Hi all,
Im going today to have a look at a property which is i think an absolute steal. Its a 1000sqm property with the land value alone being around $280-300k mark and I could get the property for under 350k. A usual 3×1 in this area, on this size block would be in the vicinity of 4-450k….But heres the catch…
It needs
New kitchen
New bathroom
New toilet
Flooring throughout
(damn the previous tenants must have run a complete muck)Its a 3 bed, 1 bath ex government house I dont know the exact specs of floor plan and size etc but hopefully get details today and i should be able to take my camera in and take a few shots to show exactly how bad the condition is (will the real estate agent not like me doing that- in which case i will try to do it on the sly?)
Anyway anyone have a guess- (complete averages here I am fully aware that it all depends on the size,style etc) of what it would cost to do these types of things. Are we talking 20k, 50k what? For example flooring would cost what per sqm for tiling and carpeting?
I also heard IKEA does good flat pack kitchens, Im willing to try and install the kitchen with my partner and we have always wanted to buy a cheap run down dump and renovate it.
Another thing to consider, is this the right type of market to buy reno-lease (possibly sell). I know its pointless during an upswing, because the house prices are rising anyway?
Any help and tips would be greatly greatly appreciated.
I should add, im pretty motivated and will do as much stuff by myself… though im not a builder or tradie.
Thanks
Joe
I doubt that this property will be suitable for a buy, renovate and resell strategy.
It sounds like the rough numbers on this property are:
Purchase Price: $330k
Stamp Duty/Legals: $12k-$15k
Renovation Costs: $35k (based on suggested 10% of purchase price- this may be a bit light though)
Holding Costs for 6 months at 7%: $12k (I have included 100% of purchase price plus a little bit for legals as you need to count oppurtunity cost of having your deposit invested in in an alternative investment)
Closing costs at 5% of selling price of $425k: $21k
Total Costs: $421kAssuming you sell for $425k whicj is in the middle of where you said that similar houses are selling for then this does not leave you with any profit. It is suggested by many people (Steve McKnight, Elise Parker) that you need to increase the property value by 135% in order to make 10% on a cosmetic renovation, and the numbers you have mentioned will not be able to acheive this.
If however you think you could sell for $450k, or if you could get the property cheaper (maybe for $300k – $310k) then it may be worthwhile. Make sure you do your numbers though and be certain about all the costs and the sales price as mistakes can be expensive.
Look forward to hearing how this project goes if you go ahead with it.
Regards,
LukeJust realised that my number add up to $410k for the total costs- I am still dubious of whether this will be able to make enough of a profit though.
Cheers,
LukeHi Joe,
To make the most out of this, you would need to do a lot of work yourself. Be careful about the romantic lure of renovating though – you get over it really quickly!! The extent of the rennovation really does depend on the state of things. Go ahead a take photos, I can't see why the agent should mind? Then post them, get some ideas and if you are still keen, spend a few hundread dollars to get a builder to go through the place to give you an idea about the cost (even just a rough one) and possibility of doing what you want to do. Given you haven't really done this before, this is probably a good idea.
depending on how far you go, Luke is probably right about 35K being light on. Tiles are expensive, they often cost more to lay than they do to buy! Kitchen and bathrooms are also the most expensive rooms to ronovate. Carpet isn't too bad on price, but wall to wall carpet doesn't impress me. You could consider a foating floor, which is probably middle of the road. Those IKEA kitchens can be alright, but all the bits and pieces can add up. It also depends on the finish you are looking for to get your target price.
Good luck, I hope it goes well.
Hi,
I don't know if you plan to buy reno and hold or sell so I'm not going to go into figures on whether its worth it or not, but I agree the romance can soon leave if a few hurdles come up which can have a cost blow out.In saying that if your set on going ahead I would be very specific what you want to do. It would also seem you will need to paint the place and when you do this usually the power / light switches look shi% and are also best to replace so all looks new. What I'm trying to say is look at each room in turn and jot down what is to be done and what is to be replaced, this includes the above rooms, to save $$$ don't go changing the plumbing within reason in the kitchen, bathroom etc this will help keep the cost down. When going around measure the bathroom and kitchen so you can contact cabinetmakers etc and get estimates.
At the end add them all up and add say 5% for buffer.
This is a very basic approach and there are lots to consider before you take the plunge. Of course it can be very rewarding to turn a dump into a diamond (so to speak).
This may give you some prices as I have listed mine on my reno its on the last page https://www.propertyinvesting.com/forums/property-investing/value-adding/4332210
Thanks
BrianWell I disagree with Luke. I've done reno's like this with great results.
If it takes you 6 months and costs you $35K you need to stop looking at houses and do something else.
Ok how much of the work do you plan on doing yourself. This makes a HUGE difference.
My last reno was new kitchen, bathroom, polished floorboards with carpet in he bedrooms. Paint throughout, including doors, archs etc. Took 6 weeks and cost $18K. We did everything except the bathroom and polishing the floors and laying the carpet.
I take you mean new carpet/ polish floors when you say new flooring (not actually replacing the floor).
Buy, reno and sell in that price range is difficult but not impossible. $350K + $13K stamp duty + $2K legals + $20K reno + holding $2K = $387K Now if a usual one is $400-450 there's a small to good margin. Not wonderful for selling at the lower end. I'm assuming the $400K ones wouldn't have new bathrooms and kitchens. The price will obviously reflect how good a job you do also. But keeping it as a rental should give you a good yield.
There shouldn't be a problem with taking photos.
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