We are about to settle on our first investment property next week. We are renting out the PPOR along with this one and have been shopping around for the best deal.
Agent 1: 8.5% management fee and 1 week letting fee (this we negotiated from 2 wks to 1 wk)
Agent 2: 7.7% management fee and 2 wk letting feeAll other fee are similar. which one do you guys think is the best deal?
Also the agents say we could get 330$ rental without doing anything. the kitchen is pretty old and was thinking of putting in a $4000 ikea kitchen. The agent says this will increase the rent to 350$. Is it worth it go do the reno? cheers
Hi Jnb,
Don't forget you will most likely need more funds for the kitchen, for example – applainces, plumbing, tiling, electrical. The $4000 IKEA kitchen is more likely to be around $6500. Still worth it in the long run
So you reckon its still worth spending 6500 if we can get 80$ extra rent each month? thanx Jo
I've always put new kitchens in my IP's. I am a cabinet maker so for me doesn't cost me much at all but the first thing people want to see is the kitchen and bathroom. Doesn't have to be flash, just clean and practical.
At the end of the day it might even attract a better tenant.
Hi jnb,
I was just at a seminar on the weekend with Cherie Barber, the 'Renovation Queen" and she said that you should spend 2% of the purchase price on renovating the kitchen. Yes 2%, it's hard to believe, but this is the formula that she follows for success.
Good Luck
Kathryn
Our property purchase price is 310000. We bought it 25k under market price. So 6.5k is around 2%. thanx for the info Kathryn. Yes Joe you are right, kitchen is always the focal point. Thanx
Shop around for local kitchen suppliers. You'll do better than IKEA. Many install also.
Rip the old one out yourself. You don't need to buy expensive appliances.
If it's a basic size kitchen $6.5K would be a maximum you'd need to spend in total. Don't forget the depreciation report.
not only will you get more $ from rent having a decent kitchen but you'll also increase the value of the property.
There are lots of places that sell flat pack kitchens these days including bunnings, do your research & shop around. Depending on the shape of the kitchen you require & how handy you are, there are often kitchens available at auction clearance houses. Another alternative is to buy a good quality 2nd hand kitchen, often they are in perfect order, just not the right colour/style etc.
Hi
In regards to choosing a property manager, choose by referral if you can
the difference between paying 7.7 % and 8.5 % is only about $3 per week
Choose your property manager wisely as they can dramatically affect the returns you get
Instead of buying a whole new kitchen, see if you can just cosmetically upgrade it, new cupboard doors, or a lick of paint, Bunnings sell fantastic timber looking bench tops for $99
Even new handles can improve the look
For an extra $80 a week i would definitely do a $6500 reno. It is a 64% return on investment. $80 * 52 / $6500 equals 0.64 which means 64%. Even factoring in the cost of the vacancy and readvertising it will still be a great return. In my opinion if you are.going to go to the effort of value adding, you do want to reserve your money for smash it out of the ballpark projects. For less than 25% return i would think twice
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Your initial post had the rent increase from $330 to $350, and then later on you say it increases by $80 per week?
Taking the lower number of $20 per week I would still say it is worth it. It may take an extra 6 years to redeem the added income in rent terms, but the overall value of the property should rise by at least $6,500, so essentially you have made an immediate return on the property in the form of equity.
Of course it always depends on the current state of the kitchen, if it is a decent looking kitchen and replacing it with a flat pack or equivalent, then the added cost would not be realised in the capital gain of the property, but of course if the kitchen definitely needs rework, then every dollar spent will be worth it.
I would go for the renting anytime since it involves no extra capital usage and you might end up having a better renter.
Do you have to put in a new kitchen? Can you reface the existing with new doors, handles – maybe a new sink and splashback? It all depends on the state of the existing kitchen but if this option is available, you could get away with spending a lot less money.
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]
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