I'm new to learning about property investing and currently looking for our first house. On the weekend we looked at a house which even the real estate agent admitted had been over-capitalised. The price was in line with houses in the area which had not been updated or been over-capitalised.
The old 3 bedroom weather-board house had two extensions put on, one adding an extra living room, other adding a larger main bedroom with ensuite and making the smallest original bedroom into a study leading into the main bedroom. The house is now a 3 bedder, study, 2 bath, 2 living rooms. The kitchen however was tiny and unrenovated, as was the main bathroom. The house generally (except for the new main bedroom and ensuite) needs a general refresh.
Would you consider this a good investment? Would giving it a quick refresh; kitchen, bathroom, paint, floors, lights and fixtures add value or would it still just be an over-capitalised property?
If it’s valued around the same as the other properties and comes with the extra living space – then it sounds good. How was the workmanship on the extensions? Do they look professional? Can that study be converted into a 4th bedroom? This could result in higher rent.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Overcapitalised means: land value + depreciated value of improvements > realisable value of the property. Is this the case if the property requires a great deal of work?
As pointed out above, does the layout lend itself to converting one of the lounges or study into a bedroom? Work out what it would cost to update the house (ie kitchen, painting, 4th bedroom, outstanding R&M etc) and whether this would fit the market ie instant increase in equity/better rental values.
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