Hi Everyone, we are looking at our first investment property. We have found a “bullet-proof” basic 3BR home which there is a demand for in the area. It has been rented out for many years and had little done to improve it. The agents said it will rent “as is”, but we really want to paint and clean it up while it’s empty. The yard is a mess of overgrown shrubs and dead lawn. The house construction is sound and fences good. There is no carport, shed or rear under cover area.
This area has had 25% increase in property value in the last 12 months.
Our questions relate to the fact there is little scope for increasing the rent in this area. By adding a carport and garden shed we can gain about $10/week which takes us to the top level of what people in the area are paying. However (this is only est cost of $2000 – we have trades relatives) with this done and a tidy up we could sell for $14,000 more immediately.
At the current rental we would break even over 12 months. We are looking at ways we could eliminate expenses eg property managers have quoted us 11% + expenses and I have seen on this forum that most of you are paying around 7%. Also, as the owner is not flexible on price can we add a clause that requests him to mow the yard and remove rubbish when we make another offer?
The home is in the $70’s and there is nothing in the area under $90,000. Rent as is $125, with improvements $130-135. So no it doesn’t meet 11 second solution. Sorry to be long-winded am trying to think of what you need to know. Any advise will be taken gratefully, DianeHi Diane
Personally I would purchase (I’m believing everything else stacked up). Do the clean up yourself – if the owner was going to do it, he would, and then sell for more. If you can add a carport etc. for a small amount, and add $14K in value then you are in front. Although if there are no houses in that range, maybe a cleanup would take it up to the values of the $90K houses?
If the property is vacant, I would offer based on you being able to get in there and clean up, and add carport etc. before settlement – and show prospective ‘occupants’ – either for onselling or renting. It’s not 11 sec solution, but with improvements, and added rental, it comes close.
Cheers
MelHi Diane,
From the info you’ve given, I’d buy it in a heartbeat too, and as Mel says do the cleanup myself to get the extra ‘value’. Sounds like a good find, well done! [
]Most lenders won’t reassess a new purchase’s value within 6 months unless there is a major renovation done, but some lenders will – this may help you draw out the equity gain by cleaning it up and adding a carport and by the sounds the rent will still cover the increased loan plus you’ll have cash back in your pocket to keep investing – brokers come in handy to organise this sort of thing!
Let me know if you’d like any assistance.
I think I’ll have to start calling myself Mel2 [:0)]
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Mel
[email protected]Thanks, Mel and Mel ( we have a daughter-in-law Mel too ) We appreciate your advise. Yes we’re going to do the clean-up and painting ourselves and it’s a great idea to try and organise getting in before settlement. We’ve done the Buyer Beware templates and are enjoying all the things we keep learning along the way.
It’s good to have like-minded support,
Dianehi di,
this sounds good to me 2. have you checked out all costs of doing it up and rental in the area.
i have heard that it is better to buy the worst house in the best street for capital growth, maybe a wrap is also an option but it sounds good thoughHi Mel
I’ll let you be Mel, and I’ll be Mel2 as you’ve been here a lot longer!! I’m happy to be Melbear, as i’ve been called that for a number of years now!!
Cheers
Mel 2/bearMy nicknames were ‘sMellie or Bogues – don’t ask – so I think Melbear is probably the pick of the bunch! [
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Mel (1)
[email protected]They all think they are so original don’t they! I still sometimes get ‘smelly’.
Cheers
Mel 2
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