Renovation for rent and value adding

Hi

I have invested in a couple properties over last decade or so, but generally have had no need to make renovations to a property until now so am inexperienced in this area.

In around 2001 I bought a 2BR, single front, brick, semi detached house (with a dodgy extension) in Elwood (for those that don't know, a beach suburb around 5 km from Melb CBD). This is also the area I live in.

Since then the property has deteriorated. This is primarily due to part of Elwood historically being a swamp area, and therefore quite 'silty' and this silt having substantial ground movement that causes walls to crack (particularly given the volatility of rainfall patterns we've experienced).

Anyway the tenants have recently moved out and with the house in the condition it is in, I do not believe I can get a decent rate of rent.

Rather than a simple temporary patch up, I am considering a significant renovation. My motivations are to increase the rate of rent I achieve but I would also like the renovations to add significant value to the property (ie do not want to overcapitalise for the return likely on eventual sale - if ever).

I think the foundations definitely need to be fixed to avoid future maintenance expenses (recracking, gaps in skitring and floor, etc). This I expect will be quite a substantial expense but necessary.

I would however also like to consider the following:

- add a third bedroom (currently both bedrooms are at front of house). The third bedroom would be adjacent (behind) one of the existing bedrooms (the other bedroom has the bathroom adjacent (behind)

- renovate the kitchen as well as fix the exterior wall (due to slippage part of the kitched has dipped, the window does not even close due to this)

- knock down the interior wall that for some reason separates the small extension at the back from the dining/living area (its suppose to be a dining area I think) and create a open plan living area by doing so (incl redoing rear wall with french doors etc)...this would also make up for the living area space lost from addition of third bedroom. The big issue here is that the extension has a sloping roof (from the aforementioned interior roof). I think this will ahve to be removed and the roof made parallel with the floor (ie like the rest of the house)

- the kitchen is also closed off from the living area except for an opening. I would consider removing part of the interior wall that separated the kitchen so that it is open to the living/dining area

My question is what your thoughts are here in terms of value added in terms of rent, and future sale value. Rent would definitely be increased substantially I feel but am not sure whether the costs will outweigh the value added at eventual sale.

I have an excel spreadsheet with rough floorplan pics and brief notes that I would attach, but unfortunately it exceeds the file limit for attaching excel files (due to the pics).

Also, can anyone recommend any good builders I could get a quote for the above work (or part of).
 
You're missing an extremely important detail - is the house on stumps, a slab, or on those cute little dwarf walls?

If its not on stumps you're in for a world of pain underpinning the house.

Edit: ugh, brick ATTACHED house? That sounds expeeeeeeeeeeeeeeeeensive to fix o_O
 
Hi Rumpled

I haven't had that checked yet, but I am assuming the worst given that its brick and therefore probably requires underpinning.

To be honest, that doesn't really bother me (in terms of other renos - it bothers me of course due to cost) because it has to be done whether I like it or not otherwise the house will just keep cracking and eventually will get worse (should have done it many years ago!).

So I am just treating it as an unavoidable expense, though admittedly will cut into the budget of what else I can do.

PS: I hate banks too...particularly the NAB (because I used to work for the buggers)
 
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If you're getting a builder in to do major stuff you might as well go nuts and whack on as many extra rooms as you're legally allowed without going completely overboard.

You might want to think about getting a draftie off here to draw up some compliant plans for any extensions and take that to a builder (after its approved) rather than getting a builder to quote, it'll be far easier to compare quotes that way.
 
Not much space for extra rooms unless I extend further at the back - big back yard for Elwood, one of the key reasons I bought it as I didnt think the price I paid was adequately reflected by the land value!

Regarding the plans, yeah I'll have to have a chat with my bro-on-law about that. He is a former architect (before he moved to the darkside and got into finance :rolleyes:) so can probably assist with keeping those costs down not to mention turning my rough draft into a work of art :p
 
Gidday mate. If you are after an underpinner l can recommend one. I've used them on a number of jobs that l have done around Melbourne. The companies name is Techniblock and talk to the owner Marty. Hope this helps
 
Have you had a good look around at other similar properties to suss out your market valuations? Many investors are fearful of a cost blow out when undertaking structural renovations.... nice to see you are considering all options :) keep us up to date with your plans :)

Holly
 
Sounds like a lot of work, after the work is done..how much do the reckon the rent would go up by??

I seen someone spend $80,000 on renovs and only achieved an extra $15pw + $45,000 in "potential" capital But lost 14 weeks in rent ( 9 weeks empty + 5 to find new tenants)

I suggest try to do the important renovs first, or the one where you might need "internal" access...then rent the place out and do the "another" external renos.


Make sure the financial works and dont let the emotions kick in:)

Regards
Michael
 
UncleKnackers, thanks I'll see wjat the structural engineer saids then will give Techni a call. PS: Love the reno videos :)

Renoteam, yeah I've lived in the area all my life so have a pretty good understanding of the house valuations. My thoughts are that with all the apprtments and flats that have gone up around Elwood over last few decades, houses with 3BR or more (in the more affordable area of Elwood) have become pretty rare hence why want to add an extra BR. The conversion to open plan is the major cost that I am unsure whether will add significant value though, so am sussing that out.

MickC, the rent I was getting from the tenants that have just moved out was fairly high considering the condition the house is in. Have actually had the agent advertise it after they moved out, and basically the interest was very low and did not thing I could achieve same rent level compared to how the house was a couple years ago. My epxectation is that the reno will achieve a bit more than what was previously getting, however much more than what I could currently get. There is also a slight chance that at some stage, I could decide to leave my current PPOR and move into the house I'm renovating and make my PPOR a rental or sell that.
 
You're doing the kitchen, how about the bathroom? Looking at rentals, good kitchens and bathrooms get points from me. Having said that it might not be worth spending all that money... but that's already been covered :p
 
Shame you can't attach the existing plans. I just re-read your post & it sounds like you intend on using the existing footprint. If so, it won't be as extensive as I first thought. That said, if it has the old 'lean-to' extension at the rear you'll find it's quicker & easier to completely rebuild it, especially if the floor is stuffed. Add the removal of interior brick wall/s & the price is probably starting to get up there. From your description, the 'interior' wall is there because it's probably the original exterior rear wall (major structural change). I'd have a look at what similar properties are renting for with a cosmetic reno and work out a budget for that first. Spending $100k on a more extensive job may make more sense if you are selling or want to increase the capital value, but there'll come a point of diminishing returms with the rental market.
 
AngelMoo, yes the bathroom needs a bit of tiling, a new toilet, some shower doors (replacing curtain), and a decent mirror. Unfortunately the roomsize is not big enough to accomdate a separate shower and bath, so combo bath and shower will have to do.

MsJade, good spot, yes the 'interior wall' is the original rear exterior and therefore structural and costly to knockdown. I've managed to create a simple pic of floorplans within size limit, which I've attached (hopefully works). The room numbers and what they are are as follows:

Room 0: Bathroom
Rooms 1 & 2: Bedrooms
Room 3: Dining area or can be used as a 3rd Bedroom but there is no door to Room 8, just an opening. Has double doors to garden.
Room 5: Living area
Room 6: Kitchen
Room 7: 'Laundry'
Room 8: Just the exit area

Interestingly had the builder in and he agreed with your sentiments. Was amazed at the potential of the place, but thought if I was considering living in it myself at some stage, there was no point doing a middling job but rather going for a cheap and easy patchup ($30G or so) to get decent rent, or a very significant renovation basically kncoking down the house from the living room back, and starting from scratc, signfiicantly extening the house further (has a big backyard) - would cost around $220G+.

Thought the middling job would cost around $120G (plus $20G for contingencies) and the rent increase would not be justified and would probably not be nice enough to move in myself, and teh value add not that great if sold later on.

Tough decision.
 

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Can't see your pics for some reason but from the floorplan it has fantastic potential. I would do the small cosmetic reno up to maybe $40k if you want to do a new kitchen & bathroom etc. Definitely worth spending 200+ for the full extension (I imagine double storey) but wait until you can move in.

Edit: OK I saw the pics. Love the yard, too. It may increase the rent to turn Room 3 into a third bedroom. This is easy if it's just a stud wall. Ypu can extend it & put in a standard door jamb. If not, get a local carpenter to make up double doors so it can at least be closed off.
 
By the way, if anyone is interested, I've taken a few photos of exterior and interior of house and added them to an album on my Facebook which I think is public...link is:

http://www.facebook.com/media/set/?set=a.10150205603799824.331777.681174823

Damn, looking at the photos, just realised the floorboards in the living area, and extension area do not travel in same direction. That'll look pretty stupid if I were to just open it up.

Saw the Pics on FB, it looks great! Good work with the backward..

Regards
Michael
 
MsJade, room 3 I think was actually being used as a 3rd BR by the tenants, though its original use when the extension was made was as a dining room I expect since there is no interior door, just an opening. So I think its a decision whether to knock the strucural wall down (separating room 3 and 5) and turning it into a 2BR house with open floorplan rear (and could also then combine the laundry and exit area into one bigger laundry), or leave it as is but just add a door to turn it into a proper 3rd bedroom.

Might ask the agent which is better from a rent persepective.

MickC, thanks, wish the reality matched the pictures. With the yard, now have to turn it into something easily maintainable and attractive. Might add a paved BBQ area where that brick wall is near the back of the yard...have no idea what the heck that single wall is there for but might as well make use of it.
 
cdchi1, I wouldn't be getting rid of the structural wall right now. Sure, it will increase the size of the living area - but I'd think that your longer term plan would include opening up across the whole back & to do that you'd have to move the laundry anyway. I put a euro laundry into the kitchen in my Elwood place & it's been fine. i wouldn't waste precious floor space with a laundry there, let alone making it bigger.
 
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