Just crazy enough?

Hi guys, we have had some accidental IP's over the time due to being expats in other countries so have bought and sold, gained and lost but came out on top again by accident due to 2 gains in Sydney offsetting a big loss in Ireland and another gain allowing our PPOR plus our savings to be mortgage free.

I stopped working, we have 4 kids that apparently need raising but approached this in probably the same manner as our IP's,( if it happened it happened)and I have very little in a pension fund. Hubby has a pension fund dwindling away here from years ago, he works in another country so isn't obligated to and hates super funds. He pays tax there and due to an agreement with oz pays the diff. Here along with Medicare and levys and such. But we found out recently we were getting old...really old according to the little people, so in our usual fashion went almost blind folded into putting an offer on our first proper IP, as in it won't be our usual turning our PPOR into one.

Anyway, property is near brisbane city, uni. Transport and on a main thoroughfare. 810sqm block, wide house, (might be hard to subdivide because of that) also pre war and DCP area.

60-80k worth of work needed on retention walls and drainage as per estate agent armed with the builder quote the owners didnt want to do the work pre sale.
Put in offer in my name to pos. gear subject to inspection.
Inspection typical for house of that age but due to cracks strongly reccommended structural engineer. Also verbally said asbestos but put possible hazordous material.
Structural engineer reckons cost to repair way to low, more like 120-150 but will get his builder to check. Also said asbestos (with cracking so remove) in the add on (pre permit) stage at the back. Looks like they brought the laundry and 2 small back rooms in to join to house. Peers at front of house cracked along with front stairs moving but not joined to brick work etc. lots of drainage issues causing seepage and movement etc. stated if repairs are not done it will cause structural issues to house over time but house itself and footings are good.

So our plan. Obviously demolish would be great if we can get around DCP, if not possible then huge Reno. Lift house and build 2 units under. House is currently split into 2 units.
Also, though not showing on council flood map, insurance company says whole postcode flood zone, it is on a hill so unlikely to flood if drainage and damp proofing are done properly) . Insurance from contract offer for only 200k is 1k per year.
To do this major Reno. Looking at borrowing over 800k now so neg. gear.

Plan of action: renegotiate on purchase price, if this works, (told it prob. Will just depends on how much) cancel current contract and put into hubby's name to make it tax effective, get town planner (2-3k?) and see how to maximise land potential (high student area) approx $450 per week for 2 b/ r in good cond. hope to get 4 units love to get 6 (est 1800 incl gst oer 100 sqm?) though all depends on what we don't know! Pay 1/3 in cash borrow 2/3 in hubbys name and keep PPOR out of it (Apparently we have to keep paying for education for several more years though given they still say brang, not sure why really!) and it won't have an income for quite a while based on applications, works etc

Needless to say highlighting pitfalls would be very appreciated as this is our first foray at needing to and trying to do this right. I have been reading this boards and this is what I am getting so far but I know I have missed stuff and could be overly optimistic!
 
Looks like a serious case of caveat emptor but of course you are already well aware of that.

I look forward to hearing advice from others on here who are way more experienced than I.

Good luck!
 
No, I am not aware of it, Is this to do with it being only in one of our names and the risks involved if the marraige dissolves ? If this is so, we are looking into that aspect and getting it sorted legally should it all go ahead but if it has other implications I am not knowledgeable in that area, can you help with some info on that please! Or is it the buyer beware aspect...just googled another explanation! ...yes, that is one i am aware of :) that's why I am here, high risk or too high a risk, that do be the question :)
 
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If you lift and build units underneath, will these be approved by council? Will it become "student accommodation" or a "boarding house"?. I get a bit confused about being able to rent to different entities in Brisbane. Eg. we could put in a second downstairs kitchen in our own house and rent it out separately but it would not be legal. I'm not sure what needs to be done to make this sort of set up legal? Is it having council approval for fire rating between top and lower floor? Fire exits? Is there more to it?

If you will not be living there, would lifting and adding "units" downstairs mean it is a boarding house with all the extra cost involved in doing this?

Perhaps you are best to talk to a town planner before committing yourself to this expensive purchase, especially if you find out too late that you cannot legally rent out upstairs and the downstairs "units" separately unless you spend a lot of money making it pass council laws.

I have no idea really because we've never wanted to do this, but I say be careful about your plan in case you find the end result isn't legally able to be rented to separate parties on separate leases. Even more than five (I think) unrelated people is not allowed in Brisbane (and perhaps this will change to three people? - did I read something recently?).
 
Hi Wylie,

The land is already zoned LMR with council which is multi unit dwelling which is I think 4 units 2 storey (poss. 3 storey) depending on frontage, height from street level etc. it's over 800sqm with wide frontage so may pass for more. I assumed LMR is automatically multi unit, is this not the case?
It is already spilt into 2 separate units (own kitchens bathrooms laundry s etc) with a firewall between them and is insured as a multi unit dwelling due to this. Though to my knowledge has not previously been rented as such.

Our intention is to speak to a town planner as we want to maximise this but we won't have time to fit this in before we have to commit to purchase so I guess we are still taking a punt. Would love to know if we have enough to go on to call it a calculated punt :)
 
I have no knowledge other than what I've learnt here on the forum. We have houses only, nothing more complicated than that.

Why not give RPI a call from the forum. Do a search on him in the "Community" or via the "Search". Maybe he can help you with your questions before you must commit.
 
its a pretty big job to just take a punt. imo it sounds nasty and if i was to do it i would make sure i have triple checked all my DD and enough buffers in place. tread carefully

as everyone says the deal of a lifetime comes around every week. is it worth taking a punt?
 
Hi Bman, yep, you are not wrong, it is a pretty big job...is it nasty? In what way? Where do I need to go on that to buffer the nasty? And protect ourselves on that. What are the nasties?

The way I am looking at it is
A. Given the structural engineers reports and costings which came in today, and came in lower than anticipated thankfully. The works have come down to 133k though am still working on the 150k as a 'buffer' this gets the existing dwelling of 2 units up to scratch and all ready to go when completed and it will need council approval as some walls are above the 1 metre (though I read 1.2mtr somewhere else) so certifier/surveyor council are involved. Have counted 10k for this on top and think it is probably lower (but i dont know) so just in case. Doing this gives us a 5.8% return

We are good with this if we do not know enough or learn enough to go bigger or can't go bigger. And (hopefully) as its a long term there may be some capital gain and also rent increases with inflation etc that add to the bigger picture.

B. get town planner involved and make it a big project for an 8% return. Involves more borrowings which we have been told we can get verbally and will involve more cost draftsman/architect, lots of applications etc i imagine and this is where we tread into the unknown. I assume LMR means multi unit dwelling so A. Is just approval for renovations that require the approval.(retention walls)

B is a whole other ball game so this is where we go slow and steady :) on top of going longer without a return as I assume by the time I see a town planner, find out where we can go with it, get it drawn up by an expert, have application properly lodged go back again a few times I imagine with more drawings and so on, meanwhile find earth movers builders asbestos removal specialists, yes it is huge and daunting but if it can be done it is also exciting and a massive learning curve, I love a challenge and I used to love all risk, now I like calculated risks by the book :)

A. Is safe and doable and relatively 'easy' that's ok too if we have to go with it but its B I would love to learn about and speaking to people who have been there and done that is a great eye opener. I can't cover all risks no matter how much I am armed with there will always be "surprises" but when people have been there ahead of you there is such a wealth to learn from them!

My daughter wants to be a town planner, pity I didn't have her a few years earlier eh!!!
 
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