Yes.. here i am again
101 ways to massively increase the value of your real estate without spending much money
Having just read the residential real estate section of this book and skimmed through the other sections, I was just wondering about Rolfs statement about
“The humble carport” – condensed
One of his favourite examples
“Imagine that you have a residential investment property that has neither a carport nor garage, the tenants car must be left out in the rain,hail,sleet,snow.”
“Surely it is reasonable to assume that if you were to provide a carport, the value to the tenant would go up, from experience, the additional rental that you can get by having a carport is easily around $20 p/wk or $80 p/mth, some places more some places less, lets assume this is a reasonable increase”
“With the carport ( at a rough cost of $1000) in place you should get an extra $80 p/m, this translates to an extra $1000 income annually. In this case the return on your $1000 ( building cost) would be 100% per annum, if you owned such a building with no carport, why would you ‘not’ build one.”
“Option one-pay cash receive 100% return per annum”
“Option two-build carport (not paid for yet) with new rental in place call in valuer, revalue based on the fact you have increased income $1000 p/yr ( value of property could go up $10 000 – based on capitalising the rental at 10%) With the $10 000 more new appraisal, go to bank, re-finance, using 70% L-VR ( loan-value ratio), the bank will lend you $7 000 at say 10%”
“So with $7 000, pay $1 000 for carport, we also have to pay the bank the annual interest of $700,. We are receiving $1 000 extra per annum, after paying interest we are left with $300 of annual income”
“However we still have $6 000 left in your pocket, ask yourself this question –is the $6 000 taxable ? well its not income, so no income tax is payable, and you didn’t sell anything so no CGT, therefore money created out of nothing”
“If you think it’s not worth it for $1 000 p/yr imagine if you had 20 such properties would you do it for $20 000 p/yr or with the second option, would you like to put $120 000 in your pocket tax free”
_________________________________________________As I said this is condensed- but is it just me, because I look at this and think about the $6000 at 10%, which over 25 years ( or loan term)I presume would be ‘a lot’, granted you now have some money freed up to re-invest, but I can’t see someone paying too much extra for a carport, and there’s no tax benefit/ depreciation is there – it’s a capital improvement.
Some of the ideas in the book were good and gave me some ideas but this one confused me ( says he scratching his head )[
]What do you think… hmmm
REDWING
“The man that thinks at 5o as he did when he was 20 has wasted 30 years of his life”
Redwing
Yes I remember reading that a long time ago. When I tried to apply it to my environment it just didn’t stack up.
Anywhere you could throw up a carport for $1000 with council approval and not have a hideous eyesore would generally be an area with older fibro type homes. It is not my experience that you would then 1. get $20 a week more rent 2. revalue the property by 10K based on a cap rate of ten.
A cap rate of ten would be great but residential real estate isn’t valued that way to my knowledge.
A recent example was putting ducted evap a/c in a house in Mt Pleasant after the tenants had complained about the heat the previous summer. After much negotiation they agreed to pay an additional $10 per week, I wanted $20. So now they pay $260 pw. The a/c cost $3900 so that is a 13% ROI. Haven’t revalued so can’t say what, if any, value has been added. The benefit to me is I keep some very good tenants in a very competitive rental market.Clive
Redwing, $6000 at 10% is $600 per year, so in 25 years, it’s only $15000!! Which becomes ‘tomorrows’ dollars, and therefore worth less than today! Not much at all really.
As for the carport, if there were two identical properties for rent, and one had a carport and one didn’t, and the extra money wasn’t an issue with the tenant, I’m sure you could easily get an extra $10 per week from them ($20 if it was a higher priced property anyway). I know I’d prefer to have a carport than not.
Even if it’s a ‘slow’ market, the option of a carport may just help you attract a tenant, as opposed to having a vacancy. As for depreciation, I have no idea on carports.
Cheers
Mela house with no carport is like a fish without a bicycle [
]I think these days, tenants have greater expectations. People would have to live fairly poorly to have no carport on a house, but I guess lots of sydney people park on the road. But sydneysiders will pay any amount for nothing at all really- lower than low expectations.
I figure rolf de roos is referring to the regional/country shacks with no carport. Seems, though, that a carport in those kind of places, is an essential. Living in the middle of nowhere must have some compensations. And country/regional rentals can only go up so much.
kay henry
a house with no carport is like a fish without a bicycleI didn’t know that fish like to ride bikes. [
]There is a great opurtunity for rural towns. The only problem is there is a fine line between the town being to small, therefore low rental demand, and also hard to get finance and being the right size.
My 2 cents
Matt
“If you do what you have always done, you will get what you have always had.”
“Isn’t it time for a change?”
I don’t know about carports, but i just put in a shed for one lot of tenants (they had heaps of stuff to store), cost $273 and i put it up myself . I increased the rent by $10 a week.
And in another one of my IP’s there was no off street parking but room at the front to put a drive way in . So i applied to council for a permit $70, and paid a concretor to put in a crossover, $700, then i put some gravel down for the drive . Increased the rent by $20, and added $20,000 to valuation, not bad for $770 and some gravel!*pats the rabbit* :o)
That seems like a good improvement, rabby. Guess I was just thinking that if one puts in a carport (extra $20 rent) plus aircon (extra $10 a week), plus cable (+$5 a week) plus plus plus! Guess if we do multiple “improvements” then the rent can get too big, no? They may just go to a place that has all those “features” to begin with.
kay henry
I think that a carport could add some value/return whether you are selling or holding. Country or city. Next to a home and a dog; man’s best friend is his/her car! I’ve got a ground floor flat in Sth Yarra, which is the only one in the block of 30 that has a carking space next to it. So if I can get a car port through body corp I recon it will be a winner for me and the tennant.
All depends on what your sort term cash flow is like. ie can you afford to invest a little now for some return later. I think with the way vacancies are, you can’t afford not to maintain you property to a high standard or set it appart from the rest of the pack.
Cheers,
Shaun.kay, if you’re making these improvements, you’re not necessarily doing it while you have a tenant, and upping their rent. If you do it on settlement, or between tenants, then you can ask a higher rent, so effectively your tenants ARE going to that place that has all the ‘features’ to begin with.
I agree that there’s only so much you can squeeze out of them as well – if you try to up the rent for every improvement, then you could well be ‘over limit’ and find you won’t get a tenant at all at the higher price.
Cheers
MelYep Mel, there is only so much you can rent you can charge for any property. But for me that is only a part of the equation. When one lot of tenants move out i always spend a well planned out week or two to lift stakes a bit higher.I am up to new blinds and a dishwasher on one property. I figure, i am not only increasing the rent but also hopefully aiming to a better class of tenant, and making the property more competitive.
I am even thinking of partly furnishing one at the moment.I hear heaps of tenant horror stories but so far in 10 years i have had no problems. So i figure i must be doing something right . The last property i listed for rent was empty for 6 days.It is a balance to catch the best possible tenant in the shortest possible time, once i waited three months, but i was worth it, the next lot stayed for 3 years. I learnt from that experience to try and avoid listing a property for rent during winter, seems no one likes to move when it is cold.
My strategy has been to think of my tenants as business partners, because my income is fairly low and irregular, there is just no way i would have achieved what i have without being very mindful of how vital the tenants role is in the IP picture.It does also help heaps having basic building skills, and good contacts with trade suppliers.. i get premium paint for $3 a litre. I am aiming to do the property thing full time some time soon in the near future, this site has given me heaps of ideas as to how i can achieve this . thanks everyone.
RABBIT HOP!!! HOP !!!
>I have just finished reading this book, very interesting.
Gee I would just LOVE [:X] to have Dolf as my neighbour ’cause he will happily paint my house, mow my lawn, maybe even wash my windows free of charge. [^]
All because having a nice looking house on his left and right will increase the value of his own property!
Thinking of that, may be I should take my paintbrush out and start on my neighbour’s house[xx(]
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