Cosmetic renovation of 60yo weatherboard house for rental. Worth it?

Hi all,

I've just purchased my first IP and am at the unconditional stage on a 2 bedroom 1 bathroom 60 year old weather board house and will be receiving it as vacant possession on the final date of settlement.

This has provided me a window of opportunity to take 2 weeks off work to clean up the place and fix the issues that were reported in the building inspection so I can reduce the chance of any future issues occurring and potentially add some value to the place.

My plan is to keep the place for at least 10 years and then maybe demolish and develop 2-3 units on the block down the track.

The house is already very clean, however it looks like its been 10-15 years since it last had a renovation.

What I aim to do in 2 weeks is:
a) Get it re stumped by a professional (stumps are rotting). Most likely timber with ant caps. - rest of the building is structurally sound.
b) Fill cracks and repaint the interior.
c) Lay new carpet.
d) Repaint parts of the exterior.
e) Clean up the garden and throw away some rubbish.
f) Optional: Install an air conditioner.

I haven't done any quotes are research yet, however I estimate that it could cost me anywhere from $10k-$15k to get it up to a nice standard.

However my parents are assisting me get into this first place and they are very much against me spending any money on a light renovation as they feel that adding carpet is overcapitalizing. They would rather I put this money towards the loan straight away to reduce the interest.

There are two choices.
1. Do the cosmetic fixes and then lease.
2. Not do anything and then lease and save the money to reduce the interest.

I would like to know from people who have purchased investment properties if my decision to do a light renovation is a good one or not.
 
We always do light renos when we buy, but with a plan of demolishing in ten years, I would maybe not paint the outside unless it really needs it.

Painting inside is the cheapest and easiest way of adding "value" and makes it easier to rent.

We don't put carpets in, but polish floors, but Melbourne may be too cold for this without good heating.

Ditto with the aircon. In Brisbane it is a real plus but I suppose in Melbourne, the heating side is probably just as important.

Why not get a property manager through. Tell them you want a rent appraisal and get their opinion of what it will rent for "as is" and ask them what it would rent for with the light reno and make a decision from that.
 
Why not get a property manager through. Tell them you want a rent appraisal and get their opinion of what it will rent for "as is" and ask them what it would rent for with the light reno and make a decision from that.


wylie's right here ... if a reno is only going to improve the rent by $10/wk, then it's not worth it ($520/yr) ... but if it increases the rent by $100/wk then yes it is ($5,200/yr plus depreciation) ... especially if you're going to knock it down in 2 years.

if you're going to knock it down then i certainly wouldn't bother to restump, unless it is an accident hazzard.

do the sums - not restumping and no aircon (tenants have their own heaters and pay for the electricity), but doing the carpet and painting, might be worthwhile.
 
Thanks for the replies.

With restumping, even though the building inspection shows that they are rotting its ok to keep them like this for the next 10 years? I might have to call my building inspector and confirm this again.

My folks feel that putting new carpet is a waste as the tenants will wreck the place anyway. I feel its harsh to judge my potential tenants this way however my parents had one of their IP's not treated well so I guess they are looking in my interests.
 
If the carpets are dirty or really worn, or horrible patterns, it could put off potential renters. If they really need replacing, why not consider sanding the floors, or buying a whole houseful of carpet from an auction and just paying somebody to lay it. It could possibly be laid over the old underlay to save even more.

I would get a builder or stumper to look at the stumps. If they are rotting, they could last quite a few years without any problems. They may need chocking to make the house level. Unless they are dangerous, I would leave them as well. They have held the house for 60 years, and probably will do another ten (unless they are REALLY rotten).

I really think you need a property manager so you don't spend money unnecessarily. You want to get the most bank for your buck and best rent for money spent, especially considering you will be bulldozing it down the track.
 
If the value of the reno is much higher than the existing yield and/or much higher then your mortgage interest rate, then yes do the reno.

What i mean is if the reno increases the rent by say $40 and thats a 20% gross yield on its own calculated from the cost of the reno. Then thats much better then putting the money on your loan, which is a benefit of say 9%.

Hope you can follow this, not sure if i've explained it well. But its what i've done previously.
 
Hi beekay,

With regard to your list of this of items to do with your cosmetic renovation, I would probably do the following:

1. Not restump...if there are any parts of the floor that are dropping, get under the house with a hydraulic car jack, jack up the offending floor joist and put some packers in.

2. Definitely paint (if it is in your budget)...paint the whole house white, inside and out, kitchen, bathroom bedrooms, closets, ceilings, doors and exposed concrete floors.

3. Install cheap new venetian blinds...with added with a new paint job the place will look a million bucks inside

4. If the carpet is just dirty, hire one of those big carpet washing machines from the supermarket and clean the carpet a few times...the amount of muddy water that comes out is amazing!

5. Definitely clean up the yard....get rid of all weeds, trim overgrown plants. A trailer load of black mulch gives existing garden beds a HUGE lift.

6. Introduce myself to the neighbours and let them know that the property will be available for rent once you have completed the tidy up.

7. Definitely NOT install the air-con....$1000 would be better spent on insulation and sealing the house from draughts and leaks

Good luck

Glenn
 
Sounds like you know your stuff Glenn. With regards to the jacking up of the floor joist, is it really that simple? Obviously you have had experience doing this, any general hints as to the best/safest way to go about this?

Regards
Roger
 
Something else that has not been mentioned.

As well as increasing the rent (and perhaps making more rentable, so potentially fewer vacancies) you can potentially increase the value. And you can use this increased value to borrow for fourther IPs in the future.

A real estate agent may be in a position to help you. Their property manager can adbvise you on rent; a good REA should be able to advise you on what you can do, and how much value it can add.

I've heard it said that for every $1 you sepnd, you should be able to add at least $2 worth of value.

Paint and flooring/carpet will definitely add value. A resdtumping won't in the short term- but could stop some very big problems in the future.

A carport may also add some value.

Just a few thoughts.
 
Great suggestions folks, I sincerely appreciate the assistance. Everything I'm doing is a first time for me at the moment and I'd like to get it to the stage where a tenant is in, is happy and all is set.

So far I have asked my property manager to arrange some time to inspect the house before settlement with the real estate agent. I've requested a current appraisal and suggestions for improvement.

My folks are also concerned that even if i make improvements the tenants could potentially wreck the place (I will be buying insurance so I don't see the point of worrying about this).
 
Hey Beekay

I'd like to get it to the stage where a tenant is in, is happy and all is set.

The better your property, the better the chance of this. However, because you are dealing with people, nothing is guaranteed. Don’t let me scare you off though, sounds like you’ve taken a good step.

I've requested a current appraisal and suggestions for improvement.
Get some comparable rentals together off the internet and make your own assessment also. If the agents assessment is wildly different from yours ask them why?


My folks are also concerned that even if i make improvements the tenants could potentially wreck the place (I will be buying insurance so I don't see the point of worrying about this).
Definitely, Building insurance AND Landlords insurance are vital.

Let the numbers guide you with regard to your improvements. If $1,000 worth of carpet will bring you an extra $10/wk then over 2 yrs you will have paid back the outlay, also there are depreciation benefits, and the house will look better, attracting better tenants.

However – if you need to spend $10,000 and only get an extra $20/wk then it would take you a bit under 10 years to recoup the cost. Of course this will also be offset by depreciation and quality of tenant benefits – but that’s still a long time.

Well done on your first IP – may it help set you up for the future.

TB
 
My folks feel that putting new carpet is a waste as the tenants will wreck the place anyway. .

What sort to tenants do you want to attract?

The carpet can be depreciated in any case, and if they wreck it deliberately, get a fresh one through insurance.....

Oh, and do ALL the painting BEFORE the carpets.... (as stupidly simple as it may sound)

Restumping - prob a good idea to stop cracks appearing in your freshly painted walls.

External painting - only for bits thats seriously needed, or the front facade.

Cheers,

The Y-man
 
My folks are also concerned that even if i make improvements the tenants could potentially wreck the place (I will be buying insurance so I don't see the point of worrying about this).

don't worry to much about this - obviously they've had a bad tenant at some stage in the past, and cannot see the 1000's of good tenants because of the one bad one.

besides - the carpet doesn't have to be flash and expensive. you can get some pretty cheap, virtually tenant proof polyester carpets nowadays.
 
My folks feel that putting new carpet is a waste as the tenants will wreck the place anyway. I feel its harsh to judge my potential tenants this way however my parents had one of their IP's not treated well so I guess they are looking in my interests.
I'm with the others.

My parents also had a property which was badly treated- well before landlords insurance.

And they had a reference from a top Australian politicaian.

They sold it for some profit. But it was inner North Melbourne, and would have been worth a motza now if they had kept it.

But I've also had bad tenants. But no property was ever trashed.

You have the insurance available now. That must provide some peace of mind.

But, also, people who have not had poperty as an investment will try to discourage you.

A property MAY lose value. It CAN deteriorate.

But it is MUCH more likely that it will gain value.

Don't worry much about the parents. If you have your figures correct, go for it. If not don't (obviously).

Just make sure it is your decision. And that you are comfortable with that.
 
rotting). Most likely timber with ant caps. - rest of the building is structurally sound.
b) Fill cracks and repaint the interior.
c) Lay new carpet.
d) Repaint parts of the exterior.
e) Clean up the garden and throw away some rubbish.
f) Optional: Install an air conditioner.

I haven't done any quotes are research yet, however I estimate that it could cost me anywhere from $10k-$15k to get it up to a nice standard.
This is going to be a lot of work for 2 weeks,just wanted to add that you would also may want to have a look at the plumbing-elec's costs once the house is reset on new stumps,if it's an old house they both may have to be replaced,also if you paint the outside then you may have to do the roof at the same time to set the property..willair..
 
It also depends on the area, type of other housing also for rent etc. For example its easy to say "forget about the a/c" BUT if the house is in certain areas with certain climates then the a/c could be very important. I know when we rented for a short while we would not even look at places that didnt have aircon. I see it pritty well a must have these days but thats just me.

As for the restumping, like the others have said, it really depends how bad they are. Have a good chat to the person who done the building report for you. Not neccesarily as easy as jack it up and pack it out. Depends on how bad they are, if there has been much movement etc.

I think a coat of paint if a good thing. Helps get it up to scratch and 10 yrs is a long way away, you may not even end up knocking it down. I would certainly be painting her up. New floor coverings I think are a good thing if the current ones are beyond a good clean. Floor coverings, paint, and a tidy up will make a huge diff on most properties.

Just my thoughts ;)

Cheers jayro
 
I agree with Jayro re the airconditioning. All our properties in Brisbane have a/con.

My philosophy is that I want tenants who will remain on a long-term basis, so I will make the property as comfortable as practicable in order to achieve this - without spending huge amounts of $$, of course.

Cheers
LynnH
 
Hi beekay,

With regard to your list of this of items to do with your cosmetic renovation, I would probably do the following:

1. Not restump...if there are any parts of the floor that are dropping, get under the house with a hydraulic car jack, jack up the offending floor joist and put some packers in.

2. Definitely paint (if it is in your budget)...paint the whole house white, inside and out, kitchen, bathroom bedrooms, closets, ceilings, doors and exposed concrete floors.

3. Install cheap new venetian blinds...with added with a new paint job the place will look a million bucks inside

4. If the carpet is just dirty, hire one of those big carpet washing machines from the supermarket and clean the carpet a few times...the amount of muddy water that comes out is amazing!

5. Definitely clean up the yard....get rid of all weeds, trim overgrown plants. A trailer load of black mulch gives existing garden beds a HUGE lift.

6. Introduce myself to the neighbours and let them know that the property will be available for rent once you have completed the tidy up.

7. Definitely NOT install the air-con....$1000 would be better spent on insulation and sealing the house from draughts and leaks

Good luck

Glenn

I agree with glen though replace the carpet if things are looking pretty thread bare.
From your post, I don’t think you really know what you will do in 10 years but only restump if you definitely aren’t going to demolish
 
Regarding the re-stumping.

It may be more expensive than you think. We have just had our PPOR re-stumped. I knew it would be at least $5,000 and guessed up to $7,000. It looks like the final figure will be $8,000 - $9,000 with unexpected extras added in.

Also - a re-stumping job that was going to take 5 days max - is now nearly complete 4 weeks later. Staff kept leaving, 'urgent' jobs kept coming up.......
We were advised to restump house before painting, because of potential cracking in walls. And you have only 2 weeks to do the lot......

Also, our building inspection told us the stumps were rotten, so we knew they had to be done, but re-stumpers said our current ones would have still been okay for 10 years. As we are planning to live here forever, we still got it done before other refurbishment jobs - living in a high termite prone area was also a factor in this (replacing wood with concrete stumps).

So upshot is - restumping is expensive and time consuming. And you may not really need to do it if planning on demolishing house anyway. Get some stumpers out to have a look at it for you.

Good luck with your renno. The first one is always exciting.
:)
Lily

PS If you do have to go the restumping route - make sure you get people that come well reccomended. There are some dodgy ones out there.
 
Hi Lily. I realise you probably know this already, but your comment about termites and cement stumps (as opposed to timber stumps) makes me want to ensure that everybody knows that cement stumps don't mean termites cannot make mud trails up them and still get into your joists, bearers and the rest of the house. Ant caps don't seem to deter them either, wiley little blighters.
 
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