Renovations

Reply: 1
From: Owen .


I've done a cosmetic apartment one which paid off well. What do you want to know?


Owen

"Gambling promises the poor what property performs for the rich – something for nothing"
 
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Reply: 1.1
From: Even Steven


Owen
When you say it paid off well, is that because it increased the rent or because you were able to on-sell at a profit? How do you determine that it paid off well?
Steve
 
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Reply: 1.1.1
From: Robert Forward


Owen did actually post about his reno a few weeks back. I think from memory that he got both a higher yield in the rent and a greatly improved reval by the bank.

So I dare say that is what Owen meant in saying "it paid off well".

Cheers
Robert

The Sydney "Freestylers" Group Leader.
 
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Reply: 1.1.1.1
From: Owen .


Roberts right, the pay off was primarily in the revaluation but there was an increase in rent return although not much due to market pressures. The new valuation allowed nearly all the cost involved in buying and renovating the apartment to be wrapped up in an 80% LVR loan. That gave me my deposit back so I can do again and effectively made it a 'no money down' deal (although spread over a couple of months).


Owen

"Gambling promises the poor what property performs for the rich – something for nothing"
 
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Sim

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Reply: 1.1.1.1.1
From: Sim' Hampel


Many people use the measure of "cash on cash return" to evaluate an investment. This can be expressed in other words of "when do I get my money back ?".

The usual definition of this is the number of years it will take to get your initial cash outlay back in hand, expressed as a percentage, with one year being 100%. In other words... a "100% CoC return" means that you will get all of your cash outlay back by the end of the first year.

Following this on, a 50% CoC return means you get your money back in 2 years, 33% = 3 years, 25% = 4 years and so on.

If you get your money back within 9 months, this is actually a 150% CoC return, 6 months = 200%, 3 months = 400%.

So Owen... strictly speaking I wouldn't call your deal a "no-money-down" deal, but it sounds as if you got in excess of 300% CoC return on your outlay (or was it "equity on equity" return ? ;-) ... which to me sounds pretty darn nice.

Now if only it was cashflow positive as well, you'd be stoked right ?

 
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Reply: 2
From: Rolf Latham


Hi Steven

Client of mine has just finished reno on a 2 bed unit, increasing the val by 47 %.

Increased equity available for other things I suppose.

Ta

Rolf
 
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Reply: 2.1
From: Ann Tsu


Hi guys,

Anyone knows any good renovators (with good price and quality ?)

Thanks.
Ann
 
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Reply: 1.1.1.1.1.1
From: Owen .


'Equity on equity return' is an excellent way of putting it. From settlement to completion of reno was 6 weeks with another 6 weeks before being tenanted and revalued. 12 weeks to get my money back (pay off the equity LOC) and get an income. The 300% return you mentioned.

The rent and the current low rates plus depreciation makes this cash flow positive after tax at about $10pw. 6-8 months ago I would have been making $50-$60pw but the rental market has really flattened out (dived) for reasons we are all aware of.

I wasn't looking to buy at this time at all until I found this deal but with the high sales values in the area, some hard negotiations and an un-knowledgable vendor to work with, it was too good to pass up. You HAVE to know your market. I knew exactly what the rental returns would be and this was factored in to the deal. It was a good exercise to prove to myself that deals are available in any market and money can be made. Now I'm chasing another.

Owen

"Gambling promises the poor what property performs for the rich – something for nothing"
 
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Sim

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Reply: 1.1.1.1.1.1.1
From: Sim' Hampel


Woohoo ! Go Owen !

 
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Reply: 2.1.1
From: Cathy Baxter


Owen

Can you briefly describe renos or if you've written it up before can you refer me to the post please?

Ta
Cathy
 
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Reply: 2.1.1.1
From: Owen .


This post is copied from an email reply to one of our lurker forumites but asnwers Cathy's post well too. I couldn't find my other post so here's what I did. The property is 2 br/2 bath unit in Alexandria, 4kms from Sydney, next to Sydney Park, 300m from a train station, 15min walk to the King St, Newtown restaurants with City skyline views. Potential plus.

Reno.

Kitchen. Cupboard doors off, handles and hinges off, oven, cooktop, rangehood, dishwasher, sink out. Painted doors and external cupboard surfaces with White Knight Laminate paint system (Hi-Gloss White). Painted tile splash back with White Knight Tile paint system (Semi-Gloss Grey). Got Granite Transformations to cover the laminate bench top with black granite (cool). Installed Stainless Steel oven (flash), Stainless Steel rangehood (flash), electronic dishwasher (flash), Halogen cooktop (real flash). All bottom of the range Westinghouse stuff. Reused sink (new mixer), door handles, hinges. A flash kitchen that looks a million dollars but cost a quarter the price of a new one.

Bathrooms. Removed vanities, taps, rails etc. and replaced vanities with Hi-Gloss White ones on Stainless legs (latest look, local made). All taps and rails with Dorf El Toro chrome stuff. That’s it.

The rest. Painted everything first. Nice sand/wheat type colour on walls (Matt - easy to patch) , cool Eggplant/Purple type colour in kitchen and around the end wall of the lounge/dining room (Matt). Feature walls are very dramatic and very simple. Everyone loves it and it cost $40. Bathrooms (Pale Blue Semi Gloss – clean and sharp), ceilings (Flat White – easy to patch), doors and frames (White Birch Gloss - off white). Removed, cleaned, polished and reused door handles. New deadlock on front door and removed the stupid door closer. It’s a home, not a motel. Replaced every light fitting, fancy Halogens in kitchen and bathrooms and plug and light switch cover (Gloss White). Carpet a nice 50/50 Wool/Synthetic Sisal look one with a good rubber underlay. Real luxury and it will last long after the depreciation. Slimline Venetians on the windows and a nice curtain in the lounge.

Why. The first thing tenants do is switch on a light, use the taps and check the kitchen out. They look at the switches, flick it and then look at the light fitting. They see Dorf on the taps. Halogen cooktops aren’t common so if you don’t have gas, have one of these. Big hit. Don’t scrimp here. Same with the carpet. I made prospective tenants and the valuer take their shoes off and the carpet is nice and soft. It also sets a president for what ever tenants you get. Maybe they will keep doing it. Mine say they will!!! These things, the granite bench top and a $40 feature wall were a big hit.

Result. I then got a whole lot of sale notices from surrounding comparables, ads, Home Price Guide reports and wrote a big ‘History of the Building’ story and spend nearly 2 hours chatting with the valuer and looking at the view in our socks. I asked for a huge increase in value (comparable with other City views) and got nowhere near it. The result was, however, exactly what I expected and needed (I know my market) and was 24.5% above my purchase price and 6 times my renovation outlay …. in 6 weeks. I can’t wait to do it again.

Suggestions. Read everything you can on Geoff Doidge (reno’s Queenslanders – check the forum and API Magazine) and Peter Spann (does the same for apartments). I’ve spreadsheeted everything spent and bought for this reno and I can repeat to the last dollar tomorrow. I will change things but the basics will remain the same. Over time, I will stop doing them myself and hopefully tradesmen I can trust to do it. I can just project manage it then and keep track of the numbers. Easy.

Disclaimer. This is the one and only reno (except for my house which was way different) I have done. This one worked and I am positive many others won’t. Wrong house, wrong market, wrong time etc. But I’m pretty confident this is an easily repeatable process (for apartments at least) and I will be doing it again.

I hope that helped a few people. Micheal Croft's post from a month or so ago about adding rooms and converting garages was a gem too. Find it and read it.

That's all folks.

Owen

"Gambling promises the poor what property performs for the rich – something for nothing"
 
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Sim

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Reply: 2.1.1.1.1
From: Sim' Hampel


Great post Owen, thanks.

 
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Reply: 2.1.1.1.1.1
From: J Parker


Inspirational Owen! Hope all your renos come in so successfully! I have to agree with you about the s/s appliances- I put them into my IP unit and they really do look flash! Ditch the curtains though, if you can, (sometimes you can't) and go for timber venetians- look great, easy maintenance and cheap compared to other options!

I got my unit revalued recently for $285K after paying $213K for it just under a year ago. I spent $11K on reno and am a very happy girl! Mind you, the boom market has helped a lot! Here's to equity out of thin air!! cheers, Jacque :)
 
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Reply: 2.1.1.1.1.1.1
From: Glenn M


Owen,


Did you include the Renovations as part of your borrowings/Loan with your Bank? If so, did you organise for quotes before settlement and pass these on to your Bank?
Was there a tenant in your Property before settlement? If so, how did you organise quotes around the tenant?

Sorry about all the questions but I'm currently looking at doing a few renovations myself.

I currently have a Tenant in my Property and have asked them to leave before the Settlement date (60 days from now). However, I want to do some renovations and would like to have these all under way within the first couple of days of Settlement. The bank will allow me to include Renovation costs as part of my borrowings, but I must have detailed quotes. I'm just trying to think of ways of trying to organise some quotes with the current Tenant who I have just asked to leave. At the moment I'm thinking of giving them $50-$100 for the inconvenience.

Can anyone think of any other ways of approaching this problem?

GlennM.
 
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Reply: 2.1.1.1.1.1.1.1
From: Even Steven


Thanks for the good oil Owen. Sounds like a great job you did there. Can anyone tell me if Geoff Doidge and Peter Span have websites and books.
Thanks
 
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Reply: 2.1.1.1.1.1.1.2
From: Owen .


On 1/4/02 7:46:00 AM, Glenn M wrote:

>Did you include the Renovations as part of your borrowings/Loan with your Bank? If so, did you organise for quotes before settlement
and pass these on to your Bank?

*** I have a LOC secured against my home with a $0 balance. Out of this came the 20% deposit, stamp duties, lawyers fees and every cent of the renovation. I had an 80% LVR P&I mortgage secured against the purchase price of the unit. This loan had no exit fees and no features. I got it purely so it could easily be refinanced after the reno (by the current bank or any other that would accept the valuation). After the reno, I asked that the loan be extended to 80% LVR of the NEW valuation. As it was still only 80% LVR and I vigorously proved the valuation with loads of info, photos and my plan, I had no problems, no extra valuations and no LMI was needed. The additional money paid off nearly all of the debt in the LOC so it is empty again and ready for the next IP. This set up means no cross-collaterisation. If the unit goes belly up the bank can have that back but they don’t get my home. All I get left with is an empty LOC I can spend anytime I want. Nice and safe.

>Was there a tenant in your Property before settlement? If so, how did you organise
>quotes around the tenant?

*** Yes there was but I asked for vacant tenancy. I had one day in the apartment before settlement to measure up and plan what I was going to do although I already a a fair idea of what I was going to do as that was the reason I bought the unit in the first place. Know your plan. I called some tradies to get ball park quotes on stuff I couldn't do and then I wrote up a budget. The expected/planned increase in the valuation had to cover stamp duties and costs and the balance was then available for the reno. My budget was out by just $2k. I took 3 days off work and pre booked all the tradies for real quotes and then I got into it. As I went I confirmed installation dates with the tradies and it mostly went to plan. It took 5 weeks work over a 6 week period.

So I had the available funds for the reno and then revalued and refinance after the work. I don't know how you could get a bank to loan you funds based on a possible reno and possible new value.

I hope this answers some of your questions.

Owen

"Gambling promises the poor what property performs for the rich – something for nothing"
 
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Reply: 2.1.1.1.1.1.1.2.1
From: Glenn M


Thanks Owen for your reply.


GlennM.
 
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Reply: 2.1.1.1.1.1.1.2.1.1
From: J Parker


Glenn, on the latest property that I bought, I put a clause in the contract that gave me access to the property for quotation purposes. I am letting the tenants know well in advance of dates so that they are inconvenienced as little as possible. I also contact the agent, as they need to know when I am entering the house.

In the unit I renovated, I did the same thing and had the kitchen company deliver the kitchen the day of the settlement. Two weeks later all was done and the unit was rented out the same weekend. We were all exhausted but it was worth it!!

Most tenants are fairly good about getting quotes etc whilst they are still there. Just be extra nice to them and leave them a bottle of champagne when you first turn up, to make it harder for them to refuse you. A little niceness goes a looong way. Have fun!

Cheers, Jacque :)
PS: I sent my tenants a xmas card with movie tickets in it as a way of saying thanks for looking after the place so well too. People appreciate those sorts of things.

Cheers, Jacque :)
 
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