Have bought 2 IP's this year needing reno B4 renting. Fundamentals good – great areas, ammenities, high rental demand etc. Both properties were painted inside and out, floorboards polished, new (second hand) kitchen put in one – nothing structural, but they both looked way different when we'd finished. Did almost all the work ourselves – took 9 weeks and 7 weeks respectively – and spent about $12,000 per property.
It's worked well because they both attracted tenants within a day of being advertised, and rents are much higher than they would have been without reno, but when we had them re-valued, they had only moved by $11,00 and $13,000 – almost exactly what we had spent on them, with none added whatsoever for our total of 16 weeks labour.
It hasn't been a disaster because our primary aim was to make them rentable, but I'm wondering how, exactly, people go about manufacturing capital growth. We definitely didn't add any 'wow' factor – just brought them up to the point where they looked fresh and clean – could that be why? Or is it a timing of the market thing?
Would be interested to hear any views, or any advice for furture renos.You didn't mention the front garden. Landscaping – What the front of the property looks like.
You didn't mention light fittings – painting of ceiling ?
A Carport can add value or an outdoor area like a pergola. or paved area outiside .
Door knobs
Tap fittings
Drawer handles
Light Fittings
bathroom and Kitchen are important areas that have a huge impact !I think at the moment it will be hard to increase the value as valuers are being conservative due to financial crisis.
I just had an evaporative cooler and central heating installed and the council valuation is 40k higher but I am not sure I would get the extra 40k or not if sold.You may have to buy a really bad place that the condition is putting off buyers to get a cheaper property that can then have value added to it by renovation.
Thanks Duckster. Did most of what you mentioned – tidied up front, added a garden in one, took down 6 trees making the other look dark and gloomy. New kitchen in one (second hand one we had cut down and fitted in,) 'freshen up' of the other kitchen (handles, new stove.) New tiles, bath, shower and vanity in one. New light fittings in both. New fencing. Nothing structural like a pergola, but they both definitely looked a thousand times better than when we bought them, and were more functionable and liveable. It's not like the renos didn't add ANY value – it's just that they didn't add any over and above what we spent, and if we'd actually paid for labour, we would have been way behind. I'm curious to know – has anyone else completed renovations this year, and if so, did you see the value increase??
Hi Morgan,
My wife and I completed a simple low-budget reno in July 09 on a 2 BR unit we had purchased in May 09. One thing we read and subsequently found to be very true is that we made our profit when we purchased. In the midst of the mad rush that was the First Home Buyer Boost, we bought the unit at $375K, according to council valuation, while similar conditioned units at the time were selling for $390K – $400K.
Based on this conservative estimate, our profit was already $15K. But the story did not end there.
After spending $10K on the reno, we found out that another similar conditioned unit (equal in standard to our post-reno'ed IP) was sold in Sept 09 for around $420K. So, our IP could now be conservatively valued at $420K; extending our equity gain from $15K to $45K.
The low-budget reno help to attract good tenants quicker and increase rental yield, but it was buying cheaply in the midst of the mad rush of FHBs that helped with the equity gain. The stage of the property market and spending time in the market were important factors too.
Regards
Daniel Leei did two places over the last year, one in Clifton springs, now for sale on (www.realestate.com.au) and the other in ocean grove. the Clifton springs property value jumped from 360 to 480 but for considerable outlay as it was a new build, and the ocean grove place went from 530 to 620 for a 10k spend there. i guess you have to look at where your IP is located and do the math…and watch the market.
HI Morgan,
I agree very much so with Daniel with the statement that you make your money in the buy. One thing that I have found helps with this is purchasing properties that are dirty and not kept well, the last house we bought had very dirty tenants in it, the house actually smelt so bad as it was clearly not cleaned, I’m not saying it was enjoyable, but I do find that if you look at a house that needs cosmetic work done to it but has been kept immaculately you will pay a lot more for the house than one that needs the same work done to it that has not been kept well!
There are also things that you should definitely look for when buying that will help with your valuations, min 3 bedroom, 2 bathrooms if possible, car space/s.
Sounds like you have done well with having the property tenanted so quickly.
As mentioned you do make your profit when you buy. Cosmetic changes in the right area will attract an equity increase, however it can be very difficult to get a 2:1 equity yeild. When we do reno's there are two areas we look at, equity increase and rental yeild.
For increase rent and quicker leases, we look at cosmetic changes- Paint, floorcoverings, lighting, bathroom and kitchen.
To get a higher valuation you often need to change your market bracket- ie if you have a 3 bed 1 bath house, and convert to a 4 bed 2 bath house, you are now in a totally different market, Sometimes these can be very simple conversions (Convert a garage and install a carport).
Whatever tack you take, there is one rule as mentioned earlier- you make your profit when you buyYou did nothing inherently wrong, just renovated for the one market, and you got the houses tenanted quickly. Well done!
wish you all the best with your next project
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