Advice sought.......experienced renovators please!!!!

[Big Tone]

I am looking at a three bed,top floor unit in sydney @$440k (currently waiting for valuer to give me a full valuation)the owner has started the renovation and has completely gutted the unit and I mean completely........there is nothing, no carpets,no kitchen,no toilets,no lights, nothing. For some reason (apparently work commitments) he/she is unable to finish the job,so,as this is my first reno, my question is :-

Given the state of reno required what "rule of thumb" could I use to GUESSTIMATE"return on reno dollars.

EG
Would a $10k kitchen return more than a$4k
Would stainless downlights return more than basic white or even "oyster" type or track fittings
would a ducted A/C system return more than a wall unit in living room EtcEtc
(Iam sure get my drift)

All thoughts and comments are highly appreciated

Big T

 

[evand]

I think it depends on the market you are selling to. The area you are in, the other units in the block and the state of the block itself. Also, consider the final selling price.

You have head the term 'over capitalising a property' right?

You need to consider all of this before you determine how much to spend on the reno (and to what level)

 

[buzzlightyear]

I'll preface my comments by saying that I am a renovator in training

* Are you intending to rent this after completing or sell for profit?
* What do other similar properties have in their inclusions
* If you are going to rent out, what type of tenant (ie age, demographics) would usually be attracted to the area. (If selling, obviously purchaser).
* Is the area changing? eg gentrification
* You'll essentially make your moneyon the reno, when you buy, so buy well (stating the obvious I know)

If you are getting a sworn valuation, maybe you can get an indication from the valuer about renovated properties in the same area are selling for.

REA's are a good source of information about the features that are going to appeal. When I purchased to renovate, I got 3-4 agents in to tell me the features that tenants would look when searching for properties. I listed them all down, and tried to include them in the property update plans.

Some other random thoughts about your comments.

* For the kitchen, I would choose middle of the road finish on the cabinets, but spend the extra money on good appliances (ie Euro brands)
* Units may have small ceiling space, so downlights may not be appropriate eg overheating of transformers in small ceiling space
* Downlights are good to focus lighting on a specific area (ie under cabinets to highlight benchspace) but less effective for general lighting. There is a thread on downlights here
* ceiling heights will impact the type of light fittings that would suit
*if you are spending $1 on your reno, you should try and get $2 back on your valuation
* Don't discount holding costs (ie the time that it takes to complete works
Would you be managing the reno yourself? Depending on the size of the works and your other work commitments, someone to manage the job may be an option.
* Have a buffer because yes everything is more than you expect (labour especially), but you may find that your mind changes on various parts of the reno, which inevitably cost more
* all renovation costs will only be depreciable, so an indication of the rate of depreciation of the various improvements would also assist in determining tax benefits from holding
* Do you have an expert, partner, member of your family or friend that you can bounce ideas off? I have found this to be invaluable. Both in terms of design and technical issues. But you may have better technical knowledge that may not make that as important.

Good luck with it. Its stressful but a great learning experience (finance and property aside)..

 

[fernfurn]

you should be able to buy this project incredibly cheap as there will be very few people who will take on such a massive project. That said, if you are not daunted by even looking at it, a lot of the hard work has been done with the demo out the way. Have they carted away all the rubble etc. as this can add considerable cost to reno, particularly if it has to be carted downstairs barrow/bucket load at a time. You will have to remember that equivalent to building a house, you are at fit out stage, so you are only half way through. Is the electricals there, what about plumbing, these are big costs to add. Did he dismantle walls to get a better floor plan, would you still have to do this, or rebuild new walls, this would entail carpentry, new plaster, cornices, skirtings door frames, doors. door furniture. etc. Some body corporates make you pay to lock off the lifts while you cart stuff upstairs, little costs I know but boy do they add up. Is there a problem wit body corporate that made him stop this. These may be a lot of 'hidden' costs you would have to think of

 

[namtrak]

I appreciate that you have asked for a return per item, but I think it is probably more reasonable to look at the larger picture, rather than the return per item.

With the renos I have done/ and am doing the first thing I look at, even before I buy is how much can I expect to get for the property in its prime. That gives me my margin between purchase price + stamp duty + repayments and sale price when I sell.

Eg. If you purchase for $440,000 plus $20,000 costs plus $15,000 mortgage repayments over six months, and given I would suspect that you are looking at a budget of between $50,000 and $80,000 to do a complete fitout. Will the finished project return more that $550,000? If yes, what profit less CGT is worth the heartache.

Once you get your potential (be realistic) sale price do some homework on what people are getting when they spend that sort of money as a minimum. New kitchen, heating? Ensuite, Parking? etc

This sort of project (someones unfinished job) can be very lucrative - done properly.

Kitchen is your prime target. Primo fittings/appliances is critical. (As an aside, in a lot of cases the cheaper appliances are often the more reliable but dont resell as well, ask a small motor repairer which ones they see the most of....)

In your kitchen concentrate on the triangle between sink, fridge and stove. Drawers under the benches are the new black (cupboards are passe and impractical)

Lighting is also high impact, low cost. Whilst halogen downlights aren't as energy efficient they are generally the most effective given the small footprint.

Can you squeeze in an ensuite? Ensuites are almost a given in new developments now days.

As with the kitchen use primo fittings in the bathrooms.

Another aspect to consider is the environmental awareness of the place. A lot of buyers nowadays are impressed by places with a smaller environmental footprint.

Think twice about using a floating floor, they look good for a while - but the quality is not quite upto scratch in the long term. Being a upper floor unit, a hardwood floor is probably out of the question, so look at good looking tiles in the wet areas and hard wearing carpets everywhere else.

Cheers and best of luck

 

[Glenn]

Hi Big Tone,

You are lucky to find a renovator special in this condition! All the hard work has been done....do you know how hard it is to demolish an entire interior and actually get rid of it?....down stairs as well!

Fitting out a unit in this sort of condition is one of the few times that I would engage the services of an interior designer to assist with kitchen and bathroom layouts, finish types and finish colours. Just make sure they have a reasonable budget to work to and let them know your intentions with the property, whether it be to sell or rent out...some finishes work better in a rental than others.

The 2 main reasons I like this kind of reno are:

1. No maintenance calls for 7 years
2. I am much more likely to get a better quality of tenant

Glenn