Renovation project in Ipswich

Hi,

I've just purchased an investment property in Ipswich, about 1km from the uni/hospital. It's a 2 bed, 1 bath timber workers cottage built approx 1940, in a quiet street with good access to public transport. It's the classic "worst house in the best street" as both neighbours are renovated cottages and other properties on the street are much larger.

The property is structurally sound, but has the usual problems with a property of that age that has been intermittently maintained - corroded roof, ancient (but serviceable) kitchen, grotty bathroom, stuck doors, rotting front fence etc...it would also benefit from repainting inside. The exterior paint is pretty good, the hardwood floors have been sanded/sealed and the wiring and plumbing all seems fine. There's also a timber "lean to" tacked onto the back, containing the laundry. The interior cladding is partially VJ and partially fibro.

It's on a 650m2 block, and the house is situated on the front corner, leaving wide access down the side and a huge backyard.

If I did nothing more than mow the grass and install a fire alarm it would rent for $220-240/wk, which is roughly a 6.5% yield. If I built a 1 bedroom granny flat, I think that would add another $180/wk, which would give me a yield of about 8%.

My plan was to rent out the existing property for 12 months or so, until I had the time to do a full renovation, then hold it as a rental for 5+ years. However, given that the peak demand for rentals will be in Jan/Feb (uni starts in Feb), I'm now wondering whether I should take the plunge and renovate between now and the end of the year.

I'd appreciate some advice on a couple of things:

1. Which of the renovations below do you think would add the most value and rental yield?
2. Should I borrow the money and renovate now, or wait for 12-18 months and pay cash?
3. Thoughts on building a granny flat?

Potential renovations:

- Re-roof and add insulation. The existing tin roof has some very small holes and is starting to corrode between the sheets. Had a look at the roof space and it doesn't look like it leaks, except possibly in periods of sustained wet weather. Building inspector says it's not an urgent problem, but needs to be done sometime in the next couple of years.
- New kitchen. The existing benchtops are good, but the cabinet doors are fibro and falling off their hinges. There's also a weird hollow fibro bulkhead over the stove, which I want to rip out and replace with an exhaust fan.
- New bathroom. This is top of my agenda, as the existing one is pretty bad.
- Internal painting. It's not that bad currently, but would definitely benefit from new paint, especially window frames and cornices.
- Replace the internal fibro walls with (fake) VJ to improve the "character" of the house. It'd look nice, but not sure if it adds value.
- Build a new front fence. The existing timber fence looks ok, but you can put your finger through it in places...
- Pull down the "lean to". This is another top priority, as it leaks and the concrete floor is cracked. I'd replace it with a new slab and a smaller covered laundry/storage area.
- Replace/re-detail the original window frames.
- Replace/remove shutter from windows.
- Build a partially enclosed carport down the side of the house. There's already a decent concrete slab in place, so it's just a matter of building the structure.
- New hot water system and housing. The current one works ok, but there's no slab under it, so it's sinking into the ground...
- Exterior painting. Not a priority, but would add value in the long run.
- Lift house and build underneath. The vendor had "in principle" approval for this, and had the plans drawn up... I could build a garage and rumpus room/storage under the house, but I doubt the cost would be worth it.

This is a long post, so take your time and let me know your thoughts! I'm conscious of not over-capitalising, but I also don't want the place to fall apart.

Cheers

Ricky

Edit: maybe I should do nothing and enjoy the 6.5%?!
 
Whats your budget for renovation I assume you had this in your calculation when buying the property.

A number of things to consider with your post. What would the place rent for if all renovated. It will take a bit to plan your renovation so do you have the time to get it all done before Jan / Feb including the granny flat.

If you elect to do a full reno get a depreciation schedule done before.

If I was going to do anything first for the renovation it would be the lift which will level the place and most likely sort the stuck windows out. Lifting will effect the lean to and your carport not to mention all the plumbing to the bathroom and kitchen. Basically once the base is right the rest is easy.

I guess you could consider building the granny flat I assume not attached and just clean the main property and renovate down the track. This way you will get some income and time to plan the renovation without be rushed.

Brian
 
Thanks Brian - I'm not necessarily planning on doing ALL the potential renovations, just wanted to get other people's ideas about what they thought would add the most value.

My budget is $60-70k

Rick
 
Hi,

I've just purchased an investment property in Ipswich, about 1km from the uni/hospital. It's a 2 bed, 1 bath timber workers cottage built approx 1940, in a quiet street with good access to public transport. It's the classic "worst house in the best street" as both neighbours are renovated cottages and other properties on the street are much larger.

The property is structurally sound, but has the usual problems with a property of that age that has been intermittently maintained - corroded roof, ancient (but serviceable) kitchen, grotty bathroom, stuck doors, rotting front fence etc...it would also benefit from repainting inside. The exterior paint is pretty good, the hardwood floors have been sanded/sealed and the wiring and plumbing all seems fine. There's also a timber "lean to" tacked onto the back, containing the laundry. The interior cladding is partially VJ and partially fibro.

It's on a 650m2 block, and the house is situated on the front corner, leaving wide access down the side and a huge backyard.

If I did nothing more than mow the grass and install a fire alarm it would rent for $220-240/wk, which is roughly a 6.5% yield. If I built a 1 bedroom granny flat, I think that would add another $180/wk, which would give me a yield of about 8%.

My plan was to rent out the existing property for 12 months or so, until I had the time to do a full renovation, then hold it as a rental for 5+ years. However, given that the peak demand for rentals will be in Jan/Feb (uni starts in Feb), I'm now wondering whether I should take the plunge and renovate between now and the end of the year.

I'd appreciate some advice on a couple of things:

1. Which of the renovations below do you think would add the most value and rental yield?
2. Should I borrow the money and renovate now, or wait for 12-18 months and pay cash?
3. Thoughts on building a granny flat?

Potential renovations:

- Re-roof and add insulation. The existing tin roof has some very small holes and is starting to corrode between the sheets. Had a look at the roof space and it doesn't look like it leaks, except possibly in periods of sustained wet weather. Building inspector says it's not an urgent problem, but needs to be done sometime in the next couple of years.
- New kitchen. The existing benchtops are good, but the cabinet doors are fibro and falling off their hinges. There's also a weird hollow fibro bulkhead over the stove, which I want to rip out and replace with an exhaust fan.
- New bathroom. This is top of my agenda, as the existing one is pretty bad.
- Internal painting. It's not that bad currently, but would definitely benefit from new paint, especially window frames and cornices.
- Replace the internal fibro walls with (fake) VJ to improve the "character" of the house. It'd look nice, but not sure if it adds value.
- Build a new front fence. The existing timber fence looks ok, but you can put your finger through it in places...
- Pull down the "lean to". This is another top priority, as it leaks and the concrete floor is cracked. I'd replace it with a new slab and a smaller covered laundry/storage area.
- Replace/re-detail the original window frames.
- Replace/remove shutter from windows.
- Build a partially enclosed carport down the side of the house. There's already a decent concrete slab in place, so it's just a matter of building the structure.
- New hot water system and housing. The current one works ok, but there's no slab under it, so it's sinking into the ground...
- Exterior painting. Not a priority, but would add value in the long run.
- Lift house and build underneath. The vendor had "in principle" approval for this, and had the plans drawn up... I could build a garage and rumpus room/storage under the house, but I doubt the cost would be worth it.

This is a long post, so take your time and let me know your thoughts! I'm conscious of not over-capitalising, but I also don't want the place to fall apart.

Cheers

Ricky

Edit: maybe I should do nothing and enjoy the 6.5%?!
With the HWS that would be the first job,a concrete slab too install under the unit is less then 30 bucks ,just have to ask does this property have flood cover and what was the cost..
 
Hello Ricky

Have you considered the potential rent after your renos. There is no point spending any amount of $$ if the increased rent is miniscule in comparison.

Who is your student demographic? I dont know myself which courses are popular for boarders in Ipswich, but I have done this exercise in the past regarding a property close to the Gatton campus. In our case, the maximum rent that anyone would pay in that area meant that it was not feasible to go ahead with the project.

Ask the local agents what features their typical tenant would want. As a teacher, I would want bathroom, kitchen, roof and paint. I am not afraid of fibro, but other adults can be. If you have fibro sheets in the rooms to be reno'd, I would get it removed at the same time rather than at a separate time.
 
G'day Angel - yep, I think a new bathroom, kitchen and paint would cost in the order of $20k and add roughly $20 to the weekly rent, which obviously isn't a great return. However, it would add more than $20k to the value of the property.

Likely tenants include students (including lots of foreign students who get conned into thinking they're studying at UQ St Lucia and end up in Ipswich doing mandatory English language courses before they can get to the city campus!), single mums (I"ve had dozen of applications...) and young couples. Seems like they'd all want a decent bathroom and kitchen.

If I did build a GF, the market would expand to include couples with an elderly parent, parents with a teenager, or even more students.

Kitchen and bathroom are definitely priorities.
 
Don't do anything other that the basics to get it rented.
Save up for the reno
Don't over capitalise with the reno
Consider one of these for the granny flat. http://www.australianmodularhomes.com/ Apparently they are drop in and forget. Word has it they are selling like hotcakes with easy council approval.
A.
 
Hello Ricky


If you have fibro sheets in the rooms to be reno'd, I would get it removed at the same time rather than at a separate time.

if the fibro is a problem (which it isnt if understurbed) simply sheet directly over it .
done this many times in my ip,s better finish without the huge costs associated with asbestos removal and dump fees.
 
OK, so I'm not going to bother with renovations for another 12 months or more, on the advice of property managers who all say reno wouldn't add much to the rental yield.

Can anyone recommend a good PM in Ipswich? I've met 4 so far, and they're all pretty uninspiring.
 
OK, so I'm not going to bother with renovations for another 12 months or more, on the advice of property managers who all say reno wouldn't add much to the rental yield.

Can anyone recommend a good PM in Ipswich? I've met 4 so far, and they're all pretty uninspiring.

dont go with PFS ,the term "absolutley usless" was created just for them alone ,no one can stand in their shadow when it comes to incompetence and poor housekeeping/management .
i have one of my properties with all local real estate,the principal is down to earth and his staff do a good job with the management .
give him a ring
 
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