Hello everyone,
We have a property that would suit the first home buyer market. We are not necessarily thinking about selling it as it is well and truly positively geared. However, we are always strategising and throwing the numbers up.
The property has been a rental now for about 8 years. It needs a renovation. New kitchen, bathroom, floor coverings and paint inside and out at least. Garden could probably do with a makeover too.Sometimes I think that there are a shortage of these sort of properties on the market, and that everything has already been renovated by someone looking to make a profit. At what point do you think there becomes more demand for unrenovated property than there is for renovated? I see some renovated properties on the market where someone has done something very bold, like painted a deep aquamarine feature wall, or deep crimson or something, and I think that details like that are likely to turn some people off a property. Is the property better off as a blank canvas?
Perhaps we should sell while this mini FHOG boom is going, but then what do we do with the money? That is the main reason not to sell. We don't have any other real debt. We'd come out with about $100K cash. Then what?
It seems that between FHO's and renovators, there is a fair market for solid properties in need of a reno. We are not in a position to renovate the property ourselves, but could pay someone else if that seemed like the sensible thing to do. Any feedback?
SI recently went to bid at an auction for a property which needed a total renovation, hadnt been touched since built 40-50 years ago. It was a deceased estate and I was expecting it to sell for a price that would have allowed the 50k renovation required and a profit margin for the time and effort, as well as the time it couldnt be lived in while the work is carried out.
I was surprised that the property still went for $680k (I was expecting the renovated apartment to go for low 700s). There was no margin in it at all, even if you hadn't had to pay the stamp duty and other closing costs.
There are some price brackets where it is much easier to sell unrenovated due to crazy government grants. If it would be worth $550k to $600k renovated and the renovations would cost $50k, it is worth more to a first home buyer unrenovated as it will save approx $11k in stamp duty.
I think there is also an "emotion" factor when people go to bid on a house. Some people just want particular house that badly that they are willing to pay almost any price to get it even if they know they are paying too much. From my experience in going to a fair few auctions over the past few months it is typically the houses that are on nice quiet and attractive streets, in desiraeable suburbs that have transport, schools and shopping nearby that fetch top dollar. This is regardless of whether a property is renovated or not. If the property meets all the other criteria there will be a lots of willing renovators to bring the property up to scratch.
I personally think the key to a good investment is spotting a property that has heaps of growth potential, perhaps something that other prospective buyers may have missed.
SHales, with the house you have mentioned above, I would ask myself whether you think the street, the suburb, and the nearby amenities are enough to get you a good price. If you're not in a trendy or in-demand suburb then a renovation may help attract buyers have a bit more money to spend.
thanks both for your comments.
The property I am talking about is in an inexpensive area popular with young families and people who want to live a little bit out of the main town (Toowoomba). I see it as prime FHO ground, which is why I'm toying with the idea of selling it now, in this overheated FHO market. Perhaps I should talk to my favourite agent in the area.
If only I knew what to do with the cash. The place is cheap, 3 bed on half acre with good sheds last valued a couple of years ago at $185K. I've seen similar properties on the market now for $220K. We only owe $83K on it. Only trouble is there is a tenant in place with 5 months remaining on the lease, which might affect the ability to sell, and the price. Unless the pm forgot to renew the lease – I should check.
I don't know. Our business is based upon a govt contract which ends next March. We will almost certainly manage to renew the contract, but we need to win an additional contract this May or June to make the business worth continuing with. I'm all undecided about basically everything until I know what is going on with the business.
SSHale, is this house in a new estate or an established area? I assume the house is in an established area which doesn't have many renovated houses. A high number of renovations usually takes place in areas where urban gentrification is taking place and the main factor that is driving up house prices is the fact that the suburb is becoming a more attractive place to live. If your house was renovated do you think it would stand out from the pack more distinctly?
skuz,
There are only about 7 other properties for sale in the area. Some are more modern brick homes, and one is cheaper, renovated but less of a house than mine. I think we already stand out because of the excellent shed space, and the price range being pretty sought after. My only concern would be to ensure street appeal by tidying the front yard, trimming trees etc, I think. Painting could be done cheaply, but I don't want to go to the expense of new kitchen, and seeing as that needs to be done aswell, I thought perhaps leave the lot to a new owner then they can choose their own colours etc. Exisiting paint colour is inoffensive, just has had a few years of tenants in it, but seeing as the house is occupied, flaws in the paintwork are not terribly obvious, and it would be hard to paint with the tenant in place. Perhaps exterior paint would be something to think about, though.
SWhat location is your property in? I am looking at buying in Greenmount at present but have concerns regarding finding a tennant. What has been your experience in the Toowoomba market?
Cheers Oscar
Our property is actually slightly west of Toowoomba, in Kingsthorpe. We have had no trouble in the Toowoomba market. Rental yield, if I bought a property there today, would be lower than I'd like. Watch out for the wrong sort of tenants in housing aimed at lower income. There is quite a noticeable indigenous population, which our PM has instructions to avoid. We have also instructed our PM to only place their top rated tenants in our property, and we are happy to allow a slightly below market rate of rent to get tenants that the PM already knows to be reliable and to look after a property. Our recent lease renewal has a slightly increased rent. I think that areas in Toowoomba close to the university are worth looking at, so is accom handy to the CBD so long as it is not irretrievable daggy. We like the western suburbs of Toowoomba because of their proximity to many employment options such as the two major meat works at Oakey and Cecil Plains, the Army Air Base at Oakey, the industrial estates in Western Toowoomba, and still only about 20 – 30 minutes drive (from Kingsthorpe) to the CBD. So, the Western suburb areas suit our target tenant (blue collar working family). Can't comment on Greenmount itself, but generally, I've found Toowoomba to be a fairly stable town, with lots of employment opportunities, a real country atmosphere and good steady value growth. Capital growth is faster on the coast. Personally, I'd stay away from units in Toowoomba because I believe that the psyche of the town is still very rural and the largest number of people would rather live in a house with a back yard (especially in our target group). I also have a personal dislike for anything which does not include freehold. Good luck.
sSHales wrote:I also have a personal dislike for anything which does not include freehold.s
Shales, strata title, community title and stratum titles are all forms of freehold (crown guarantees the title). However you have closer living quarters & shared rights over the freehold.
Old System is also freehold title without the crown guarantee.
Have you considered the capital gains implications in selling the property? Unless you have to sell, I'd hold on to the property.
Well, since I started this thread two months ago, we have decided to hold onto this property. There seems to be a shortage of better places to put the money.
Cheers
S
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