Buy reno flip

An agent rang me the other day and I looked at a property in Slacks Creek Qld. A number of agents are aware of what I am looking for. This one fits the bill.

Anyway looked at the place it needs a lot of work, the agent gave me the building and pest report and I spoke with the Inspector and no great issues that I did not pick when I was there. He just had a camera so I got a better understanding of the hidden damage.

At this stage I am plan is buy reno and flip. If I do end up holding it will be just under 8% yeild.

The property is in a nice location with equal quality homes the current market has properties in the area between $327000 - $370000. land value is $220000from the search I did.

I have a fair chance of securing this property at $175000 due to the damage.

My figures
Buy $175000
Stamp duty $6100
Legals $1500
Reno $60000
Holding costs $3300
Agent fees $12000

Total $257900

If I work on selling for $330000 leaves $72100
Which a bit of 25% over costs less tax of course.

The reno cost is based on what the inspector had estimated $65000 and mine was $50000 to $55000 so for the sake of working things out just put $60000. I am in middle of working the reno cost out in full detail.

I am aware if it sells for say $300000 its just under 20% however I am confident it will market and sell for $330000 at least. Agent indicated $350000if fixed up to its original glory, so to speak.

So asking some opinions here if what I am considering seems sound or i'm off the tracks. Is there other costs I have missed?

Of course the other hurdle is would need broker asap as I was not really prepared at this stage for this (bugger).

Brian
 
Is the property so badly damaged that lenders would class it as uninhabitable or require a lot lower LVR? If you had to put in say 30% deposit would the funds to do the reno still be available?
 
dont know much but all i have to say is dont expect to sell it straight away and get top dollar
theres no point relying on it selling for a 330k in the first week if it ends up selling for 300k in 2 months time and has blown all your budget out of proportions
as long as you work out the bare minimum you need/ want from it and atleast know you can get that anything extra is the cream on the cake
 
An agent rang me the other day and I looked at a property in Slacks Creek Qld. A number of agents are aware of what I am looking for. This one fits the bill.

Anyway looked at the place it needs a lot of work, the agent gave me the building and pest report and I spoke with the Inspector and no great issues that I did not pick when I was there. He just had a camera so I got a better understanding of the hidden damage.

At this stage I am plan is buy reno and flip. If I do end up holding it will be just under 8% yeild.

The property is in a nice location with equal quality homes the current market has properties in the area between $327000 - $370000. land value is $220000from the search I did.

I have a fair chance of securing this property at $175000 due to the damage.

My figures
Buy $175000
Stamp duty $6100
Legals $1500
Reno $60000
Holding costs $3300
Agent fees $12000

Total $257900

If I work on selling for $330000 leaves $72100
Which a bit of 25% over costs less tax of course.

The reno cost is based on what the inspector had estimated $65000 and mine was $50000 to $55000 so for the sake of working things out just put $60000. I am in middle of working the reno cost out in full detail.

I am aware if it sells for say $300000 its just under 20% however I am confident it will market and sell for $330000 at least. Agent indicated $350000if fixed up to its original glory, so to speak.

So asking some opinions here if what I am considering seems sound or i'm off the tracks. Is there other costs I have missed?

Of course the other hurdle is would need broker asap as I was not really prepared at this stage for this (bugger).

Brian

8 % is a good backstop position

If u dont have the cash to purchase, or set it up so no val is required, you may run into issues with lenders wanting to fund the purchase.

In addition, in either case, it would be good to have the cash to do the build if doing "owner Build". Even as a licensed builder they get funny with this stuff.

ta
rolf
 
I think you should just buy, reno, hold personally.

No CGT and all the repairs can be depreciated.

I'll even buy it if you don't - but will try to get it for 150k:p
 
Thanks for the replies.

JWR - If I can get it for $150000 I will do that trust me (less if possible) :D, and would be very happy about that. Its not a big issue if I Buy Reno and Hold which is my preferred method, however I felt selling on completion of this one will generate some cash to move to other projects. Yes I am aware of the CGT. I cannot write the reno off but will be able to depreciate the costs so is a capital expense so only 2.5% can only be claimed about $5800 worth.

Rolf - Yes with 8% yeild was a good back drop. I would prefer to put 20% down and borrow the rest but can put 40% down and borrow the rest if required and still have the funds to renovate. I would do via my builders license and would do a full scale budget of costs for the bank if required. I found that out with my last reno was best to buy reno and reval and draw equity out to 80%.

Bman - I don't expect it to sell straight away I have allowed 6 mth from reno to sale mind you my holding costs are out and would need another $5500. Worked it out on the wrong figure. I agree however If after I am complete and market and get no serious offers in 2 mth on the market I would just revert to holding.

DaveMSydney - You can live in it its clean tidy and all amenities work and the structure is not going to fall down. The work involved is both bathrooms, laundry, new legal pool fencing, a fair bit of structure work, re gyprock some areas, tiling, carpets, painting, bit of roof work nothing major and drainage and some landscaping. It is habitable no issues there.

At least it gives me something to do while watching the footy.

Brian
 
Geez NBS - that description of the house sounds like the one I just bought! I got a scare and thought you somehow got it from me after settlement!

If its habitable as is wouldn't it be better to not spend 60k (just 5k painting, cleaning, minor repairs) and rent it out - then using the $55k for another project?

Would you mind PM'ing me the link if you are comfortable? I have no idea with renos so would not buy it.
 
It would be better of course to just spend $5000 however its not that simple.

When I say its habitable I would live in it no problems but I could / would not put a tenant in it as it is. The place needs a fair amount of structural work and by this I mean pulling wall sheets off and rebuild some walls etc and its NOT one for the faint hearted. For me I call it simple work however for many they would just look at it and it would just sent shivers up the spine :) because I'm looking at that sort of work may as well do the bathrooms as they need a good refit.

Doing the figures today I have the work costed out at $50000 this has allowed $5000 for the opps factor. There are also areas with in the workings I know I can save $$ but I usually price a bit more so am covered for the unknown and this is on such project "unknown".

Also a legal pool fence is a MUST.

I can send the link

Brian
 
Not exactly Invstor. To be honest when I was there I never really had a serious look as the boundry fence was the pool fencing and it was later the agent said part of the fence needed work. I just took it at this stage to put a new fence in for pricing.

When I have another look I will check everything out in more detail.

Before entering a contract

If no pool safety certificate is in effect, before entering into a contract of sale for a property with a pool, the seller must give the prospective purchaser a Notice of no pool safety certificate - form 36 ( 59 KB).

Form 36 advises that the pool may not comply and the steps the purchaser or pool owner must take to ensure the pool complies. The form is also intended to help prospective purchasers make a more informed decision about purchasing the property.

Before settlement

If a pool safety certificate is in effect before settlement, the seller must give the buyer a copy of the certificate.

If a pool safety certificate is not in effect before settlement, the owner must give the purchaser a Notice of no pool safety certificate - Form 36 with the settlement date on the form. A copy of the form must also be sent to the department. For shared pools, a copy must also be given to the body corporate.

After settlement

For non-shared pools, if a certificate is not in effect before settlement, the purchaser has 90 days from settlement to obtain a pool safety certificate.

For shared pools, if a pool safety certificate is not in effect before settlement, the pool owner, usually the body corporate, has 90 days from settlement to obtain a pool safety certificate. However, for settlements occurring on or before 1 September 2012, a phase in period applies—the pool owner has until 30 November 2012 to obtain a pool safety certificate for the pool.

Auctions

If a property with a pool is being sold at auction and no pool safety certificate is in effect, the owner or their agent (e.g. auctioneer, real estate agent, etc.) must ensure that copies of Notice of no pool safety certificate - Form 36 are given to the prospective purchaser/s before entering into a contract of sale.

For more information about the new pool laws relating to selling a property with a pool, refer to the selling a property with a pool fact sheet ( 193 KB)
 
Thanks for that! Yer it makes sense, not everyone would be financial to meet the regulations before selling. It's quite cheap, easy if you research first. I used Poolwerx, which I found better/cheaper than a couple of others. It's best if you attend inspection and change anything while there.
 
I thought the term flip was used to indicate the person had done nothing to the prop themselves. 50k is a lot of nothing.

Is this market right for buy, Reno, sell. I guys you could argue if you buy in same market it shouldn't matter.
 
I thought the term flip was used to indicate the person had done nothing to the prop themselves. 50k is a lot of nothing.

Is this market right for buy, Reno, sell. I guys you could argue if you buy in same market it shouldn't matter.

Matto flipping can be based on many things. From buying something under market value and selling straight away, buying off the plan and selling on or before settlement (similar to the first, so many believe but often they get caught out in a changing market) or adding value through renovations, sub division, rezoning etc.

Having worked with many people using the flipping strategy I can honestly say one thing I often see is:

Flips Flop more often then people will tell you


In my opinion, a $50k is a large investment. For the same amount you could transform a property worth a lot more than that. However it seems you are in 'the business' and hence I doubt there is any movement in those numbers to achieve what you want to achieve. Sounds like lots of work, which let's face it anyone who has done a reno knows. I have just finished my 7th IP reno and I am constantly learning and surprised at how much work is involved.

PS Great work having the back up plan with a property returning 8% yield is good in case you can not sell, just watch the market. I recently worked with someone who did an incredible structural reno in 4 mths - no footy watching - full on business like venture - the market moved and so did the price over $100k downwards.

Hope this helps
Jane Slack-Smith
 
I think you should just buy, reno, hold personally.

No CGT and all the repairs can be depreciated.

I'll even buy it if you don't - but will try to get it for 150k:p

Agreed. After you do the reno, you might offer it up for let and see what kind of rent you can get for it. Might be worth it in the long run.
 
Thats the sort of a property that will produce profit at the end, i never believed in 10k renos unless you are doing it to get more rent, but not so much in CG.
I just completed one reno and i have spent 90k on it, took me 2.5 months but expected profit is 100k its going on the market next week.
I love properties with structural problems.
 
I just completed one reno and i have spent 90k on it, took me 2.5 months but expected profit is 100k its going on the market next week.
I love properties with structural problems.

Nice work you will have to keep us posted on the sale. How is the Wollongong market?

Jane
 
Thanks everyone for your replies. I have been beating the numbers and have two options at the moment. My first option was reno and sell however the numbers lean more to reno and hold for the time being anyway.

Of course the first consideration is the BUY price. Not right not mine. I will know on Saturday.

I am not looking at this with dark glasses rather wide open in fact and its not a MUST have place I have two others I am looking at.

Brian
 
Something I learnt a long time ago, it takes just as much effort to reno a "cheap property/house in affordable suburb" as renovating a "cheap property/house in expensive suburb" I would lean more to renovating in an average suburb to make all your hard work more worthwhile.
 
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