to renovate or keep equity to buy a rental property??

R

rookie101

OK, need some advice please?

we are first timers wanting to get into the property market

So we have 30k redraw on our new mortgage (18months old).
Our goal is to start investing in property.
we our family home is valued at around 390 000.
2 options:
renovate the family home to add market value, save more money then purchase rental in 1-2yrs.
Or leave family home as is and save another 10k to purchase rental this year?

all advice welcome!
 
Hi rookie101!

Welcome :)

$30K redraw is great - well done!

How much value can you add to your property with reno? How much are you looking to spend on reno?
 
I personally would only add value to my PPOR if I did it without costing me money,example,cash easily attained or personal sweat and tears.

Use the money you have available to create money,other people on here would probably recommend shares.
I personally haven't any knowledge in shares( I would like to though)
 
well.... the current kitchen and bathroom was done 8-10yrs ago. the structure is really good still. Ideas were re-tiling bathroom, new bath and vanity- max $2000.
kitchen, we contacted granite kitchen transformations, who wanted $11 000 TO KEEP THE KITCHEN WE ALREADY HAVE and make minor changes in structure, new doors and granite benchtops. the plans for reno are decorative really- new paint, blinds, doors, landscaping and carpeting.
how i do find information about finding out just how much value these changes would make?? also it would eat into the redraw.
our home is a surburb with 7% growth, what would you suggest??
 
WTF!!! $11K for basically keeping your same kitchen! Who are these robbers?

How handy are you with DIY things like that? You can save heaps!

I think a rough rule of thumb is that for every dollar you spend reno'g, you want at least $1.50 - $2 return on it. (I'm no expert in renos by the way!)

Just little things like new handles on the kitchen cupboards can make a whole difference to the look of the kitchen. I really don't think you need to spend $11K that can go towards your next IP :)
 
yes i agree, told them where to go!! haha. i might ring a smaller company and get a quote perhaps, we would buy one from ebay but our kitchen is a Galley and a funny design??
 
rookie101 said:
OK, need some advice please?

we are first timers wanting to get into the property market

So we have 30k redraw on our new mortgage (18months old).
Our goal is to start investing in property.
we our family home is valued at around 390 000.
2 options:
renovate the family home to add market value, save more money then purchase rental in 1-2yrs.
Or leave family home as is and save another 10k to purchase rental this year?

all advice welcome!
Click to expand...

Hi Rookie

Personally, I'd start investing. Get that money working for you sooner rather than later.
 
Jamie M said:
Hi Rookie

Personally, I'd start investing. Get that money working for you sooner rather than later.
Click to expand...

ok what would you suggest?
isnt the interest we are saving on the loan by having this much chipped off already going to benefit us over the life of the loan?
i used a calculator and having 30k off the loan within the first 2yrs saves over $100 000 in interest over the life of the loan?
 
rookie101 said:
OK, need some advice please?

we are first timers wanting to get into the property market

So we have 30k redraw on our new mortgage (18months old).
Our goal is to start investing in property.
we our family home is valued at around 390 000.
2 options:
renovate the family home to add market value, save more money then purchase rental in 1-2yrs.
Or leave family home as is and save another 10k to purchase rental this year?

all advice welcome!
Click to expand...

rookie101 said:
well.... the current kitchen and bathroom was done 8-10yrs ago. the structure is really good still. Ideas were re-tiling bathroom, new bath and vanity- max $2000.
kitchen, we contacted granite kitchen transformations, who wanted $11 000 TO KEEP THE KITCHEN WE ALREADY HAVE and make minor changes in structure, new doors and granite benchtops. the plans for reno are decorative really- new paint, blinds, doors, landscaping and carpeting.
how i do find information about finding out just how much value these changes would make?? also it would eat into the redraw.
our home is a surburb with 7% growth, what would you suggest??
Click to expand...

Depending on the valuer - who may simply do a drive-by, or desktop valuation - these types of renovations may not add much value at all (from a bank val POV). You would need to make sure that you requested a "full valuation" (??) to ensure that the benefits were completely realised. If the improvements add to your living standards however, then things like painting and blinds can add lots to quality of life!!
 
yes definately a hard choice, coz we have 5yrs + left in this house and the kitchen and bathroom are driving me nuts!! LOL.... i guess more saving.
but next yr we will have to make a decision re investment property?
 
rookie101 said:
....and the kitchen and bathroom are driving me nuts!! LOL.... i guess more saving.
Click to expand...

Money spent wisely on kitchen and bathroom makeovers almost always add-value to a property. An $11K benchtop upgrade would not be considered wise but re-tiling, new vanity etc in a bathroom would be. :D

Paint, floor & window treatments are also good value-adds. Landscaping is a bit iffy, as is a stencilled driveway for instance.

You should be looking for a $1 spend to give you $2-3 more in end value. If it does not, then don't do it.
 
rookie101 said:
ok what would you suggest?
isnt the interest we are saving on the loan by having this much chipped off already going to benefit us over the life of the loan?
i used a calculator and having 30k off the loan within the first 2yrs saves over $100 000 in interest over the life of the loan?
Click to expand...
Hi Rookie

I'd hope that your investment property would make more than $100k over this same period.
 
Well done on the savings :) IMO it's too early to spend (waste?) it on reno. The fact that you're contemplating reno or investment means that you could 'suffer' without reno a bit longer. I say get an investment as long term, it's better for building wealth (assuming that's your goal).

Given the current flat/ declining market it's a good time for buyers.
 
I don't think $30k is enough to buy much right now. But once you can get a bit more (through savings + increased growth) you'll be better off buying another property if you can. If that property averages 7% growth p.a you'll be much better off than having the $ against your mortgage.

E.g. IP 250k
Year 1 + 7% = 267.5k
Year 2 + 7% = 286.2k
Year 3 + 7% = 306.3k
Year 4 + 7% = 327.7k
Year 5 + 7% = 350.6k

So you are 100k better off after 5 years with this IP v. taking 25 yrs in interest saving without the IP.
Of course, growth doesn't work in a linear fashion but the end result in 10-12 yrs should be about right.
 
ok, so ill sit on the pennys and keep saving.
when we hit 50 000 redraw in around 12 months, ill pull it and get the investment.
thenthe question arises are units vs houses for investments? units in our area currently are increasing higher than house at 7/7% growth
 
Ms Jade said:
I don't think $30k is enough to buy much right now. But once you can get a bit more (through savings + increased growth) you'll be better off buying another property if you can.
Click to expand...

$30k gets you a 5% deposit on a 300k property and covers stamp duty too with LMI capitalised.

All depends on what sort of property you want to buy, I would prefer to start looking for deals now in that price range, if nothing comes up then you just keep saving. All personal preference :)
 
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