Hi all,
I’ve just had a look at a property which I am interested in buying, but need some advice on a few issues. The property is located around 7-8 km from the Melbourne CBD and in a quiet area. There is a bus stop around 100 metres away and train station about a 5-10 minute walk away. The property isn’t listed with any agents and the way I found the property was by doing a letter box drop in the area [biggrin] The property was owned by a man who passed away 6 months ago and is now in the hands of his sister, who is pretty motivated to sell as soon as possible.
Here are the details:
– The house is in a quiet location, situated on a corner block (600 sqm). I think I could comfortably sub-divide the backyard (~ 300 sqm) and build a small unit with its own street frontage.
– House is brick.
– 2 bedrooms in total with a separate single bedroom bungalow in the backyard, so I guess it’s a 3 bedroom home.
– Large lounge room and separate formal dining room.
– Air conditioning in lounge, plus gas heater and separate wood heater.
– Decent size kitchen which was updated about 10 years ago. Lino flooring could do with an update and maybe the cupboards too.
– Very small bathroom which was updated 5 years ago. Consists of a full shower, toilet and wash basin. Would be good if it was larger, but I guess it is functional and good enough for a rental.
– Single garage with remote roller door.
The house is in very good condition, but the inside is quite dated. The things I don’t like are:
– Old (but in very good condition) red floral design carpet throughout the bedrooms, hallways, lounge and dining room.
– Old (but also in very good condition) floral design wallpaper (3/4 length of walls) in bedrooms, hallways, lounge and dining room.
– Recently painted “blue†ceilings and “green†walls!!
– Outside is ugly orange 50’s era brick.
– Roof tiles seem to be in ok condition but could do with a clean and preferably a nice paint.
– Gardens are very bushy and need some cleaning up.
I have a rough vision of what I would like to do to this property and this is where I need some advise (mainly on costing and feasibility).
1) Remove the carpet throughout the house. There are floorboards underneath, but it is difficult to see the condition of the boards without removing the carpet. What is a rough price on sanding/polishing floorboards? The house isn’t very large. I would probably give this to a professional to ensure it is done properly.
2) Remove the wallpaper and repaint interior. I can do this myself, but not too sure on the wallpaper removal. The paper is the thin, smooth finish type. Can I paint over it or isn’t this recommended? I’ve read that the paper can be removed using a steamer and/or chemical solution. Any ideas? I think there are wooden panels under the paper, but not certain.
3) Clean and paint the roof. I have access to a compressor and paint gun so will probably give this a go myself too. Any tips? Is it expensive to get a professional to do this?
4) I have 2 options to create a 4th bedroom:
Option 1: put a wall up between the lounge room and dining room and make the dining room a bedroom. This would be the cheapest option. The only downside is the kitchen will then need to double up as a dining room and it might not be large enough.
Option 2: Knock down the wall between the lounge and kitchen and have a large open plan living area, which joins to the kitchen. I could then put a wall up between the lounge room and dining room and convert the dining room to a bedroom.
Sorry I know this must be hard to visualise! Has anyone had any experience knocking down walls and erecting new ones? What is involved? I’m guessing there may be structural issues in knocking down a wall. Any advice on this would be appreciated.
5) Give the kitchen a mild makeover, i.e. new flooring and maybe new cupboard panels.
6) I won’t go into the sub-division/building side of things too much, from my initial discussions with the council planning officers, they believe it is viable to sub-divide and build a house in the backyard. New units in the area are selling for around the $300k mark and rent for around $250-$270 p.w. The existing house would rent for around $200-$220 p.w. as is and probably $240-$250 p.w. after renovations.
I am currently in negotiations with the vendor. She has spoken to 2 agents who say it would sell for around $320k-$350k. This sounds about right for the area, but given that I would need to spend a bit doing up the property, I don’t want to end up paying too much. The vendor hasn’t given me an exact figure, so I am wondering just how motivated she is. She just told me to make an offer! I was thinking of going in with a low ball of around $270k – $280k, just to see what she says. I think I would be prepared to pay around $310k – $320k for the property given there are no structural defects. Any ideas/tips?
I should also add that I don’t plan to sell the 2 houses on completion and would be keeping them both as rentals.
Sorry for the long post. Any help/comments would be appreciated.
Kind regards,
OziOzi
Tell her agents cost about 3% + 2% in advetising. It could be a 2-3 month advertising canpane and another 2-3 months to settle. Toal of 6 months , if that money was invested somwere else for that time it could add up to anther 3.5% of the sale price (going on interest rates of roughly 7%) so the money in her hand would only be about 91.5% of the sale price anyway.
Tell her you will do a quick settlement , she has prbably got a lot of things she wants to do with the money and the sooner she gets it the better.
Let her know that the figure that agents quote are ussally exagerated. So $320,000 take away say 10% for a no hassle sale you should be able to get it for a round the money you want to spend anyway.
Good luck cheers Rick
We buy properties cash fast settlements no fees no fuss. contact me on 0408 355568
[email protected]Ozi – Well done in creating this opportunity for yourself. ie getting out the and hitting the pavement.
I can help you with some of these
1) floor sanding 2-3k
2) Buy a steamer from bunnings at about $100 – make sure you don’t steam to much of the gyprock paper – you only want the wall paper off. Try not to get it too wet. steam and the pull it- hard to explain
3) roof paint by a pro 800 to 1200 – if you do it yourself STRAIN THE PAINT TO STOP BLOCKAGES AND WATER IT DOWN ABOUT 1 EXTRA LITRE OF WATER IN 10 LITRE PAINT – don’t do on a windy day. Make the first coat a galvanised roof primer – this will stop rust spots coming through and give you extra life – the modern primers are white not silver and you can get it tinted to half the colour of the top coat
4) Don’t knock down or erect anything before you get a builder to have a look at it ___ i would get about 4 or 5 sales agent through (after secured) to get ideas about this – builder should have some good ideas as well
Negotiation????? – this is where you will make most of your money – firstly secure the deal before you give out anymore details about the property – sound like a good one
If she does go with an agent that’s fine but make sure there is no exclusive. Make a record somewhere of the time and dates you viewed the property etc
Just one tip that is simple but often forgotten – follow up your offers if not accepted
If you get it and you a going to go hands on see if you can find some tradies or a builder that will work for an hourly rate to start with and see how things work out. If you think you can help then do.
Try and do a project plan for the renovation.
Dates
Times
Budget
Who
when
how
where
whatEXIT
cheers
I Buy Property http://www.cashflowproperties.co.nz
Hey There,
If you do get an offer knocked back…. ask them when they li8st with an agency that they write in pen on the contract:
No fee or commission payable if sold to “your name, comany or agent of yours”Cheers,
KiwiHi Rick,
Thanks for the negotiating tips. I will take these into consideration when calculating my budget. The owner is already aware of the agent costs, which is why she doesn’t want to sell through an agent. I’ve already made it clear to her that I would be prepared for a quick settlement and she was happy with this.
Don, thanks you for your help too! I knew the wallpaper could be removed, just wasn’t sure how expensive (both time and money) it would be. It seems to be a cheap process by the sounds of things. I’m not too concerned about how long it will take, as long as I know I can do it myself.
In regards to respraying the roof, the roof is tile and not galvanised. Would you say costs/process would be similar to a galvanised roof?
I’ll be sure to put together a detailed project plan if I get the property… I would just like to get some rough estimates done first to see if its worth going for
Cheers,
OziHi Kiwi,
That is a great idea! Thank you.
Cheers,
OziYou should be able to hire a floor sander from somewhere like coates hire for around $100 – $150/day. (I haven’t hired one for almost 10years now but I wouldn’t expect much more than that.) They also carry Wallpaper steamers, and Air Compressors and Painting equipment. I’m pretty sure they’ll teach you haw to use the stuff before letting you out into the wild world with it if you ask them too.
Stuart Milne
Non-Conforming Specialist
READY Mortgages
http://www.readymortgages.com.au
[email protected]
Mob: 0404 056 055Hello Ozi,
I don’t no if this will help but this is how we negotiated our last property that needed a bit of work / renov to it.
As you mentioned rough asking price is appro $320000 and as Rikky said before -10% then work out approx cost for renov”s and take that from the asking price as well.
Are your finances in place ” have pre-approval” etc if not get them in place.
Do you have access to some spare cash ?? maybe $10000
Once all this in place go back to the vendor with a writen offer with something like this:
Offer : $305000 / $310000 with a $10000 cash dep “and wave / or hand them $10000 ,quick settlement 10/15 working days offer is valied for 24hrs.
Worst case they say no.[blink] but alway keep in mind your profits are made when you buy the property.
Hope this helps
PaganIn regards to respraying the roof, the roof is tile and not galvanised. Would you say costs/process would be similar to a galvanised roof?yeah – that’s different. Let the pros do it because you would probably break more tiles while you are up there unless you really know what you are doing – not sure of cost
I Buy Property http://www.cashflowproperties.co.nz
Hi Stuart,
I know it is possible to hire floor sanders, and I probably would attempt doing it myself. I’m just worried the end result will look cheap and tacky. I’ve heard of many stories of people attempting a DIY floor sand/polish and haven’t been happy with the results. Most people I’ve spoken to have recommened leaving this job to the professionals.
Pagan, yes I got pre-approval 2 months ago, so it should still be current. I will check to make sure. Is it possible to settle in 10-15 working days? I’ll need to speak to my broker to see whether this is possible. I’m yet to speak to a solicitor so if anyone can recommend a good one in Melbourne, please let me know.
DLPP, thanks for clarifying. Does anyone know rough costs for respraying a roof?
P.S. I just found out the rateable land value for the property is $280k and capital improved value is $350k. I know this doesn’t reflect market value accurately, but is this a rough indication of what the true value is?
Regards,
OziOzi
Sounds like your on a winner.
If you need tips about renovating will talk to you about them tomorrow. Keep the iron in the fire with this one don’t let her sign up with an agent .Good work so far
We buy properties cash fast settlements no fees no fuss. contact me on 0408 355568
[email protected]Hi Rick,
No problems mate! Look forward to catching up tomorrow.
Cheers,
OziOzi
How you going with that deal any luck ?
We buy properties cash fast settlements no fees no fuss. contact me on 0408 355568
[email protected]Hi Rick,
I’m still negotiating with the vendor but its not going as planned! I put an offer in of $270k last week and spoke to the vendor a couple of days ago. She wasn’t too impressed with my offer and stood firm on her minimum price, i.e. $320k. She told me she will be getting a couple more agents to view the property this week and will probably be listing the property for auction.
I’m a little confused as to which way to go now. I am thinking about increasing my offer to $290k which may still prove to be a good buy, but any higher than that and I may need to let this one go. The problem I have is there aren’t many new properties being sold in the area so it is hard to compare prices. I am trying work out what the end values will be, then work my way backwards to determine the profit margin.
*** BUILDING COSTS ***
After doing a bit more research, it seems that building costs run at about $10,000 per sq (for something ‘ok’ quality – including landscaping, driveways, etc). Does this sound about right? So a 12sq house should set me back $120,000. Would this be the cost if I was to get a builder to build for me? Or is this how much it would cost for an owner builder?I have also estimated the permits, development approvals, sub-division, etc to cost around $20,000. Would this be a conservative estimate? I know it varies from council to council and also the block of land.
Any ideas on what I should do?
Regards,
OziIMHO You neeed to go in with your best price or walk away price..run through all the conditions and costings as posted by the guys above and give it your best shot..
You should be able to settle in 14 days (we use settlement agents here in WA- and you need a switched on one)
Low balling when she has had her hopes built up by the agents is probably a bad idea..she is now probably looking for the higher prices (even if they dont eventuate she may try..you need to put yourself back in the running by showing lower sale price but “saving money in fee’s” and “quick settlement”)
Martin AYLES once commented about his fair price theory..worth considering
If you cant get it for your MAX price to make it all work (maybe work this out by forward planning andworking back) then….you may have to deal with the agents
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorHi redwing,
Thanks for the tips. Regardless of what is deemed a “fair” price for this property, I am only willing to spend up to my “best” price, which is determined by the end values in mind and how much work and effort will be involved from begining to end. Since I am purely looking at this as a development project, if the numbers don’t stack up in the end, I won’t go through with the purchase, even if the price is under market value.
I think I will just go in with my best price. They can either accept it or I walk away. Now all I need to do is work out my best price.
Cheers,
OziHi again,
Just a quick update on how things have progressed with this deal. It has been a bit difficult getting in contact with the vendor as she has been unwell in hospital the past week. I just spoke with her and it turns out her family has turned against her and demand she let the agent sell the property at auction, to which she has agreed. Her family who will be benefitting from the sale have gone as far as making threats if she was to sell to me privately as they believe she would be “giving the property away” for far less than what its really worth. I decided not to push her any further and thanked her for her time. I asked her to put a clause in the contract which states that if I do purchase the property while it is listed with the agent, then no agents commission is payable on her behalf. She said she will ask the agent, but I’m not sure if they will agree to it.
Do you think I’ve done the right thing? Any comments would be appreciated.
Regards,
OziHey Ozi,
been following your story for a while now, and to answer your question i think that you have gone about the negotiation very well, and yes its time to take the iron out of the fire.
The clause is an interesting touch, not sure if the agent will go for it, it has no benifit to him [confused2]. Hopefully you told the vendor that its upto her, NOT the agent to have the clause in the contract.
I guess all you can do now is attend auction and see what happens.Good Luck [biggrin]
“It’s not how much money you make, It’s how you spend it that matters.”
Aspiring property developer
Giulio Taranto
Hi PropertyPassion,
Yes I hope I have done the right thing. I also don’t think the agents would agree to having the clause in the contract as this would have no benefit to them at all. I would prefer not to buy at auction, so I will probably wait for the agent to list the property then go in with an offer and see where that leads too. Who knows…?
Regards,
OziGenerally sopeaking though for an agent to earn their commission they have to be the “effective cause of sale”. As in your case you were the cause of the sale by approaching the owner/vendor yourself, they have no real entitlement to commission (unless you purchase at auction.)
My recomendation to you is this for future purchases – Front with an offer. If offer is accepted buy property. If offer is refused/declined query the vendor why? It may be they have been high balled by an agent. If this is the case find out who the agent was. Then track down a past sales history (6 months should suffice & is available through RP Data or similar) of their listings – Listed Price vs Actual Sale. Show this to the owner/vendor use the average or median differential to knock down their price. Then calculate their commission on the price subtract that and do the deal if the figures stack up. The vendor cannot argue or claim it is unfair they have the evidence in front of them. If they still won’t play ball walk…
Stuart Milne
Non-Conforming Specialist
READY Mortgages
http://www.readymortgages.com.au
[email protected]
Mob: 0404 056 055
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