HEllo All
Im looking at buying the next door neighbours house 1950’s weatherboard/cladded 3 bed, 1 bath house, structural sound but needs a massive cosmetic renovation in the Eastern Suburbs of Melbourne and will be aimed at young families that have flocked to the area over the last 10 years. Buying direct from owner so no commissions etc. Id hope to do the reno’s before settlement if I can negotiate with owner to grant access and make it even more cost effective.
I have a company and a unit trust in place for a recent land purchase and house building IP im doing in QLD, So im also trying to work out what trust structure will be best as the unit trust was expensive to setup plus CBA would only do commercial lending which meant paying for all the establishments costs/fees and higher IR of 7.3%
I need to do this with very limited funds as my equity has been exhausted with the QLD project, so bank are doing some figures on the project for me.
Purchase Price $ 400,000
(Owner Valuation maybe more but have a good relationship with owner so hope to negotiate $400K price
Stamp Duty $ 19,070
Legals $ 2,000
Bank Setup Costs $ 1,000
Total Upfront Costs $ 422,070
Improvement (Reno) Costs (7%) $28000
Total Costs $ 450,000
Sale Price $ 525,000
Agent Commission + Marketing $10,000
Legals $ 2,000
Net Proceeds $ 512000
Net Capital Return $62000
Return on Equity 14%
BUDGET $28,000
(including a handyman ive used on my own home)
– Gardens and Lawn $5K (ill be doing the labour work for this)
Roof Respray $3K
Rip up carpet and sand/polish floors $4K
Paint inside house $5K (Recommended paint colour anyone???)
Brother in law has spray gun…good idea???
Cosmetic Kitchen/Bathroom
(new doors, benchtops, splashback paint over tiles and bath etc $10K.
New light fittings, handles, door handles etc etc $1K
Do you think the above is a good project to take on and possibly sell within 12 months? Any advice on the structure and costs, budget for reno and any other advice would be greatly appreciated as this will be my 1st project as a reno and if this works well buy more bottom end of the market properties and go again..
Cheers
Dangermouse
If your going to sell then maybe a discretionary trust would be good. Could use the same trustee as the unit trust or personal trustee.
This way any profit could be flexibly distributed – including to the unit trust if need be – to off any losses and save tax.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
How do you know you will get $525,000 for the property when you sell it?
Make sure you research the area and find out if there are large differences between renovated and unrenovated properties. If there is a large difference then you might get the return on investment you are looking for.
But if there is not much difference between renovated and unrenovated properties then you might not sell for as much as you want to. Many investors think "Because I renovated I can sell for X dollars" but make sure you have research to back your projected figures. Otherwise you are just gambling.
Ryan McLean
http://CashFlowInvestor.com.au
Helping You Invest In Positive Cash Flow Property
Ryan McLean | On Property
http://onproperty.com.au
Email MeTalked to a agent and seen similar houses for that price on the market. Plus the house will be of similar quality to our PPOR which we had valued for more than that. $525 is being realistic/conservative.
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