40 yr old 4BR2B vs 20 yrs old 3BR1B as PPOR+IP

HI great minds, I am relocating to Goulburn for 1 yr for job placement and looking to buy my first PPOR which i will rent out after 1 year. After inspecting I sort listed 2 houses with same price, both in a good area, surrounded by kinda well established big houses in a nice looking old estate

1. 4BR2B Brick house 900+m2 land.
-asking price mid range of carelogic autovaluation range
-build in 1977, north facing deck ,living, kitchen, plenty of sunlight etc
-Currently rented for 400/w for last 2 yrs. My repayment will be 410-420/w
-cons: bathroom fittings are old. no dishwasher, only master bed has built ins, so may need some work done prior renting in mid 2018. I think I will be able to rent it out for 420/w at that time

2. 3BR1B brick house on 850m2
-asking price slightly higher than the carelogic autovaluation range
-built in late 90s
-wall height is quite low, only 1 bath
-nice fittings in toilet bath n kitchen, wont need any urgent work
-i think i'll be able to rent it for 360-380/w in mid 2018, my repayments will be 410-420/w

Option two looks a bit newer polished house. the rental yield will be less for me with significant out of pocket cost. My aim is to hold the house for long years.
Which option would you suggest? Old house 4be2bath or little less old 3br1bath?

Does the older house has more potential for reno and add value to it in future?

 

Location is the first consideration, but appears to be equal.

Personally, I would go for the older but bigger house. A thorough B&P inspection should show any major issues.

Our house was built in 1979, and all tradesman who we have had working here tell us to never sell as it is so solidly built.

Another advantage is that you will be living there for a year, which gives you time to do improvements to increase value.
Marg

 

Hmmm..I would recommend the newer build. Much better building standards in the nineties but both houses may be due for rewiring. The seventies build probably needs replumbing and other major jobs. Ultimately you have to be happy with the house and location will make a big difference.

 

70's will be solid.
And sounds like much better potential and yield. No brainer.

 

Not necessarily. And I don't agree the building standards were any worse in the 1970s, except regarding insulation. These older houses were built to last! My mum and dad built their house in 1950 and it never had issues either.

Our house (built 1979) has never needed any replumbing or major jobs. Renovations we have done have been purely cosmetic to replace the outdated fittings of the era. Think orange laminate kitchen benches!

Only age related issue was the replacement of the old style shower trays that eventually leaked, after around 20 years, so a bathroom and ensuite renovation was long overdue and was overdue have been done anyway. Hmmmm, just looking at the bathroom, renovated late 1990s, it is starting to look a little dated......
Marg

 

Assuming its not cheap or easy to add 1 bedroom and a bathroom to the newer house I'd go for the older - i'll assume its a 1970's brick build - in my mind it would be a solid house with good sized rooms and windows. Internal reno will probably help bring it up to date but that's achievable.
Often 1970's houses look really good rendered, rendering makes them appear to be contemporary and new.

Extra bedroom and bathroom, a bit more land. Long term this will be a better buy imo.

 

Thanks everyone it does look like a solid house that needs a touch of cleaning.
What are the things I should be looking at before making an offer, potential extra cost considering its a 40 yr old house
-plumbing
-rewiring
-age of carpet
-all switches, fittings
-all doors and window, are the frames/slides working or not
-condition of blinds
-Toilet: all flush, tiles, leakage, condition of cabinate
-Kitchen: condition of cabinets, benchtops, oven,
-stove top will need to be changed to gas
-how do i know if the roof is in good condition or not
-rendering/ paiting front brick wall, paiting guttuer eaves etc if possible
-garden needs cleaning of overgrown shrubs

Any additional thing i need to check before making an offer?
Any additional costs that i am missing here?
Thanks again everyone. Your inputs have been life saving help

 

Why does the stove top need to be changed to gas?

As to your questions re. condition - two words: building inspection!

 

Hi Joynz, the house has an electric stove and i always prefered gas stove. If it is not much costly i’f prefer to change it before when i move in.

Isnt the B&P inspection arranged after I make an offer and sign initial contract? Anything i should be checking myslef before committing?

 

If nothing else is gas, I'd avoid changing also.

The supply charges alone do not offset the saving or you liking gas....
Go induction if you really need to update

(My vote is for older also)

 

Re: "Hot market". It's Goulburn. I would never particularly think regional inland town areas could ever be "hot".

Maybe my view is tainted though, my sister had an IP (house) in Mount Austin (Wagga Wagga) and it took about 6 months to find a buyer.

So with this in mind, I'd make a verbal offer.
Get the agent to agree to it.
Get a copy of the contract and give it to your solicitior to read.

Do the Building and pest inspection.
See if there is anything to worry about. You may be able to negotiate further now. (I'm assuming Goulburn may be a bit slow/buyers market).

If all good, sign the contract.

Re: Buyers market. See how fast properties tend to go under contract in the suburb. Less than about 40 days, it's hot. (Under 30 days is very hot). Over around 60 days, it's a buyers market. And are there lots of properties in the suburb for sale, or only a few?

 

Hi stoffo and Gockie, the ducted heater and hot water system runs on gas already. Ok ill think about induction too.

 

Hi Gockie. Very limited supply and lots of buyer, specialy for good size houses in good areas. We couldnt finish inspection and some of the properties received offers straightway after the inspection. Most of the houses sold quickly already had extensive reno done

 

Oh wow. I never thought it could be like that in a smallish inland (non capital) location!

 

If you intend to rent it out I wouldn't go induction as they are very expensive and you are unlikely to get increased rent enough to justify it.

If you want it because you would enjoy it, then that's fine. However, be aware that if you buy it for your use while you live there you can't claim it as a rental expense.

 

Hi Joynz thats a good point. I will leave the stop as it is! I dont cook much anyway.

If I want to do some reno like kitchen tiles, bathroom upgrade, plumbing and rewiring, fixing fly screen, buying dishwasher etc, would that be tax deductible if they are done during our own stay? Or do I need to do the renos after I move out and advertise rent?

 

Read this.
Expenses deductible immediately - management, maintenance, interest
Improvements are not tax deductible but can be added to your cost base (and can be deducted at the time you sell). But it must be available for rent at that time. Repairs are tax deductible though. Refer to the link.
Ps. You may not need to do anything to the plumbing or wiring. These items are invisible ways to spend money, same as restumping. Generally like to avoid these sorts of expenses. I've owned 8 properties, most of them 1970's and earlier properties and in none of my properties have I changed the plumbing or wiring due to age.

If you buy in Qld an electrician should be able to tell you if the wiring should be changed - in any case, a quick look at the electrical box and they'll tell you if that needs updating. Probably the same in NSW and elsewhere.

 

Renovations are improvements and never fully tax deductible in themselves, no matter when you do them. However, you will be able to claim some depreciation once the house is rented.
Marg