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%?!
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%?!