Hey Everyone,
I have been looking at a villa in the Perth Suburb of Mount Lawley.
The average median house price for Mt Lawley this year is $912 500. The suburb is 5kms from the Perth CBD, has a train line running through to the CBD, a number of Primary and public high schools in the suburb and a couple of private schools in neighbouring suburbs.The villa is in small complex of 6 with no strata fees. The complex is quite run down but has plenty of potential. The complex is well designed and has plenty of lush trees with a number of new homes surrounding the complex.
The villa is a 2×1 with the toilet seperated from the bathroom and also a seperate laundry
The owner is asking $310 000 so hoping to purchse for between $280 – $290k wouldnt go any higher then $290k
Now my budget is $325 so I would have money left over for renos. The outisde needs a new paint job and also needs a new kitchen. Bathroom is ok for now. My current nextdoor neighbour is a handyman and built a second storey on to his house by himself so could use him for most of the work at a discounted price. Oh and I am able to do the above without consulting any of the owners in the complex as long as the colour cheme for the outside isnt to different to the other houses
My main question is. Is there any point renovating a villa if the rest of the villas in the complex are run down?
Once renovated the villa would rent for about $350 a week
I will live in the house for 6 – 12 months then rent it out and move back home to start saving for a PPOR
Thanks for your help!
Have just found out there is a levy of $750 per owner p.a for the next 2 years to pay for the rendering of the whole complex in 24 months
Hi Howardcm,
Thanks for making your post.
I'm not a great fan of doing a value add project on a unit in a complex, as external visual appeal contributes significantly to the emotion of the target buyer.
For instance, if you reno the villa then you are probably adding value to the unrenovated ones as much as your own, as you increase their quality by association.
Furthermore, a project I was involved in taught an incredibly valuable lesson. And that is that it is almost pointless to do the inside of a property if the outside remains ugly.
In this case we spend 85% of the budget doing the inside of six units, and the remaining 15% on a basic upgrade to the outside.
The problem was, people drove up, couldn't get past the ugly exterior, and then kept driving!
Some feedback on your deal then:
1. The numbers look tight; purchase for $290k; $15k for closing costs; $20k for renos… that brings it up to market. Then, if you sell, $10k in sales commission and advertising.
You need to look at comparative sales to see what similar renovated dwellings would sell for, but gut feel tells me the deal is marginal.
2. That said, if you qualify for the FHOG, then $14,000 + some potential stamp duty savings may make it sweeter.
3. I'm not a big advocate of renovating then renting, since a lot of the gloss of the renovation can be lost when tenants move in. That is, the property has maximum appeal just after the reno is complete and everything looks clean and new.
4. Rental return at $350 p/w is around 6%. Assuming an 80% loan at 8% interest, the deal will be negative cashflow. This means that your profit will have to funded by growth, and so you need to ask is the villa a good growth property?
Hope this has helped.
Cheers,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hey Steve,
Thanks for your reply!
I will be using the shared equity scheme available in WA so the loan will be 65%. 20% will be government equity and 15% will be my own deposit.
I can see your point about the outside of the villa being unattractive bringing down the price. I'm meeting with the agent in a couple of days so will ask if the complex is having an upgrade in the near future and if so will wait until then to think about doing any renos
Thanks again
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