Forums / Property Investing / Value Adding / Renovation profit margin

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  • Profile photo of JalugeraJalugera
    Participant
    @jalugera
    Join Date: 2006
    Post Count: 3

    I live in Melbourne but have bought, renovated and sold property in the affordable North Geelong area (postcode 3214).

    These posts seem to ignore the signifcant on-costs: transfer (stamp) duty, registration, legal, insurance, holding costs, etc.
    These on-costs preoccupy me as they are significant and add no value.

    For example, in Victoria, on a $350k property:
    – Transfer duty alone is $16,070 ($10,675 in Qld, $11,240 in NSW).
    – Registration, legal, insurance add another $2,000.
    – Finance cost? Depends on your setup costs and interest cost you need to pay until property is rented or sold but not trivial.

    So, in Victoria,allow around $20k on-costs if you keep the property as a rental investment. If you sell for $450k+ you have the additional cost of Agent and ads, around $10k.

    So how do you take on-costs into account?

    A useful transfer/stamp duty and registration calculatorfor all States is at http://stampduty.calculatorsaustralia.com.au
    I know transfer duty is reduced for a first home buyer and PPOR but thta is more a one-time opportunity and not regular investment.

    I also believe you need funds to cover a deposit of 20%, the on-costs and reno costs. You may source this from another property or your home if you have that flexibility.

    Profile photo of Colin RiceColin Rice
    Participant
    @fms
    Join Date: 2011
    Post Count: 338

    20% is the rule of thumb for developements.

    Im not a reno guy but woild think the same % applies.

    Colin Rice | CDR Finance
    http://cdrfinance.com.au/
    Email Me | Phone Me

    Perth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]

    Profile photo of Colin RiceColin Rice
    Participant
    @fms
    Join Date: 2011
    Post Count: 338

    20% is the rule of thumb for developements.

    Im not a reno guy but would think the same % applies to make it worthwhile.

    Colin Rice | CDR Finance
    http://cdrfinance.com.au/
    Email Me | Phone Me

    Perth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]

    Profile photo of pascoe_82pascoe_82
    Participant
    @pascoe_82
    Join Date: 2010
    Post Count: 11

    Hi Jalugera,

    Yes the extra costs associated with purchasing here in Aus do make it a little harder to Reno for profit.

    I do this only in Qld as the costs are a fair bit less than other states. I have found on top of stamp duty that other costs including conveyancing are around $1000.

    My profit margin is 10-20% of purchase price after all expenses.

    Basically anyone looking to do this needs to have more than enough cash or equity aside to not only complete Reno but allow for buy in costs (deposit, stamps etc), holding costs and sales costs.

    I use a 10% deposit for finance and pay LMR. I see this as a cost of doing business and it allows me to keep more cash aside for other purchases.

Viewing 4 posts - 21 through 24 (of 24 total)

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