Buy -> cosmetic Reno -> revalue

[bez23]

Hi guys,

Lets say you buy a property under market value, do a quick cosmetic renovation and revalue in short period of time (less than 6 months) to release equity. If the market hasn't moved in the short period, wouldn't the valuation come in as price you paid for + Reno costs, ie you haven't built any equity ?

I keep hearing stories about People like Nathan birches who are able to spend less than 10k cosmetic Reno and get it revalued a lot more than that. How are they doing it?

Cosmetic Reno = paint, kitchen , bathroom etc

Cheers
Bez

 

[vaughan]

Nathan has his own team of tradies so can do everything for the best price. I doubt he's done a small job like this for years.

The hardest part of executing your plan is step 1: buy under market value. Everybody else it trying to do it too.

 

[Rolf Latham]

We have some clients that do this sort of thing with varying levels of success.

The primary difference looks to be being able to spot the diamond in the rough, and buying well.

The Reno is just a smoke and mirrors so the valuers don't play silly, and have a decent reason to value the thing to current market

Ta
Rolf

 

[MrChomp]

Hi Bez,

In theory what you paid for the Reno shouldn't affect the valuation. The valuation should be the current market price. Having said that the valuer so have seen are tough to push when they have access to the price you paid for the house. The way that has worked for us is to really push the Reno with them. I tell them how bad the house was on purchase and how much work and money we have had to pay to get it up to a standard. I drop the figure I'm hoping for a couple of times.

The last one we did late last year at Ipswich - purchased for $150k, spent about 12k on Reno, wanted it valued at $230k (think this is fair), valuer came back at $200k- so figures still worked for us.

I think valuers always aim under so for this quick revalue stuff you need to buy under market and spend Reno dollars well. Otherwise time is the ingredient that valuers will use to justify it.

 

[bez23]

Thanks for quick reply, when I did valuation for my ppor they asked me how much I spent on improvements and basically just increase the equity by the same amount. Should I refuse to tell the, how much was spent ?

Time will definitely help but I want to revalue ASAP to recycle my money for the next project.

 

[Singo]

Thanks for quick reply, when I did valuation for my ppor they asked me how much I spent on improvements and basically just increase the equity by the same amount. Should I refuse to tell the, how much was spent ?

Time will definitely help but I want to revalue ASAP to recycle my money for the next project.

Why don't you say double the amount you spent?

 

[MrChomp]

Why don't you say double the amount you spent?

Yep, I would factor in your wages at $100 per hour for all the time you spent arranging the deal. They are not asking for receipts so don't know how your breaking down 'Reno costs'

 

[Rolf Latham]

Thanks for quick reply, when I did valuation for my ppor they asked me how much I spent on improvements and basically just increase the equity by the same amount. Should I refuse to tell the, how much was spent ?

Time will definitely help but I want to revalue ASAP to recycle my money for the next project.

Another option is to look at moving lenders if u Can get a better val

Ta
Rolf

 

[vaughan]

... when I did valuation for my ppor they asked me how much I spent on improvements and basically just increase the equity by the same amount.

Was this by a certified valuer, or an "appraisal" by a real estate agent? I'd guess that the valuation went from a "reasonable" amount, to a slightly higher "reasonable" amount that's still around the median for the area.

It's when people buy properties for $250k and expect to get them valued at $500k because they put in a $50k kitchen and $50k bathroom and $50k pool and $50k home cinema and fly masons in from Milan to install the marble for the floor...

 

[bez23]

Yep, I would factor in your wages at $100 per hour for all the time you spent arranging the deal. They are not asking for receipts so don't know how your breaking down 'Reno costs'

Cheers might do this, I told the guy the exact amount last time just in case they asked for receipts but I guess they can't demand it.

 

[bez23]

Another option is to look at moving lenders if u Can get a better val

Ta
Rolf

True, I tried getting 3 valuation done last time and 2 of them done by same guy, so that was a bit annoying because I had to pay for it

 

[bez23]

Was this by a certified valuer, or an "appraisal" by a real estate agent? I'd guess that the valuation went from a "reasonable" amount, to a slightly higher "reasonable" amount that's still around the median for the area.

It's when people buy properties for $250k and expect to get them valued at $500k because they put in a $50k kitchen and $50k bathroom and $50k pool and $50k home cinema and fly masons in from Milan to install the marble for the floor...

Certified valuer, real estate agent will always try to tell you more to get business. Besides I dont want to sell any of the properties, just revalue and go from there. Does a real estate valuation influence a certified valuer though?

I'm talking about really reasonable price range, ie bought at 300k when median is 350, spend 10-15 k on it and try to get it revalued at 350k within few months.

 

[travelbug]

It's ridiculous that they are asking how much you spent. You are asking them to value it on what it's worth so that's irrelevant. I've never heard of anyone being asked that. We do most of the work ourselves so our costs are very low. If they asked I'd laugh and say "Oh $100K of course".

Show them some comparable homes in the area and what they sold for. Valuers tend to be a little behind in their prices when areas start to rise.

 

[Truly Exotic]

Ive been asked that many times, I usually just say double what I actually spent, and if they want to add that on, then be my guest,

As for revaluing, generally wait a month or two, and if the renovations are significant, it usually is ok,

obviously it doesnt happen all the time, and you need to shop lenders around,

ive had a property be valued at $0, $60k, and $130k all in the space of two weeks,

wasnt utterly impressed by the first two vals

hence why I dont like valuers

 

[bez23]

OK, I won't be that honest next time the valuer comes around

 

[zimby]

Cosmetic reno's can be heavily influenced by the area.
Value comes when properties are renovated up to average area market value.
Going above Median prices will most likely yield a poor result.

 

[Corey Batt]

Cosmetic reno's can be heavily influenced by the area.
Value comes when properties are renovated up to average area market value.
Going above Median prices will most likely yield a poor result.

That's a very good point.

I specifically target properties below median prices which can be raised to median with a renovation. This gives you a set benchmark and large number of comparables for revaluation, whereas starting at median and renovating can be precarious when valuation is required.