Brisbane North - Purchase and Renovation

Discussion in 'Adding Value' started by Tonibell, 30th Dec, 2013.

  1. Tonibell

    Tonibell Member

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    After gaining a lot of assistance from the knowledge and recommendations from Somersoft members - both from the threads and directly we thought we would share our journey of purchasing and renovating interstate.

    It seems there are a lot of members looking at Brisbane from elsewhere so hopefully it will be of assistance to them - but we are also hoping to benefit from some input on the challenges we will face.

    A bit of background, after years of having two heavily negatively geared properties in Sydney we stumbled upon a magazine article in early 2012 on the cash flow benefits of granny flats. We then quickly moved to make both properties dual occupancy and they are now both close to neutrally geared. During this process we discovered Somersoft and directly as a result purchased another property in Western Sydney and put a granny flat on that during 2013.

    We were then very much in land tax territory - so thought anything else would need to be interstate. After reading all the predictions and interest in Brisbane we decided to look there with the following criteria :

    - needs renovation (we always look for immediate sweat equity).
    - capable of being cash flow neutral quickly.
    - in 10km radius of CBD (for CG and also good tennants).
    - good land content (to improve potential CG).

    We found the yields in Brisbane were lower than expected and thought we may need to broaden the search area to place like Logan. After a few months of searching we came across a place at Enoggera that looked like it might meet all our criteria - but as it was going to auction we were not sure.

    A trip was planned for auction day - but we also had a number of other open houses scheduled as well. In the end we were sucessful at the auction and purchased a run-down "3 unit block" at Enoggera on a 780m2 battle axe. It is actually like a raised large house with 3 x two bedroom units but it was built that way in perhaps the 1950s - but there is some confusion with the zoning.

    There is a lot of work to do on it but we are hoping to achieve something like a 6.5% gross yield at the end of the project. A lot more details to add - but that might do for a start.
     
  2. MichaelPark

    MichaelPark Member

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    I'd love to see some shots of the property and then progression shots as you transform it.

    Good luck, I'll be monitoring for some useful tips :)
     
  3. Tonibell

    Tonibell Member

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    Attached is a photo from the front driveway and one from the backyard.
     

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  4. Tonibell

    Tonibell Member

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    This is the bathroom and kitchen from the middle unit - the other two are in similar condition.
     

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  5. eggnog

    eggnog Member

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    looks like an awesome project. wouldn't mind doing one myself. is it possible to post numbers - purchase price, estimated renovation costs, estimated end value, rent, etc
     
  6. Tonibell

    Tonibell Member

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    It is definitely going to be a big challenge to take on remotely - we are starting to scope things out and build up a support team at the moment.

    The numbers we are working on are :

    Total Purchase Costs $660K (includes stamp duty, legal, inspections etc).
    Estimated Renovation $85K
    Estimated Rental $975 per week

    The above are high level estimates at the moment - the median rent for a two bedroom unit is around $370 per week so we have some wiggle room if we need to spend a bit more to get a better result. We had Hotspace Consultants prepare a Renovation Action Plan that has a higher renovation spend but would also achieve a better rental result. We are absorbing that at the moment and deciding how to proceed.

    No idea on the end value at the moment, we think it was a good buy for our purposes (land value of $620K according to Valuer General) but it would have a limited market for resale. We have a hazy idea that it might be able to be strata titled which would add a lot of value - but have not investigated that at all. The general plan is to progressively add value to it so that it becomes an easy hold.
     
  7. Tonibell

    Tonibell Member

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    So far we have done the following :

    - settled using Andrew Wheldon Solictors.
    - building and pest by The Inspectors.
    - Renovation Action Plan by Hotspace Consultants.
    - had stumping rectified to level floor ($1K).
    - got multiple quotes for asbestos removal, painting and kitchens.
    - waiting for quotes for electrical and plumbing replacement.
    - removed kitchen and flooring from two vacant apartments.

    We got some great recommendations from Wylie to get us going , which was greatly appreciated - all the tradesman speak highly of her.

    It is a tough time of year to get trades to work - but we are looking to get the places done and rented before the end of February.

    We probably will not remove the asbestos shadow line as recommended in the pest report because it is too expensive and will just get a termite monitoring program. There is minor past termite damage which apparently is a common problem in Brisbane.

    The bathrooms have an asbestos waterproof sheeting in them which increases the expense to a do a bathroom refit. We are looking at covering it with a paint or board and resurfacing the bath and replacing the vanity and tapware. Does anyone have any experience or thoughts on painting over the asbestos sheeting ?

    We also have a reasonable amount of carpentry type work (replacing doors, fixing steps and rails etc). If anyone has recommended tradesman in this are it would be appreciated.

    We are also looking for a good floor sander to do the three apartments.

    Appreciate it if anyone can help out.
     
  8. eggnog

    eggnog Member

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    Thanks for the update. Looks like your fully stuck into things. Didn't waste much time :)
    Is it possible to describe the events you went through / timeline of how you purchased the property as I would love to tackle something like this in the near future. But I would instead live in 1 unit to renovate and rent out the rest. Then just move between units as their leases expire.
     
  9. Tonibell

    Tonibell Member

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    There is a lot of efficiency- hence savings -in doing all of the units at the same time. For us this meant that is was worthwhile providing an incentive for the existing tennants to leave. We are staying on site in a basic form but still doing all three at once. But how you do it would come down to your circumstances.

    In terms of the search it came down to the differential costs beween Brisbane and the other capital cities. Where it "should" be about 10-15% behind Sydney (based on salaries, history etc) it seems to be about 40% behind for both buying and renting. The cost difference between inner and outer suburbs also does not seem to be as great in Brisbane - so that steered us towards the inner suburbs.

    So from there we were looking at all the things you would like in an investment in Sydney but could now no longer afford (eg close to CBD, trains, airport, good roads, schools but with good land and dual/multi occupancy potential). We liked a lot of suburbs on the Ferny Grove train line but did not like the potential yields.

    When we came across this place it seemed to fit our criteria but being an auction meant we really did not know the selling price and the agent indications were more than we were prepared to pay. We attended auction day with no real expectations and was surprised to find there was really only other mildly interested party (again very different from Sydney) - as a result the numbers stacked up and we have a lot of work on our hands.
     
  10. ChrisA1

    ChrisA1 Member

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    Thanks for bringing us on your journey. I'm sure you'll have a captive audience.

    Did Hotspace quote you the $85K for renos (or thereabouts - you said they were a little higher)? and is this for others to do all the reno work, or are you putting in some hours/effort as well there (that isn't costed into the $85K)?

    Cheers,
     
  11. coastal

    coastal Member

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    Love it!!!

    Is a builder project managing the reno and tradies running through the builder or are you guys owner buildering it?
     
  12. Tonibell

    Tonibell Member

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    We used Hotspace as consultants for their ideas on design and what we should be focusing on and doing. It was money really well spent as Jane brought a real investor's perspective to things. Previously we have done renovations that evolve as we go through it - as this is largely being done remotely we wanted very clear plans. We also wanted to get things done quickly.

    Hotspace did not provide a quote but a plan with cost estimates - which is quite helpful. The $85K is quite a bit less than their estimate - but is what we want to spend - so some things will be Phase 2.

    The intention is to use trades for most things - but to do some demolition and bit and pieces ourselves where possible.
     
  13. Tonibell

    Tonibell Member

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    Looking at engaging trades directly.
     
  14. Tonibell

    Tonibell Member

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    January has largely been spent getting quotes and planning.

    We now have the following trades ready to go :

    - carpenter repairing walls and floors and replacing all doors.
    - kitchen designed and cabinets being made.
    - plumber has tapped off everything.
    - electrician to get things ready for painting.
    - painter for inside, outside and possibly roof.
    - floor sander

    We gutted the apartments ourselves and will do bits and pieces.

    The (future) managing agent has been great with recommendations.

    We should be a bit over the initial budget estimate.
     
    Last edited: 31st Jan, 2014
  15. zimby

    zimby Member

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    Very Interesting.
    Please continue to update this thread :)
     
  16. wylie

    wylie Member

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    Did you end up using any of our contacts?
     
  17. Jane - Hotspace

    Jane - Hotspace Member

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    Would love to see some progress photos Tonibell!

    Glad it's progressing well. It's a fantastic project you have there.

    What did you decide to do with the bathroom wall sheeting?
     
  18. Tonibell

    Tonibell Member

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    Hi Wylie,

    We are using Carl the plumber, Wayne the pest guy and Tom for the kitchen - all of which you recommended either directly or elsewhere on the forum. The electrician and painter we were keen to use but they were not available in the timeframe we needed and we went with a carpenter/handyman from another source after getting multiple quotes. Also we decided not to go ahead with the asbestos removal at this stage.

    We got three quotes on everything as they were all significant amounts - cannot see any difference between Sydney and Brisbane for tradies.

    Your contacts were invaluable and we let them know how we found them - it really helps when they know they have been recommended. So thank you.

    Big week ahead !
     
  19. Tonibell

    Tonibell Member

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    Hi Jane - great to hear from you.

    We are trying to stay true to the Renovation Action Plan you provided. It is a great reference document and we have multiple copies on site (without the estimated costs of course !). We are compromising in a few areas (eg doors and handles) as the reality of the costs kick in.

    We are intending to do a patch and paint on the bathroom walls. The painter is very experienced and assures us he has just the product to have that asbestos sheeting looking great and performing well.

    At the moment it is just gutted and the (minor) re-stumping done. No photos at the moment - but probably next week we should see some progress and some photos.
     
  20. Jane - Hotspace

    Jane - Hotspace Member

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    Sounds good. Glad you are keeping on top of your budget as the actual quotes come in! With older properties as you know costs can tend to escalate without warning.

    I would love to swing by and have a look at the finished project. Please keep me in the loop. Or as you know I am available to do a site visit on your behalf if you can't get away from Sydney.

    I'm particularly interested in how the painter deals with the asbestos in the bathroom; especially the metal bead/strip between the paneling. Is he going to remove the bead and then replace with new once the Asbestos is painted?