Reno questions from a 1st time investor

Hi All,

I'm a long time reader, but first time poster on the Somersoft forums, so please be gentle with me :)

I have just purchased my 1st IP - A 1br unit in Hawthorn East. I settle mid-October.

I am considering doing some renovations to the property, and would really appreciate any thoughts or advice that people may be able to offer.

The current rent estimate for the property is $250/week. With improvements I would hope to be able to get $300/week, but more importantly to increase the value of the property.

A brief summary of what I would like to do:

Kitchen:


  • Knock out the wall
  • Put an island bench where the wall currently is
  • Install a new gas cooktop and electric stove
  • Install a rangehood
  • Install a dishwasher
  • Put in a small pantry next to the fridge
  • Tile the floor (it's currently lino)

Bathroom:

  • Replace the bath with a shower, leaving enough space beside it to put a small washing machine
  • replace the toilet
  • replace the vanity
  • Install an exhaust fan. I'm not sure how you go about this if there is no roof cavity access. Can you run a small duct along the ceiling?
  • Replace the door with a sliding door

General:
  • Possibly replace the carpet in the living area with a floating floor. I don't know a whole lot about the costs and pros/cons of this. I'd be interested to know what people's thoughts are, especially on a hard wareing carpet vs a laminate or timber floating floor.
  • Repaint everything
  • Replace light fittings
  • Possibly replace the BIR. It currently has opening doors, I'd like to put in sliding doors.

The reason for knocking out the kitchen wall is that it's quite a big kitchen for a 1br unit - bigger than needed really - but not big enough to fit any sort of dining table in. I figure that by knocking out the wall and putting in a island bench I'll open up the whole space and be able to use the island as a dining table.

My reasoning for replacing the bath with a shower cubical is that it would free up space to put in a washing machine. Currently there is no space for one in the unit (there is a slightly skanky communal laundry in the block). What are peoples thought on this? Is having a shower-over-bath preferable from a property value/capital growth point of view?

To do this work I'm currently budgeting ~$12k, but I'm still looking around at prices, getting quotes and firming that up. I would need the bank to extend my mortgage to cover the costs of the renos. I've been told by my broker that they will usually do this, but require a signed fixed-price contract from a builder. Has anyone had experience with this?

Thank you for your feedback :)

Cheers,
Dusty
 

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Congratulations on your buy.

I cannot help you as I have never renovated a unit but I think your idea of opening up the kitchen is a must. Don't know about supporting wall issues, but if possible, that would be the biggest plus to that big living room. I would feel really closed in working in that kitchen and to have it open plan with the living room would be a huge plus.

Also love the idea of having the washing machine within the unit rather than having to use a communal laundry. Definitely worth doing.

Good luck.

Wylie
 
The current rent estimate for the property is $250/week. With improvements I would hope to be able to get $300/week, but more importantly to increase the value of the property.

To do this work I'm currently budgeting ~$12k

1. Is the extra rent worth it?

$50 extra rent per week = $2500 pa

$2500/12000 = 21% return (good, but see later)

2. Is the extra value worth it?

You'd need to research the values of similarly renovated property. To allow a sensible margin and a contingency for over-runs the added value should be $20-30k or more.

3. Vacancy costs

Your workings haven't factored these in. To the $12k budgeted you need to add the holding costs during the period, noting there's no tenant who normally pays about half of it. Allow at least $2k per month.

4. Your labour

Again it may need to be priced, depending on if you consider it a labour of love/learning exercise or genuine investment.

I would evaluate the above based on three scenarios:

1. Do nothing
2. Cheap reno (about $1-2k eg painting, light fittings etc)
3. Full reno (as per your plan)

If 2. gives you half the benefits of 3. at a tenth of the cost and a quarter the time, you'd have to question whether 3. is worth it. Especially if vacancy is low and rents are rising you might get the extra rent just by waiting a year.
 
Hi All,

Kitchen:
  • Knock out the wall
  • Put an island bench where the wall currently is
  • Install a new gas cooktop and electric stove
  • Install a rangehood
  • Install a dishwasher
  • Put in a small pantry next to the fridge
  • Tile the floor (it's currently lino)
Bathroom:
  • Replace the bath with a shower, leaving enough space beside it to put a small washing machine
  • replace the toilet
  • replace the vanity
  • Install an exhaust fan. I'm not sure how you go about this if there is no roof cavity access. Can you run a small duct along the ceiling?
  • Replace the door with a sliding door
General:
  • Possibly replace the carpet in the living area with a floating floor. I don't know a whole lot about the costs and pros/cons of this. I'd be interested to know what people's thoughts are, especially on a hard wareing carpet vs a laminate or timber floating floor.
  • Repaint everything
  • Replace light fittings
  • Possibly replace the BIR. It currently has opening doors, I'd like to put in sliding doors.
My reasoning for replacing the bath with a shower cubical is that it would free up space to put in a washing machine. Currently there is no space for one
Dusty, well done the layout looks good,but just the costs for something
you intend to do will /imho/ be more than 12k ,you could always just
get someone in as quickly as you can,and save yourself 30k and endless
worry and no rental income for 10 weeks..willair.
 
Congratulations on your buy.

I cannot help you as I have never renovated a unit but I think your idea of opening up the kitchen is a must. Don't know about supporting wall issues, but if possible, that would be the biggest plus to that big living room. I would feel really closed in working in that kitchen and to have it open plan with the living room would be a huge plus.

Also love the idea of having the washing machine within the unit rather than having to use a communal laundry. Definitely worth doing.

Good luck.

Wylie

Thanks Wylie!

I personally think the kitchen wall is the most important job. I'm with you in not knowing about the wall being supporting, but I've arranged access to the property in the morning to measure up and get some more photos, and I'll also be trying to get a better idea about the wall.

If there are any builders/handy people out there who could give me some pointers on how to tell is a wall is supporting, that would be great!

Cheers,
Dusty
 
1. Is the extra rent worth it?

$50 extra rent per week = $2500 pa

$2500/12000 = 21% return (good, but see later)

2. Is the extra value worth it?

You'd need to research the values of similarly renovated property. To allow a sensible margin and a contingency for over-runs the added value should be $20-30k or more.

3. Vacancy costs

Your workings haven't factored these in. To the $12k budgeted you need to add the holding costs during the period, noting there's no tenant who normally pays about half of it. Allow at least $2k per month.

4. Your labour

Again it may need to be priced, depending on if you consider it a labour of love/learning exercise or genuine investment.

I would evaluate the above based on three scenarios:

1. Do nothing
2. Cheap reno (about $1-2k eg painting, light fittings etc)
3. Full reno (as per your plan)

If 2. gives you half the benefits of 3. at a tenth of the cost and a quarter the time, you'd have to question whether 3. is worth it. Especially if vacancy is low and rents are rising you might get the extra rent just by waiting a year.

Hi Spiderman,

Thanks for your reply.

Regarding your first point about the cost/return, I had figured that borrowing an additional $15k (interest only) will cost ~$100 extra per month, while additional rent will add up to ~$215, making it a good deal. Is that sound logic?

You make a very good point about the 3 scenarios.

When I first purchased the property I basically ran through 1 & 2 and decided that they are much of a muchness since the place is in pretty good nick in terms of paint, etc. The bathroom may benefit from some of the tile paint that I've seen discussed here recently, but that's about it.

I will adjust my workings for option 3 to include holding costs and probably also increase the budget to $15k.

Regarding labour, I have asked my uncle who is a builder to give me a quote for the work and factor in my labour full-time for a week. I'd take the week off work and do it as a labour of love/learning experience since I've never done anything like this before and would really like to pick up some skills.

I'll have a heap more photos tomorrow, so I'll post some of the bathroom and bedroom. I'd be very interested in people's thoughts on what best to do with the bathroom.

Cheers,
Dusty
 
Home design software

On the topic of renovations, has anyone ever used one of the 3D home design packages that are out there?

I've looked at a couple by Borderbund and Better Homes & Gardens. I spent a few hours the other night doing up a plan for my place in the BH&G package and it looks great! You can add fixtures, furniture, etc. then do a walkthrough of the place in 3D.

If anyone else has this software and is interested, I'll post the file I created.

Cheers,
Dusty
 
Structural Engineer

Hi All,

I've been finalising my reno plans and chasing up quotes and prices. One question that keeps coming up is whether or not the kitchen wall that I want to knock down (see attachments above) is structural/load bearing.

Being a top floor apartment, I can't imagine that it would be, however that's really just a guess as I have no experience with this kind of thing. From what I can tell, I need to get a structural engineer to look at it and give me a certificate of some sort.

Does anyone have any experience with this sort of thing? If so, could you recommend a structural engineer around the Hawthorn area?

Cheers,
Dusty
 
Hi Dusty,

I think the changes you have in mind are a very good idea, and if you think you can get away with spending only $15,000 if would be profitable in East Hawthorn.
Changing the bath to a shower is an excellent idea, the type of people living there will probably not need a bath and will love the convenience of having their washing machine there instead.
I would like to see some pictures of the bathroom and the cupboard in the bedroom if possible.

Bronwyn.
 
Hi Bronwyn,

Thank you for your input :) Since the original post I've spent quite a bit of time getting quotes, etc. and I now think that it may come to more like $17k, but I still think the improvements that I plan to make will be work it.

Regarding the bathroom, I've had a chance to access the property and measure everything up now, and it looks like I won't have to take out the bath to fit in a washer and dryer which is really good news.

I now plan to fit a glass screen to the shower-over-bath, remove the existing bench, install a new vanity and be left with a 66cm space for a washing machine.

Cheers,
Dusty
 
Thanks Wylie!

I personally think the kitchen wall is the most important job. I'm with you in not knowing about the wall being supporting, but I've arranged access to the property in the morning to measure up and get some more photos, and I'll also be trying to get a better idea about the wall.

If there are any builders/handy people out there who could give me some pointers on how to tell is a wall is supporting, that would be great!

Cheers,
Dusty

Hi Dusty,

Congrats on your buy!! :D

You'll want a qualified builder to check out the wall - but if you have access into the roofspace (which you very well might if your unit is top floor) - you can go up there and see if there are any supporting beams on the kitchen wall......

Don't be suprised if it is a supporting wall - it might be helping to hold up the roof! But you still may be able to knock it out if your builder can rearrange the support. This may be far more effort (expense?) than it's worth. We just knocked out a small bathroom wall in top floor unit and it was supporting, so had to have a builder come into the roof space and move beams around and put in more support in other areas - the noisiest day of my entire life - warn your poor neighbours and buy them lots of chocolates, as the noise is deafening!!!

Cheers,
Jen
 
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