Decisions, decisions......

Decisions, decisions......about improving a property to get more rent vs. leaving as is, to get more property.

So let's start with say $500K in equity. If I buy a house here and a house there at $450K each, then ~$100K in equity gets chewed up at each purchase, limiting the number of houses to about 5. Rent from each would be about $350/wk. If I improve each property with around $100K of renos, then I have calculated a strategy to get an extra $350 a week rent.

So, assuming that I want to multiply the number of properties and hold on to them for around 5-6 years before developing the sites, would it make more sense to:
1) keep them as is, with the $350/week rent, or
2) improve them at a cost of $100K each and double the rent?

My thoughts are: NOT to improve the properties and hope that the properties appreciate 7%pa over the next 5 years, thus giving more equity and allowing me to get extra properties that way. (Although it's hard to knock back the thought of a return of $350/week for an extra $100K loan).

BUT, $350/wk = $17000K/year, over 5 years = $85000K, which with depreciation taken into account would be a break-even vs. do the extra $100K).


My goal is to buy the most properties in the next 1 to 2 years. So:

* Which way would the Banks favour at the moment, strategy 1 or 2??

Thx again,
JB
 
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Rent from each would be about $350/wk.
bradje if you are buying $450K houses then realistically in Sydney right now, you should be getting $450pw in rent not $350 :eek:

If I improve each property with around $100K of renos,
You should not be spending $100K on a reno for a $450K property. Limit the reno to 10-15% of the purchase price - $45-50K buys you a hell of a lot of reno.

then I have calculated a strategy to get an extra $350 a week rent.
There is NO strategy (calculated or otherwse) that I know of that will allow you to reno a $450K property, even with $100K, that will get you an additional $350pw in rent. But I'm all ears and happy to stand corrected.

* Which way would the Banks favour at the moment, strategy 1 or 2??
No investor gives a damn about what banks think of our strategy, that's why we hire MB's to apply to the banks for us. ;)
Banks lend money to get their usury (interest). They also want to protect their capital. They are in the money lending business - they are not generally in the real estate business really. (apart from their own in-house stuff)
 
Decisions, decisions......about improving a property to get more rent vs. leaving as is, to get more property.

What about buying really well and improving for capital gains. Pulling your money out and doing it again?

I agree with Propertunity, $100k on a reno is way too much unless it is a 1M odd house.

The most we have spent on a reno was $50k and that included almost gutting a 4 x 2 and $5k on landscaping. Added $95k so not too bad, but not our best. Rent increased from $230 to $310.

How about buying an IP that is CF+ or neutral and then being able to continue the journey rather than waiting for growth?

Sunshine
 
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