Value Adders/Renos

[beech]

Was interested to hear from u folks who do Renos.

Do u have set rules on how much to spend on each reno?
What is the minimum gain u would look for?

Are there many of u that buy/reno/refinance/& duplicate straight away?

Besides hidden costs (plumb/elect)are there many other pitfalls of doing this full time?

Have done 1 reno and enjoyed it immensely and can do some of the jobs involved .

thanx Darren

 

[Jas]

A _very_ rough rule of thumb is 10% of the purchase price. Obviously some places will need more than others, but you can spend the full 10% without adding value, so you need to be aware of the benefits of putting 'x' over 'y'.

Jas

 

[foxysilvers]

Most pros, including myself stopped buying reno properties in inner Melbourne nearly 12 months ago.
I finished the last of my stock about 6 months ago..........why?....too risky and margins are almost non existant.

If you are keen, just get to know an area like the back of your hand.........streets.........prices.............. existing residents............new residents..........everything, and then pick an agent you can work with............and buy right.......because if you dont' you will be wasting your time and money.

Cheers

 

[geoffw]

Originally posted by foxysilvers
Most pros, including myself stopped buying reno properties in inner Melbourne nearly 12 months ago.
I finished the last of my stock about 6 months ago..........why?....too risky and margins are almost non existant.

If you are keen, just get to know an area like the back of your hand.........streets.........prices.............. existing residents............new residents..........everything, and then pick an agent you can work with............and buy right.......because if you dont' you will be wasting your time and money.

Cheers

Because too many TV reno shows? Because people don't pay a premium when rented? Because ....

 

[foxysilvers]

Most pros, including myself stopped buying reno properties in inner Melbourne nearly 12 months ago.
I finished the last of my stock about 6 months ago..........why?....too risky and margins are almost non existant.

If you are keen, just get to know an area like the back of your hand.........streets.........prices.............. existing residents............new residents..........everything, and then pick an agent you can work with............and buy right.......because if you dont' you will be wasting your time and money.

Cheers

 

[foxysilvers]

Hi Geoff.............a whole bundle of reasons I guess.

I think those crazy TV reno shows were fueling the auction market in early 2002 in Melbourne anyway. When genX young ladies were paying in my opinion $50K too much for absolute problem properties I really had to step away.
These same properties are now sadly displaying "For Lease" signs 12 months later.
The market was so hot that there was absolutely no need to renovate and I flipped all deals apart from a couple without touching them in 2002.

Renovation costs for me are now too high and I would rather build a new residence or at least get a builder to do it.
I think the trend will be into more splitting of blocks and demolition of some of these old dumps, inner areas anyway.

I have absolutely no interest in the rental market.

Lastly , I had no real problem outlaying $150K plus $30k to make maybe $40k but now the buy price is likely to be $250K plus/plus with no guarantee of a profit............so back to maintenance work.

I need to make a profit and any thrill looking at my reno work evaporated long ago.

Cheers

 

[karsal]

Hi Foxysilvers, and all.

Tend to agree that TV shows are getting more people into the market. However, these will soon get flushed out as they realize that it is harder than it looks. I've seen a few lose some $$$$.

It's a bit like those buyers that used to hand me their business cards with "Professional Property Investor" written on them.

Their new cards will probably read: Professional Speculator In Deep S**t As I Can't Sell Those Apartments In Docklands That I Bought With Deposit Bonds. Point is, these fads come and go.

Surely the profit is when you buy? I try to buy below value so that the "discount" covers my reno and costs.

It helps being on the "inside" and getting a good feel for the market. Research is critical, as is knowing which agents roll over on price.

I guess that what makes a good deal depends on your objectives. If doing it for a living, then it can get tight.

Personally I am happy with a 15% to 20% profit on purchase plus costs. This will usually get me a 50%+ cash on cash.
My objectives are different, as I prefer to outsource 90% of the work, so as to not hinder my normal income.

As an agent, I can happily say that it is more of a buyer's market at the moment. A low clearance rate has presented some great opportunities in Melb for passed in properties, as vendors become more realistic.

Cheers,
Sam.

 

[Kevmeister]

Sam,

What areas do you tend to work in? I'm interested in your comment about Melbourne becoming a buyer's market...

 

[beech]

thanx for ur comments,
i have actually been thinking Ballarat/Geelong for reno,seems to be plenty of those homes with a bit of character that come up well with a few dollars spent on them.
There also seems to be fair diff in price between renovated property & un renovated.
Comments please


Darren

 

[Glenn]

Hi Sam,

It is interesting to note that parts of Melbourne are starting to favour buyers as I feel the same thing is starting to happen here in Perth, although not so much with inner city grand developments but with the inner and middle ring at the moment. The outer ring of Perth seems to be enjoying it's first real strengthening since 1989-90. Things are a bit different here though as there is just so much undeveloped land in the outer burbs that as soon as there is any pent up demand, another huge subdivision is created to meet it.

I concentrate my attention on the suburbs just to the north and west of the city like Perth, Northbridge, Mt Lawley, Highgate, North Perth, West Perth and Leederville. I heard from a mate @ work on the weekend that his brother picked up a small house in one of these suburbs that was in the middle of a renovation but the vendor could not complete it for a number of reasons and had to take a substantial loss to offload the property. This is something that I feel we shall see a bit of in the next couple of years.

Glenn

 

[karsal]

Hi all.

I"ll try to answer each post seperately.

1: I am finding that some vendors are willing to accept low offers as they are either strapped for $$, or the panic phase has set in.
Granted that these are mostly investors who have likely taken a beating in the stock market.
Understand that the media sets the tone for the market. Agents tend to use this to condition vendors on price. Thus agents do the work for you.
Melbourne is very Auction orientated. This system works well in a hot market where people get carried away. When clearance rates fall as they did late last year, there are better opportunities for buyers. Hence my reference to a buyers market. I purchased a reno in Nth Melb which I have just completed and even the valuer thought it was cheap! The agent advertised the wrong suburb, and no one was at the auction!

2: As for my areas, I tend to stick to $200-$300k. The more expensive the area, then I will look at flats. Prefer less layout per deal.
In the end, it always comes down to buying price. I tend not to aim for upmarket areas as these require a more detailed ( expensive and meticulous) reno. I was once taught about the pyramid of buyers and sellers.

The higher up the pyramid, the less bricks there are. Bricks are buyers and renters. The higher you go up in price, the less bricks there are that can afford your property.

3: Actually thought about Geelong a while back. I believe that there is a suburb where the cement mill has closed down, and there are quite a few cottages there. Perfect scenario, as long as there is substantial mark up and profit potential.
The question is: What is the liquidity of the market like?

Cheers,
Sam.

 

[XBenX]

Damn where have all these self proclaimed experts been hiding ?

We seems to have had an influx of them lately, whatever happened to being humble/modest ?

 

[Kristine..]

Ben, Ben, what are you saying???

Humble and modest?

Self proclaimed experts?

After a couple of years with this Forum, I have seen many people come and go.

However, when first discovered, this is intoxicating stuff! People actually wanting to discuss property investments, ways and means of doing this, what motivates them and what they are hoping to achieve.

If you've been involved in property for a while, it is natural to want to share your point of view - finally, you've found people who don't lapse into a stupor at the mention of negative gearing, depreciation, renovation etc

And here there are actually people who say 'tell me, tell me'!

So who could resist crowing on the fence a little?

Some months back there was a straw poll on how many properties people actually had. Those who chose to respond presented some interesting facts. Some of the most vocal actually did not 'yet' own any property. That's OK. We all have to start somewhere.

There's nothing wrong with having a strong opinion. Nor with 'gilding the lily' as to your own actual experience. That is what this Forum is for - exchanging opinion and sharing experience whether real or anecdotal. In everything there is a grain of truth. The knack is in finding it.

Cheers

Kristine

and I can't resist ... An 'ex' is a has been, and a 'spurt' is a pressurized drip! Which rather describes me even on good days!

 

[Lotana]

Bravo Kristine!

Lotana

 

[geoffw]

Hey Kristine,

An excellent response.

For me, you've summed it up superbly.

Hardly any of the face to face people I know (apart from the one I'm married to) want to know about properties. Most are defensvie.I suspect many are waiting for it toall fall down for me (as I used to wait for those other people to have things fall around them- it hasn't happened to them either).

And here there's people asking for opinions. I'm in heaven!

I trust that people realise that any opinion that I, or any other person here, is only an opinion, and should not be acted upon for advice, and should be confirmed by professional opinion.

 

[Kevmeister]

Hardly any of the face to face people I know (apart from the one I'm married to) want to know about properties. Most are defensvie.I suspect many are waiting for it toall fall down for me (as I used to wait for those other people to have things fall around them- it hasn't happened to them either).

Family can be particularly "dangerous" in that regard. They present every possible *negative* "what if" scenario. The positives, in their opinion, can never be outweighed by the negatives. I also think it takes a very large amount of determination and self-confidence to overcome that, because you are implicitly telling them that they are wrong. I find it better not to ask "advice", because rarely will it be positive. My brother-in-law the other day was telling me about all the people who were "going to be in deep ****" because of the ATO ruling concerning depreciation (I think it concerns some plant now being considered part of the building, therefore depreciates at 2.5% instead of a higher rate). He knows we're considering buying our first IP, so I don't know whether he is genuinely trying to be helpful (as in, be careful what you do), or trying to poo-poo the idea.

So, I agree with geoffw, that having a "community" of likeminded individuals all interested in "advancing" their financial position through property investment (or, as some do, with other forms of investment), is fantastic. People here want to talk about it. People here are prepared to be *realistic* about the risks, not poo-poo your ideas, etc.