What would you do with this IP to sell?

So the situation:

Own 50% of a property with my sister.

Sister wants to sell...it cost us $320 000 total including reno and stamp duty a couple of years ago. It gets us $600 to $750 gross rent per week depending on whether or not all the rooms are rented out (rented by the room). We pay power and electric. So it's positively geared with only 4 rooms rented and very positively geared with 5 rooms rented. ..... so I'm not that keen to sell... but what can you do.

We did a quick reno when we first purchased the property, but there are many things left to do.

I'm wondering if you were going to sell a house like this, what would you do? Remember I only share in 50% of the profit so I wonder how much I should bother with?

Currently I would say the property would get $420 000.

It's a flood free, nice sized block 610m2. 10ks south of brisbane city in salisbury. It's a nice position.

Some comparable properties that are a bit better for around $450 000:

http://www.realestate.com.au/property-house-qld-salisbury-117947799
http://www.realestate.com.au/property-house-qld-salisbury-117753991

And a property that is way better for around $530 000:
http://www.realestate.com.au/property-house-qld-salisbury-117745415




What sort of price should I realistically be trying to achieve, and how much work and money should I spend on the house to achieve that?

Issues with the house. Bathroom is dated, kitchen is dated, the house needs 12 stumps replacing as the concrete stumps are falling apart. The back steps are falling apart. Back yard needs grass. Downstairs is a bit of a dungeon with the laundry very dated and falling apart. Some eaves need finishing off. House doesn't have gutters.

So what I'm considering doing:

New shower cubicle, new bathtub (already recently replaced vanity). New toilet seat and cistern.

New oven/cook top. Possibly replace kitchen benches as well, kitchen cabinets aren't too bad.

Rip down back steps, put in a back deck instead. Thinking of doing the deck without a roof and maybe just a shade sail or a table in the middle of it with an unbrella. Not really bothered with the whole deck roof thing...

Turf backyard.

Put white palings around under the house to finish it off better.

Re-sheet the laundry so it's not looking like it's falling apart.

Finish off the eaves.

Get someone in to do the gutters as I haven't done them before and don't really want to waste the time doing it.

Possibly replace the 12 stumps that are falling apart. But unsure if it's worth the effort. How much do you think this would effect the sale? Some stumps you can see the rusted rio in them and the concrete is falling off in chunks. Some stumps are worse then others.

What would the rest of you do? There's lots of jobs to do. Even with all of these jobs done I might only achieve a sale of $460 000. So it's a lot of work to see my profits increase a total of $20 000 (50%) gross. Then there is probably $12 000 to get the house to that stage, so the gross profits drop down to $14 000 after all of that work.

Maybe with a deck and everything looking good it might achieve more than $460 000. I'm going to check with a realestate agent tomorrow. But I'd be surprised if it achieved more than $490 000 with all the renos done. Maybe if I put a second bathroom in as well it might get up there.



My brother in law will possibly help out with the jobs too so it won't be all me doing the work. I'm really busy with my ppor building works right now, so timing is crap.

What are your suggestions? What would you do with the property, any ideas would be appreciated. I've included some pics.
 

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Money can tear families and friendships apart.

Based on your post, it appears you are valuing it as a buyer (with that list of stuff to fix).

Now consider if it was the other way around, she wanted to keep, you wanted to sell. What would you want for it?

If you guys can treat this as a proper transaction and allow it to be win/win, I would buy it.

Otherwise, fix it up and sell it.
 
Money can tear families and friendships apart.

Based on your post, it appears you are valuing it as a buyer (with that list of stuff to fix).

Now consider if it was the other way around, she wanted to keep, you wanted to sell. What would you want for it?

If you guys can treat this as a proper transaction and allow it to be win/win, I would buy it.

Otherwise, fix it up and sell it.

Yeah I'm not even going to bother trying to buy her out. Too much potential for things to go wrong with our relationship. I'll just sell up. But my main concern is how much work I should bother doing on the house and what effect it would have on the sale.
 
Sister wants to sell...it cost us $320 000 total including reno and stamp duty a couple of years ago. It gets us $600 to $750 gross rent per week depending on whether or not all the rooms are rented out (rented by the room). We pay power and electric. So it's positively geared with only 4 rooms rented and very positively geared with 5 rooms rented. ..... so I'm not that keen to sell... but what can you do.

Can you buy your sister out for half of its current value $420K (no agent fees but low purchase price = low stamp duty for you to buy her half) and keep all that lovely rent for yourself?

We did a quick reno when we first purchased the property, but there are many things left to do.

I'm wondering if you were going to sell a house like this, what would you do? Remember I only share in 50% of the profit so I wonder how much I should bother with?

Currently I would say the property would get $420 000.

What sort of price should I realistically be trying to achieve, and how much work and money should I spend on the house to achieve that?

This is the age old dilemma we face when I do my sums and work out "what if" situations. What if I spend $20K doing a new bathroom and replacing stumps and it only gets me an extra $30K? Not worth doing in my opinion.

Issues with the house. Bathroom is dated, kitchen is dated, the house needs 12 stumps replacing as the concrete stumps are falling apart. The back steps are falling apart. Back yard needs grass. Downstairs is a bit of a dungeon with the laundry very dated and falling apart. Some eaves need finishing off. House doesn't have gutters.

So what I'm considering doing:

New shower cubicle, new bathtub (already recently replaced vanity). New toilet seat and cistern. Rough guess at cost = $2500 depending on how much you need to do to retrofit new tub and shower and quality of finish (and how much a plumber will charge to do it).

New oven/cook top. Possibly replace kitchen benches as well, kitchen cabinets aren't too bad. Rough guess at cost = $700 oven/cooktop if you buy well on ebay, bench tops $1000 (maybe $1500 depending on length of run) for timber from Ikea or laminex or cheaper option (but it will look cheap).

Rip down back steps, put in a back deck instead. Thinking of doing the deck without a roof and maybe just a shade sail or a table in the middle of it with an unbrella. Not really bothered with the whole deck roof thing... Rough guess at cost = $5000 - need approval? builder? DIY (you are owner/builder?)

Turf backyard. Guess at cost $200 if you use seed - way more if you buy rolls of turf.

Put white palings around under the house to finish it off better. We just had a fencer quote to do this. Quote about $2500 for higher set house but labour is much the same no matter height of the battens).

Re-sheet the laundry so it's not looking like it's falling apart. Guess at cost $300 depending on what you use, whether you do it yourself or pay someone to do it.

Finish off the eaves.

Get someone in to do the gutters as I haven't done them before and don't really want to waste the time doing it. Guess at cost $2K???

Possibly replace the 12 stumps that are falling apart. But unsure if it's worth the effort. How much do you think this would effect the sale? Some stumps you can see the rusted rio in them and the concrete is falling off in chunks. Some stumps are worse then others. Guess at cost - several thousand all up. You would have to assume someone will get a building inspection and try to knock $10K off the price when the see the report about this issue.

What would the rest of you do? There's lots of jobs to do. Even with all of these jobs done I might only achieve a sale of $460 000. So it's a lot of work to see my profits increase a total of $20 000 (50%) gross. Then there is probably $12 000 to get the house to that stage, so the gross profits drop down to $14 000 after all of that work.

Maybe with a deck and everything looking good it might achieve more than $460 000. I'm going to check with a realestate agent tomorrow. But I'd be surprised if it achieved more than $490 000 with all the renos done. Maybe if I put a second bathroom in as well it might get up there.

With all those listed jobs done, do you think you would achieve $460K or closer to $490K. If value now is $420K and spending $20K would increase the sale price only to $460K I wouldn't bother. You lose half to your sister and pay tax on the gain anyway. That is a big difference and for me, this would be the deciding factor. Is the work involved worth the extra you will get, without losing sight of the fact you will be paying tax on any profit?

My brother in law will possibly help out with the jobs too so it won't be all me doing the work. I'm really busy with my ppor building works right now, so timing is crap.

What are your suggestions? What would you do with the property, any ideas would be appreciated. I've included some pics.

I would be getting in at least one local agent and trying to work out how much it is worth now, how much if you do the work you suggest, and that, along with the listings you have found (and others you can take a look at rather than just judge by photos) would help you decide.

For us, it has always been a "no". We do houses up that we want to keep to increase the rent, but a big job like you suggest for a return that isn't great, and giving half away to your sister, and paying tax on whatever improvements you make... maybe just sell "as is".
 
Yeah I'm not even going to bother trying to buy her out. Too much potential for things to go wrong with our relationship. I'll just sell up. But my main concern is how much work I should bother doing on the house and what effect it would have on the sale.

I started my post and was called away, came back to finish and post and just noticed this reply. If you don't want to risk your relationship, and you did mention that your brother-in-law might "possibly" help you do the work, I would sell "as is". It sounds like you would be doing all the work anyway.

I've just arranged a retaining wall to be built. My brother (we have a good relationship but we are chalk and cheese when it comes to renovating) has been "gunna" do the wall for two years. I've been treading around trying to make him see that whilst he can do this easily, it just isn't going to happen. He admitted he hated the thought of paying someone to do a job that he can do. But we would be paying him!

Anyway, I gently pushed, arranged quotes and we chose a landscaper to do it, and it will be finished this week. This is an IP that we may sell down the track, so having it done now means it is "sale ready" if we need to sell.
 
I'd sell as-is. Give your sister the money she put in originally (including all her costs) and split the profits according to how you agreed. Money matters with family is something I completely stay away from because I've seen it tear families apart. Gets more complicated when in-laws are in the picture.

Blessing your sister is more important than money
 
Got the agent out and he said it would be worth max $420 000 as is. His fees would be about $10000.

My sister was okay with me buying her out based on a total price of $410 000.

So after an 80% lend I'll have to find about $40 000 extra to buy her out and then about $5000 stamp duty.

Should get some extra from the equity in my ppor in a couple of months, so will work out well.

The plan now is to hold onto it and continue renting it per room for a total of $750 per week rent or there abouts. Then in 3 years when I'm ready for another project after all the ones I have to finish before then, I will raise the house up, build in underneath, add a couple of en-suits upstairs, set up a granny flat downstairs, etc... and should see $1000 per week rent with a total outlay of $450 000 and a total value of the property being worth $550 000+ So I should see $15000 a year profit from the rent.

Really that's the best way to get the most value out of the investment, so although it's a lot of work it's still worthwhile... and I won't be splitting any more of the profits :)
 
Good result, but I'm curious about the 180 degree turnaround you've taken with the situation about buying out your sister? Is it because she is happy with the price after having an agent give an appraisal? I think buying her out is the way to go, but just curious about how it all panned out?
 
Originally she was talking about the place being worth around $450 000, which I thought was crazy. I wasn't even going to touch on the idea of buying her out at that price. But after the agents appraisal it seems like she was more open to a realistic price so it was worth it for me to buy her out.
 
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