Hi,
Melb based, currently have 2 ips’ and ppor. would like to acquire one or two more ips’ next year, god willing.
Anyway presently looking at the feasability (profit wise) of renovating a tired home for profit within 12 months. In consideration of cgt, stamp duty and the like it seems highly unlikely that any worthwhile profit (if profit at all) is obtainable. Especially when i think of all the work i would have to put into it.
Am i missing something, is their profit in this strategy, should i call the ‘reno kings’
Any thoughts[blink][blink]Hi jman,
I am considering doing something similar (maybe) in the near future and have asked myself the same question. I think the key would be to purchase under market value, then add value. This will give you a bit of breathing space when it comes to selling.
You say you want to acquire 2 more IPs next year. Why are you thinking of selling them after reno? Why not just refinance and NOT pay any GCT? For example, you could purchase one under market value. Renovate it. Then refinance after 6 months and use the equity to fund the next one. I see this as a good way to raise some capital to help purchase more property quicker.
I wouldn’t mind hearing from people who have used this strategy successfully.
Regards,
OziI’ve seen 2 recent clients whose properties have more than doubled in value within 12 months – without much outlay. Can be done.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
With all due respect to Terry’s comments, and I am sure he has 2 clients who have done it, it is VERY diffcult to do in Melbourne (the question in the post) in the present market.
We (http://www.buyingmelbourne.com.au) have bought over 20 under market price properties which have been renoveted for clients this year . The clients have spent between $5,000 to $35,000 on renovation works.
In all cases they have increased the value of their properties by $1.5 to $2 for every $1 spent. Their rent has also increased considerably so they get great returns.
But could they sell them and make a profit??
After costs and tax they would probabaly break even.
Buy renovate sell is a strategy that works in a rising market. Much harder to make work in a flat market.
Why not try BUY RENOVATE REFINANCE This works well but can’t re finance for 6 to 9 months
Michael Yardney
METROPOLE PROPERTIES
Author of Australia’s leading property e-magazine.
Join over 10,000 readers each month.
FREE subscription http://www.metropole.com.auHi Michael,
Thank you for the advice. I agree that selling may not be all that profitable in today’s market.
In regards to refinancing, would you say that valuers generally appraise properties much lower than what they are really worth in a flat market, compared to a booming market?
For example: $200,000 property (purchase price). Assume we spend $10,000 on renovations. After renovations, would this property appraise for more in a booming market compared to a flat market? (for simplicity, assume there has been no appreciation in value since purchase and the time we reno – this is probably not realistic).
I am just trying to understand how valuers work here. My guess is that in a flat market, even after renovations the appraisal won’t reflect the true value of the property, it may be a little lower. Whereas in a booming market, the appraisel may be a lot closer to it’s true value.
Any comments?
Regards,
OziOriginally posted by ozi:Hi Michael,
Thank you for the advice. I agree that selling may not be all that profitable in today’s market.
In regards to refinancing, would you say that valuers generally appraise properties much lower than what they are really worth in a flat market, compared to a booming market? …….
Regards,
OziThe simple answer is YES
Valuers are always worried about being sued and their professional indemnity.
(Don’t get me wrong that’s not all they are worried about – most are really nice guys, but this is always on the back of their mind.)
In a flat or falling market properties are harder to sell and some vendors are desperate and give away their proeprties. I can understand a valuer’s point of view, even though I don’t always agree.
In a booming market, it is unlikley that a valuer will get into strife with his valuations
Michael Yardney
METROPOLE PROPERTIES
Author of Australia’s leading property e-magazine.
Join over 10,000 readers each month.
FREE subscription http://www.metropole.com.auYes Michael is right. It is not likely that anyone would be able to get a property that doubles in 12months within this climate. I actually thought of another one after I posted. 2 of the clients were in smaller country areas -mining towns, but the third client did it in Sydney, a few years ago, by buying a housing commission house (where she was the only bidder at the auction). A cheap reno and a bit over a year later, it sold for nearly double.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Michael,
I thought that may be the case. Thanks for clarifying.
jman, sorry for hijacking your thread [comp]
regards
OziHi guys,
Just a thought, I bought my 4 bedroom house in 2002. I owe $60 000 and I remorgaged at an apprasial of $200 000 in April. I own a two bedroom in Coober Pedy outright and have $70 000 equity left.
If I reno my house it should be worth 200-220 a week in rent with repayments being $413 a month.
Is it true that I can rent it out and pay no capital gains tax as long as I sell it within 6 years.
I am hopeing this is the case as I want to buy a cheap PPOR with my equity n then some, and do another reno job. Sell it buy another cheap PPOR and continue the cycle.
Thanks guys
Regards
easymoney
Wow! Thanks guys and girls for your very enlightning comments,
I guess i already knew the obvious answer to the ‘buy renovate and sell (within 12 months)strategy was a no, and your feedback confirmed that for me.
Special thanks to you Ozi
for your advice on the buy, renovate, refinance and use equity strategy (will apply it, currentlly researching it now).
Also thanks for the informative stuff on valuers.Special thanks also to Michael Yardney
for his experience, knowledge and wisdom. Thank you for potentially saving me from making a very costly and uncomfortable investment error.Originally posted by jman2207:Special thanks also to Michael Yardney
for his experience, knowledge and wisdom. Thank you for potentially saving me from making a very costly and uncomfortable investment error.It was my pleasure, Welcome to the forum, you will find many experienced people here willing to help
Michael Yardney
METROPOLE PROPERTIES
Author of Australia’s leading property e-magazine.
Join over 10,000 readers each month.
FREE subscription http://www.metropole.com.au
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