout door are binding and will need to be adjusted. The front entry door is weathered across the bottom and will probably need to be replaced in one or two years time.TAPS
Water hammer was detected in the hot water supply pipes to the bathroom hand basin.CISTERNS & PANS
The toilet pan is loose and should be attached firmly to the floor.EXTERNAL CLADDING
A small section of weatherboard is missing from the front right-hand corner of this building, and there is a small amount of wood rotin the end of the weatherboard at the back right-hand corner.VISIBLE WOOD ROT
Where the weatherboards are missing at the front right-hand corner the end of the floor bearer and joint is exposed to the weather and has wood rot.ROOF SHEETING
The roof sheeting is very old, it is dinted, has small areas of rust and is loose and sticking up in some places. I believe this roof will need replacing within the next year or two.FENCING
General boundry fencing around this site are in poor condition and in need of basic repairs to replace missing palings and to straighten up the fence.GARDENS
It is not recommended to have any garden beds, shrubs or trees built up or growing against the external walls of a building. Also gardens covered in wood chip, lawn clippings, or similar materials will attract termites to the building.
Therefore the vines and shrubs growing against the building should be removed.So there it is… If anyone has made it this far I would really really appreciate any comments.
Cheers
Wes Davis
[
]Sounds like a perfect wrap to me – the new owner should be most happy to do a couple of minor repairs
On The Sunshine Coast Of Queensland Where Our Bones Are Always Warm
Wes,
Are there +ve’s also? You seem to be in the -ve?
It’s difficult to guage whether this a GREAT deal, or just a good deal when comparing it to other properties around the area. It’s the old adage of ‘worst house in the best street’…
While there some minor structure problems requiring a bit of work, most are fairly cosmetic – eg, removal of material from side of house. Other costs are fairly insignificant & can be done easily by “handyman”.
If you don’t want to go down this path, do some of the ‘really cheap stuff’ (fence & garden), then advertise the property “AS IS”…
Mixrex [
]Hi Wes,
OK, you’ve gone step one with the due diligence and collected some very useful information.
Now it’s time to leverage the data to your benefit.
The first thing I think you need to do is determine what are immediate essential repairs to make the place liveable for the average tenant looking for a neat and tidy home.
Clearly major structural repairs would fall into this category… but some of the monir stuff, like fencing, minor wood rot, wonky toilet etc. can all be fixed later.
What I’m trying to say is that you need to work out how much it will cost you to fix the major problems.
Then once I knew the cost I’d go back to the vendor and renogotiate based on the problems identified.
Alternatively, renegotiate the price so that the repairs are done before you buy (ie. built into the sales price) in which case you can end up borrowing say 80% of the renovation cost rather than funding it from your own pocket.
You have done well to isolate problems, it’s now time to work on solutions.
Building reports are essential, but they can also be alarmist if you are unsure of what it all means.
From what I read, all problems should be totally recified for well less that $5,000 (but be sure to get your own estimate!).
Bearing this in mind, do the numbers in the deal still stack up?
Regards,
Steve McKnight
–holidaying in Mackay–**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
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