Reno advice please

[cavalier]

Hi, I've recently bought a 2 b/r flat in inner SE of Melb for about $430K through a property buyer/company . The plan is for the same company to reno the place (budget about $45 and they will use the lot). All up the property is going to cost about $510K.

Its an early 80s place, wooden floor boards with bedrooms and living area in good condition paint wise. Bathroom and kitchen are original. Can be cleaned up obviously and presented ok/average but eventually will need to be renovated.

The reno plan is a full cosmetic. New kitchen and bathroom, painting wiring, A/C etc etc.

I'm not 100% convinced I'm going to get value for the reno but settlement is early 2013 and there is really no time to be messing about organising someone else independent and I can't do it myself (not practical and no time). They also plan to manage the property when completed. The conflict of interest is becoming obvious to me.

While I am satisfied that the reno will look great and will be easy to tenant, the question is:

Would I be better to not proceed with the reno, get in there and give it a quick scrub up and get another agent on to it to lease it out, renting for probably only $320 - $350 instead of the $400 odd(?) I would be looking at after the reno. Then come back at a later date to reno (year or 2) after more planning and quotes?

I am due to sign on for the reno shortly. At this stage I have a total cost but not even a cost breakdown of any sort. I also want to speak with the property manager before signing on to the reno because its not just a given that I will be handing over to them, I want to know cost in advance so i can compare.

Apologies if this is long winded but hopefully someone understands the situation. I have been deliberatly vague with some details obviously for a number of reasons.

Any opinions would be appreciated.

 

[thatbum]

Why did you buy it through a property buying company? Some alarm bells there for me already.

 

[DaveM]

Huh? 45k to reno a 2br apartment? They saw you coming about a hemisphere away.

Reno ion a 2 bedder should be 15-20k

 

[travelbug]

$45K!!! Give me $35K and I'll fly down and do it. Seriously!!

It's not a high end property why is it costing so much?

We've fully renovated a few houses and typically spend $15K (new kitchen, bathroom, paint, carpet etc. Admittedly we do a lot of stuff ourselves.

What is the expected value after the reno? You'd want it to be valued at at least $550K to make it a worthwhile spend. Also rent wise you are behind. ie if you spend $45K on the reno that's $43 a week in interest and you lose a bit in management fees so you are not making any gain on rent into your pocket.

I would take a step back and re-evaluate before proceeding with the reno. Take the time to evaluate the potential more and look for an alternative to getting the company to do the reno.
Have you thought about strata approval? You may not be able to start straight away meaning there will be a vacancy plus the reno time. What timeframe are they giving you for completion?

Can I ask the company? Sounds a lot like Property secrets in Sydney.

 

[Propertunity]

The plan is for the same company to reno the place (budget about $45 and they will use the lot).......The reno plan is a full cosmetic. New kitchen and bathroom, painting wiring, A/C etc etc.

In my opinion, the most you could spend on a 2brm unit is:
Kitchen: $10K (inc SS appliances) - and it can be much less than this
bathroom: $8K (total replacment)
paint: $2.5K
carpet: $2.5K
window dressings: $2K
Total $25K max
Project Managment of the reno should only be 10-15% of the total = $3.75K
Even if you do A/C the total only comes to $30K as an absolute max.
(There are plenty of ppl on here that would do a kitchen for under $5K) so even $30K could become $25K.
This makes $45K look VERY expensive indeed.

 

[wylie]

I'm with the others. In January this year we did a total reno on a three bedroom stucco house in Brisbane. That involved brand new kitchen and appliances, brand new bathroom, knocked some walls out and closed some windows in plus all the labour involved. That price also included substantial plumbing to fix 70 year old problems, so it was more than just the installation of the kitchen and bathroom. It also included the electrical work for both rooms, and moving a HWS outside. Included in that price was about $10K to a builder to knock out walls, insert two steel beams to support the roof, and a steel beam and three steel posts to prop up a sunken cement patio (and that included the cost of an engineer to draw plans and sign off). So for about $40K we did the rest. That price also included total painting inside, floor polishing.

The question I would ask is what is the unit worth "as is". If you have paid market price and not lined the pocket of the property buyer/company, then I'd clean it up and reno when you want to do it yourself (or at least price it yourself).

If you've overpaid already, and cannot (or don't want to) get out of the deal, then I'd cut your losses at what you are committed to and not spend any more with this company. It seems highly overpriced to me (the reno).

 

[Poppy Jane]

This is defiantly ringing alarm bells! 45k is insane!

The fact that you are felling at ease about it all should be an indication not to proceed with the Reno.

Are you happy with the purchase price for the unit??
Is this is the case I would be leaving un renovated or doing 10k reno's at the most .

 

[cavalier]

Thanks for the feedback everyone. I know there are various opinions on Buyers Agents. On the whole I think I have come out ok with the deal itself. Saved me a great deal of time and hassel. Not a bargain basement price but I think even factoring in the agents fee I've done well.

My concern is the assumption that the purchase will roll over in to the reno and then roll over in the property mgmt all with the same mob without much financial scrutiny. I have addressed this and will be meeting with them shortly to start talking some real numbers that are in MY interest not the RENO teams interest.

Some good lessons being learnt here and so far I'm just being cautious to avoid being burnt. Not signing any reno contract till I'm 100% happy.

I'll update this when I've had my meeting

 

[strongy1986]

Thanks for the feedback everyone. I know there are various opinions on Buyers Agents. On the whole I think I have come out ok with the deal itself. Saved me a great deal of time and hassel. Not a bargain basement price but I think even factoring in the agents fee I've done well.

My concern is the assumption that the purchase will roll over in to the reno and then roll over in the property mgmt all with the same mob without much financial scrutiny. I have addressed this and will be meeting with them shortly to start talking some real numbers that are in MY interest not the RENO teams interest.

Some good lessons being learnt here and so far I'm just being cautious to avoid being burnt. Not signing any reno contract till I'm 100% happy.

I'll update this when I've had my meeting

Do yourself a favour and don't go to the meeting

Managing a renno is a piece of ****, if your unsure on the process and what order it should be done just ask people on here

I think you could get a good result for 20k

Kitchen 6k
Bathroom 6k
Floors 2k
Paint 2k
Electrical ? What needs to be done
Maybe some diwnlights and fantastic in bath - 1k
Still 3k for extras

I think that's a reasonable budget

 

[JacM]

Agreed - $45k is extremely excessive for a reno on a 2 bedder... even considering that it would include a Renovation Project Management Fee... and even if you had to do some additional things such as knock a wall, replace some plaster, or replace security screen doors. It is not just a little bit excessive - it is a lot excessive. It'd be cheaper for you to guess your way through trying to manage the tradies yourself and lose several weeks rent in the process.

 

[dezability]

Holy smokes, a Reno costing 45k, they better be shining your shoes for a month or two every day you walk in..

Get some independent advice or even get some snaps of the place and post it here, I'm sure this forum can advise what to do/how much it'd cost.

If you were savvy, you could find wholesalers and get everything dirt cheap and just hire pros to install etc.

 

[Lil Skater]

Fully agree with the above! That is an insane amount of $$ to be spending; and I'm not convinced you will see the added value in return.

You need an exact breakdown of costs, plus I'd get a few agents through to give you appraisals on what they believe it's worth now, compared to what they believed it'll be worth after the cosmetic work. Then figure out if it's worth it.

 

[travelbug]

I've got nothing against buyers agents but when you have the whole thing inhouse there can be a push to do things that may be unnecessary or benefitial to you.

Just be wary of taking advice from someone that has a vested interest in you giving them money.

As I said look at the figures. Velue before, after etc.

Post them here and you'll get unbiased opinions from people that have been doing it for years.
So my advice would be to post figures BEFORE you go to the meeting then you're armed with information.