I have finally taken the plunge into the market and purchased my first property under market value .
My property is a bottom floor 2 bedroom flat.
My flat is a 1970's solid brick and has had nothing done to it since built..all original. However, it is in very good condition and only basic things need to be done to it.
Some of the key areas that I want to renovate are as follows.
Take down the kitchen wall to make it open plan into the lounge.
Remove all the carpet, as there is parchetry under it in very good condition, and polish it.
Repaint the entire flat.
Put in a reverse cycle aircon/heater into the lounge.
Install new locks and basic fittings.
Redo the kitchen, laundry and bathroom.
I know i am in for a hell of a learning curve and am quite keen to get dirty and do as much as possible.
My budget is as follows:
Area Item Estimated Actual Bathroom Toilet 200 Bathroom Shower 200 Bathroom Spa 500 Bathroom Tiles 300 Bathroom Tiles Install 600 Bathroom Total $1,800.00 $ – General Painting 600 General Floor – Sand, Polish, Stain 1500 General Skip Removal 400 General Electrical Wiring 600 General Locks 200 General Total $3,300.00 $ – Kitchen Engineer – Wall Removal 500 Kitchen Wall Removal 500 Kitchen Kitchen Set 1000 Kitchen Kitchen Install 1000 Kitchen Total $3,000.00 $ – Lounge Aircon/Heater 800 Lounge Aircon/Heater Install 600 Lounge Total $1,400.00 $ – Grand Total $9,500.00 $ – Phase 1: Kitchen 3000 General 3300 $6,300.00 Phase 2: Lounge 1400 Bathroom 1800 $3,200.00 Phase 3: Balcony TBA Laundry TBA
I am estimating an increase in value to the property of between 20 -80k.
Can someone with experience in reno's please give me any advise on my budget and plan.
I am also not sure on thee proccess required in order to remove a wall. I am assuming the wall is non-loadbearing and can have the wall removed quite easily. I have a mate that will be assisting with some of the work as he is a bricky.
All help and advise is greatly appreciated.
Miikegod_of_moneyParticipant@god_of_moneyJoin Date: 2008Post Count: 970
where is the place and how much did u purchase the unit?
You need to take into consideration the re-sale value ie. comparison in that market and the length of project.
Plus the cost of interest rates and transaction cost.
providing estimates only as a guide.
interest only 8.75%
length of project 1 month
using the property as PPOR for 12 months
FHOG being used – 10k
location: brighton east, VIC
only flat in the street, block of 6.
hard to compare as there is no property on sale or even for rent in this range. it's a pretty absorbed market in brighton east.
my only comparisons that are even close are around 400+
What you think?
MiikeyarposMember@yarposJoin Date: 2004Post Count: 247
sounds like good buying in that area
your plan sounds good and aggressive. Its difficult to comment on how good your budget is as we dont know how well connected to trades(and/or how personally capable you are). Having just finished something similar in Thornbury , for me, you seem to have the big things reasonably correct but the collection of small items (e.g bathroom) look a bit light. Overall its probably near enough if you add a 15% contingency. Believe me , there will be contingencies.
The only other thing is that I think you are being optimistic with timing. Pulling it all together in 4 weeks will be difficult unless you have it all lined up already. Even then everyone has to deliver on promises and factors like your life outside the property world and waiting for body corporate approvals (a/c outside unit placement and the like) can affect your timeline and holding costs. I am probably just bitter and twisted as I just finished my one month reno after three months elapsed time. External factors drove our timing , like me getting called away on two unplanned business trips. We did discover some great tradies during the marathon though and I am looking forward to working with those guys again.
Best of luck with your project. Please come back with a reality check at the end and let us know if the estimates worked out for you. Its good learning for anyone tackling this type of thing.
Thanks for the help Yarpos.
I intend to do a bit better than just posting my results.
Keep you all posted,Bricks and MorterParticipant@bricks-and-morterJoin Date: 2006Post Count: 10
Get your plan so detailed you know exactly how to do everything, that way your budget will mirror closely to the works. You sound like your right on track.
TIME, It always takes longer than you think, I sound like my DAD, but my dad was right! The bulk of the work is easy to estimate, but I find the finihsing takes the longest, For instance, I've just remove and replaced FC, putting the sheets up took 2men 1day 20hrs (about what I thought) and i thought if would take 3 x 1day to do the joints, but if took 2 men 3 days to do it, and there is still touch ups to do. Tradesment would take 1/2 as long, If you plan to do the work and can handel it taking longer. It can be good to get tradesmen over to quote the works and ask them how long they would take and with how many men.
Your budget sounds good, lookout for the little things, they add up, what about tools do you have extra money for them? or can you borrow it all.
It is difficult to estimate the resale prior tot the reno, use unit sales in adjacent suburbs up and down the coast. There is no rule of thumb,
Depending on what you what the increase in equity for, if you get a valuation paid by yourself you are more likely to get a good valuation compared to the banks, you can then request your bank to use the same company to value your home and then increase you r loan to use as a 2nd deposit and reno.
Good luck with it!!!NamiMember@namiJoin Date: 2007Post Count: 14
Just thought I'd share my similar experience.
I purchased a ground floor unit last December for $320k (Sydney), and using it as my PPOR while I renovate.
I recently had an internal wall removed (between kitchen and lounge room to open it all up. Cost me about $4000 (plus $350 for the skip bin). I had an engineer come to assess it first ($350), and was advised to have a beam put in. It was not a load bearing wall, but we did take out about 1.9m.
It took one day, three blokes and lot of dust and noise, but very well worth it. I did the rendering and gyprocking myself, so saved myself about $1600 on that.
I've repainted, re carpeted and redoing the kitchen. The bathroom can wait a few months…
I had the bank value the unit just after the wall was removed (due to refinancing my IP loan), and although half the kitchen was missing, and painting wasn't complete it was valued at $350k.
Word of warning though, the whole process took longer than expected due to the approach with strata. I was initially told that I had to put in a bylaw and raise it at the AGM which would also cost me $1000. This was just to raise the issue, and it could be turned down. After much umming and arring, I scrapped the strata idea, and got talking to one of my neighbours instead. They didnt really seem to be bothered about me renovating, so I just went ahead and did it. This method cut my costs, but it did cost me more time.
Also, by this time the strata manager I had originally spoken to had left the company…Phew! However, I did get a letter from strata shortly after the work was done stating I needed to tell them about this stuff, but I just claimed I didn't know. Lucky for me, it was enough for them after sending them the engineers report and the licenced builder's confimation that all was done in accordance to the engineer.
My advice would be to make sure you inform strata or other owners in the building and try to keep them on your side. I've heard of these sorts of situations getting pretty nasty.
I hope all goes well for you! I'd be interested to know how you go with it all Good luck!
NamiBanjoSmythParticipant@banjosmythJoin Date: 2007Post Count: 44
Great Work Miike
How is it coming along? Are you planning on selling the unit after the 12 months of PPOR is finished or are you going to hold onto it? I like the idea of holding onto properties long term (if you can afford the repayments). And remember if the property does increase in value as you expect it to you can still get access to that money by refinancing.
Ive just finished a similar project and it was hugely rewarding! Heaps of work but fun at the same time.
Best of luck mate!
Thanks for the advice Nami.
BanjoSmyth, I am predicting to live in the apartment for 12 months to claim FHOG without any issues as a PPOR. Once all phases are complete, estimated to be done within 12 months I intend to recycle my equity, possibly refinance and purchase a second property using my checklist simlarly to my first purchase (under market value, opportunity for minor/intermediate renovations to increase value by more than the costs to do the work). My stratgey that I intend to use is:
1. Buy undermarket value property with minor/intermediate renovations required.
2. Use as PPOR during renovation period.
3. Hold + Rent out + Recycle equity.
As I am getting closer to settlement I am getting quite excited with going ahead with my plans.
Thanks for all the great advice!
MiikeBanjoSmythParticipant@banjosmythJoin Date: 2007Post Count: 44
Great work mate
I look forward to some 'before and after' shots!
The strategy you talk about is my favorite!
I find it funny when people talk about the 'lack of liquidity' in Property Investing.
But after you have refinanced or have a line of credit the equity in your property becomes a very versatile investment tool.
In a way it has more flexibility than Shares. . . . just as long as your not forced to sell it!
Best of luck