Your first IP - reno vs. newer property?

[Ace in the Hole]

My first was a small, old, 2br house, but well located to a major shopping centre and transport at a touch over 500k.
Did a quick reno during the settlement period, maybe about 2k to clean it up.
Rented it out for a couple of years while getting approval to develop a duplex.
Built the duplex all up for just under 500k all up.

It's done well overall, almost double in the last 7 years.

My advice would be that if you don't have massive equity and not on a super high income, add value in every possible way you can.

 

[LeoT]

[QUTE=Ace in the Hole;1243560]My first was a small, old, 2br house, but well located to a major shopping centre and transport at a touch over 500k.
Did a quick reno during the settlement period, maybe about 2k to clean it up.
Rented it out for a couple of years while getting approval to develop a duplex.
Built the duplex all up for just under 500k all up.
It's done well overall, almost double in the last 7 years.
Very nice Ace!


My advice would be that if you don't have massive equity and not on a super high income, add value in every possible way you can.[/QUOTE]
Thumbs up to that


Leo

 

[albanga]

Definitely a market in regionals for subdivided land

Also easier to find a good block as not every man and his dog is an 'investor'

Anything in melbourne that someone can subdivide or put units on they pay too much for (in the sub 1 mill range) - I would think that unless your a builder then you will most likely loose money trying to develop a newly purchased block in melbourne

Given your budget I definitely was not recommending you could get a metro block that could be subdivided which is why I was suggesting a metropolitan unit for a renovation.

It all comes back to your strategy though do you want to do a renovation, a subdivision, a development or a combination. Personally I would be focusing on one thing and creating a property profile so I knew exactly what to search for.

Without one of these you will find yourself flicking through endless pages of realestate.com, also it makes it hard to get agents doing the work for you.
If however you know exactly what you want to do and where then you put together a profile and send it off to the agents, get them looking for you as well. Yes some are completely lazy and wont give you a second thought but a good one will do a lot of the work for you allowing you to concentrate on learning more about how to renovate.

 

[Dbz_Vic]

Everyone's given very good advice and shared their experience. I would say it also depends on your life circumstances, like do you have kids? Married or single? Are you tied to your job ? (probably even more reason to invest ) But these will determine how much time you have to reno and be hands on.

My first 2 IP were new properties, a little different to most here. The first IP didn't go up in value because i got emotional and paid too much, but it has fantastic depreciation, and its in an area with low vacancies and close to train station, and other crucial infrastructure.

2nd IP is a new townhouse 9km from CBD. Purchased under what developer wanted, and valuation 6 months later netted me $65,000 equity, plus good depreciation being a new property.

So not all new properties are poor investment choices, you need to work the numbers as others say and really investigate the area you are buying into to see if you are overpaying or not.

Our 3rd IP is a 30 year old brick and tile house in good condition that may require bathroom and kitchen renos down the road. But we chose it because it doesn't need extensive work, very liveable as it is and has land to add a granny flat or extend. Reasonable rental yield although not positive cashflow. Also in area with very good infrastructure which is key to future capital growth, and we think we negotiated a good price which is also important.

As someone has already said, renovating for profit takes experience. Too many overcapitalise and realise no profit. Compare with the prices of the properties that are renovated. Timing the market is important too, if you renovate in a rising market its easier to realise a profit. So proceed with caution because its a whole different ball game and good luck!

 

[seapiggy88]

If you buy regional and do a Reno, where are you located? If your spending 6 hours a week driving to a site then your holding costs will greatly blow out (not to mention car costs).

Also you mentioned the possibility of buying a bigger block further out to subdivide but in regional towns is there a market for this? People who live in regional towns usually like the fact they get land unlike inner city living.

Another consideration is equity for your next purchase. whilst a renovation should add some (depending on how well you go) your less likely to see capital growrh in a regional property. So what happens if after paying closing costs, holding costs, Reno costs your valuation comes in break even? If you have turned the property positive then the additional Cashflow will help a little but it won't get you quickly to your next purchase. So now your holding a property not likely to see as much capital growth.

Just some thoughts, but good luck!

Hi Albanga,

I?m located about 1 hour away from my regional town of interest (Ballarat/Bendigo). All the renos would need to be done during public holidays/after work during daylight savings/whilst I take AL and weekends if I don?t live there (and use my FHB SD reduction). I haven?t looked into the timeframe of renos (no IP yet), but it would need to be done ASAP to get a tenant in and reduce holding costs.

I?m hoping that due diligence and going through the numbers will avoid a cash neutral/no CG property.

In regards to subdivision, I always thought it would be worth having that option later down the track (eg in 10 years). Strongy1986, can you elaborate further on why/how you think there is a market in regional areas for subdivided land?

I think at this stage of my research I want to do a renovation on a block of land with the potential to subdivide. However, as mentioned in my previous post, I?ve been struggling between properties on smaller blocks closer to the town centre vs larger blocks further out (still within a 3km radius), but in less desirable suburbs and hoping for an increase in demand which I can then subdivide on (10+ yrs). I can see the CG potential in both options ? can anyone advise on whether there is a greater benefit over one or the other?

Everyone's given very good advice and shared their experience. I would say it also depends on your life circumstances, like do you have kids? Married or single? Are you tied to your job ? (probably even more reason to invest ) But these will determine how much time you have to reno and be hands on.

As someone has already said, renovating for profit takes experience. Too many overcapitalise and realise no profit. Compare with the prices of the properties that are renovated. Timing the market is important too, if you renovate in a rising market its easier to realise a profit. So proceed with caution because its a whole different ball game and good luck!

Hi Dbz,

I agree, I really appreciate how all the posters have been very forthcoming with their experiences! Thanks everyone!

I'm in my mid twenties and figure this is the best time to start before/if I have children. Currently the idea of financial freedom and early retirement is much more alluring than having kids, but I'm sure my mindset will change once I hit 30 hahah When that time arrives, I still anticipate renting with the family so no PPOR to speak of.

If my strategy is buy&hold, is timing important based on the valuations in rising market compared to a flat one? I suspect this might be a good time to buy as I read in the Ballarat/Bendigo thread that Ballarat has hit the bottom already last year/early this year. I need to become more familiar with property cycles in regional areas before I can decide with greater confidence though.