Equity Boost???

[Dean1337]

At the moment, I'm considering purchasing my first investment property. However I don't have the cash or equity to accomplish this goal just yet. So ... I've been looking at means to accelerate my effort to purchasing my first investment property. One idea is the reno my current PPOR.

Would certain renovations improve overall equity greater than its actual cost (ie.g 5k spent increases value of property by 7k)?

If so what renos normally achieve these results?

The follow renos could be done to my place: which of these would provide the best result?

- walls painted.
- Carpet/lino replaced.
- Kitchen currently in 90's style thus could be replaced.
- Ceiling insulation added.
- Air conditioning added.
- Pagola panels replaced (currently old and crusty).
- Kitchen skylight (currently kitchen is dark without turning light on).

Many Thanks in Advanced

Deano

 

[Propertunity]

The follow renos could be done to my place: which of these would provide the best result?

- walls painted.

Yes

- Carpet/lino replaced.

Yes , if it is tatty now

- Kitchen currently in 90's style thus could be replaced.

Yes , if it is tatty now

- Ceiling insulation added.

No

- Air conditioning added.

No

- Pagola panels replaced (currently old and crusty).

Won't add value but not replacing will detract

- Kitchen skylight (currently kitchen is dark without turning light on).

No

Cheers Dean

 

[BKR]

- walls painted.
yes, inside and out and ceilings. best value for money you can get in my opinion.
- Carpet/lino replaced.
yes.
- Kitchen currently in 90's style thus could be replaced.
yes, maybe a good second hand one, fitted yourself or a kit.
- Ceiling insulation added.
no
- Air conditioning added.
no
- Pagola panels replaced (currently old and crusty).
if wood, filler and paint. if steel, killrust and paint.
- Kitchen skylight (currently kitchen is dark without turning light on).
maybe, but a light coloured kitchen may fix it, plus light painted walls/ceiling. do them first and see if you need the skylight then.

Just had my place valued and the first thing he did was walk around the whole house to check what condition the paint was in. I had to ask cause I didn't know what the hell he was doing.

 

[Buzz]

Go with the painting this will create a new clean light look and carpet as well.

It will also pay to make the old kitchen lighter, if you cant afford the $1000 for a skylight, then replaces globes with blue not yellow light bulbs, or add some downlights under over cupboards.

Insulation will not add value - but check it out anyhow as there is now rebates available and it maybe a low spend which means you dont need the A/C (no value adder, however depending on wher you are you may get a higher rent)

90's kitchen is not that old, maybe just replacing the bench or painting the cupboards could work, or even new tile work or handles?

Remember that depending on your LVR and LMI exposure and your lender you may only be able to pull 80% of the value you add.
(ie if you have LMI with Genworth and this is a recent purchase they will only revalue after 6 mths of loan origination date, if you have a current LVR of 80% or less ie no LMI then to get extra equity you could go up to 90-95% LVR to gain more value however you would need to pay LMI)

My golden rule with renos is make the PERCEIVED value more than the ACTUAL cost and you are on a winner.

Hope this helps
Jane

 

[Dean1337]

Thank you all for the great advice. It has been a great help and I am already starting to formulate a plan.

I was hoping to ask another more specific question. What would be a ball park figure for rendering outside walls? My father thinks this could be done for 6k. Would this be worth while doing? Based on Buzz's "PRECIEVED value > ACTUAL value" I think this would fit that formula. My only concern is that it would stick out in comparison to other houses in the neighborhood since most are 90 style brick homes.

 

[Propertunity]

What would be a ball park figure for rendering outside walls? My father thinks this could be done for 6k.

Your father is right. Get 3 x quotes to confirm his correctness.

Would this be worth while doing?

Yes

My only concern is that it would stick out in comparison to other houses in the neighborhood since most are 90 style brick homes.

This is or may be the deciding factor then. No use making it the best house in the street as the other houses will tend to drag its value down. But if there are others rendered - then go for it. If you are concerned - ask 3 x REA's what their views would be for end value on a rendered Vs non-rendered house in your street.

 

[Dean1337]

Start of a plan

Thanks Propertunity, asking three different local RE would certainly be a good idea.

I'm starting to formulating a plan. A spreadsheet with estimated costs and estimated improvement to property value. At present these values are just pure guesstimations and it is likely to be totally unrealisitic.

Would anyone here have a better idea of costs and expected improved value? I'll looking to get quotes and researching cost of material but so far these are my guess to costs and improved value.

Thanks in advanced
Deano

 

[Propertunity]

Hi Deano,
I really don't think you can do stuff like this in a spreadsheet i.e.

Repair Living Room Ceiling $800.00 $1,000.00 $200.00

I don't know a valuer alive or an REA for that matter who would be able to say if you repair the ceiling it will add $1K of value to your home......it just doesn't work like that Mr Analytical (and that's coming from the biggest analytical of them all - me).

You have to take it as a whole project. The house is worth $X now. If I spend $Y on a reno will it add $1.5Y or $2Y or $3Y to the end value?

 

[DavidMc]

The first thing to do is work out the end value by looking at recently valued/sold properties. Do this before getting any quotes etc.

My recent experience was that in this market (and the conservative valuations) it's very hard to make it worthwhile.

 

[Buzz]

I am with David Mc - the spreadsheet is your wishlist I have never seen anything like that actual work. As for structural fixes it is so hard putting a perceived value on them as a valuer would assume they would be done regardless.

Individually counting your equity is difficult - but how can you do it as an overall without adding up the individual spends? Look at other properties selling in the area and the standard they are prepared to and what they are selling for - it really is the only guide.

And be careful about assumptions with equity - creating equity is one thing accessing equity in todays changing bank policies is a whole different kettle of fish.

Dont be disheartened we all started where you are and putting the time and research into what you are doing is what will make you a success so keep up the good work!

Jane