Is this a right property investment for us?

we have a house in Sinnamon Park QLD. The property is a 3 bedroom, 2 Bathroom and 2 parking house in 520 m² land. The property has very nice view which makes it unique.
we are planning to make over this property and add second story including a master bedroom with ensuit, a bathroom and two bedrooms in top level. The current property value is about $550 k and this project will cost us about $300 k.The end result would be a house with below profile with very modern exterior and interior design

General Features

• Property Type:House
• Bedrooms:5
• Bathrooms:3
• Building Size:266.00 m²
• Land Size:520 m² (approx)

Indoor Features

• Ensuite:2
• Toilets:4
• Built-in Wardrobes
• Dishwasher
• Air Conditioning

Outdoor Features

• Remote Garage
• Garage Spaces:2
• Fully glass Fenced
• outdoor SPA
• Solar system

It would be a right move for us If we sell this property at least $900k,otherwise it is just a wrong property over capitalization !
What is your recommendation?

 

Is there demand for stock of this spec in the area? Is there comparable sales that would indicate 900k would be achievable?

 

I think you would be over-capitalising. The median house price is only $726K and you will have a $900K house post-reno. Also the predominant age group is 40-50 years old. They typically don't want massive houses as they approach empty nest years.

 

I don't think there is a very high demand for stock in the area. we checked property values for 5 bedroom houses in the area and they are mostly above $900 k,but their land sizes are a bit bigger than ours.:
below are a few samples of most recent sold 5 bedroom properties in the area
20 Edward Place, Sinnamon Park, Qld 4073 - Property Details
47 Barcoo Crescent, Sinnamon Park, Qld 4073 - Property Details
12 Windermere Avenue, Sinnamon Park, Qld 4073 - Property Details
13 Lakeside Circuit, Sinnamon Park, Qld 4073 - Property Details
35 Thomas Macleod Avenue, Sinnamon Park, Qld 4073 - Property Details
45 Christopher Pl, Sinnamon Park, Qld 4073 - Property Details

 

That median house price is for 4 bedroom houses, not 5. doesn't it matter?

 

Alan's point is still valid though about demographics. Predominant age group is 40-50 YO so why would they want to buy a 5 bedroom house? They would want to downgrade to something smaller so you may not get much buyer interest.

To me this definitely sounds like a case of overcapitalizing on existing property. If you have $300K available, why not look at acquiring new IPs instead? What is your end game?

Cheers,
David

 

The median is not for 3, 4 or 5 brm houses. It is for all houses - 1/2 sell above the median and 1/2 sell below.

For purely investment purposes, it is OK to spend say 10% above the median, which would make it around $800K. If you want to make your place worth $900K then you have over-capitalised. But if you just want to make it your PPOR to enjoy and don't care about a future resale, then do whatever you want.

 

It is somehow mixed of both options. I want to make it my prop to enjoy for at least 5-6 years, and also I am thinking about reselling it after that time. I can live in a big modern house with enough rooms and space for another 6 years and I can add value to this property with no capital gain tax in reselling time as it was my first house. But !!! overcapitalizing is a mater too.

 

I found this in realestate website, but not sure if it means anything !

 

Yes high demand but for what type of property? If most in the area are low set or just 3 Bed or 4 Bed houses, or elderly, then you are not providing to most demographics in the area. Sometime people think the biggest or newest is the best but is this the norm for the suburb, you need to do your analysis. Check similar houses you mention after with 5 Bed, etc...and check what they sell for... the range, check how long they took to sell, who would be the buyer...?

Every suburb has different demographics and you need to appeal to most rather than just few, wouldn't you agree?
Sometimes perhaps a cosmetic renovation would be more profitable if that's what the suburb's demographics show....?

 

Massive over capitalization.

If you do not know how you will make money then I would not put any on the line.

 

Agree with this as well. Fair enough if you want to improve your own PPOR, but don't try and pretend its an investment or a financial strategy.

Be prepared to lose money, or at least incur a significant opportunity cost.

 

Hi everyone,
I got a bank involved with this and bank evaluated the the property 820 k, in case that we expect it to be about 900 k. The bank manager advised us that their evaluation is not the market price for the house. what is your advise? stop the whole process and sell the house? or move forward?

 

Did you read the rest of the thread? Pretty much everyone thought it was a terrible financial decision. And now the bank thinks so too.

 

+1

 

I'd go ahead and do it if I liked losing money.

 

Hang on everyone. Professionals aren't starting families until they are in their mid 30s these days. Wouldn't 40 to 50 year olds be people with growing kids and five bedrooms might suit the demographic in a leafy suburb quite nicely. Every 50 year old I know has teenage kids.

 

I don't know about you David but I'm in that age bracket with teenage children. Many people we know had children later than us so will have teenagers at home in their mid-late 50s. We are upgrading soon to a much bigger house.

I actually don't know anyone of our age bracket who is downgrading but it might be more of a trend in Sydney and Melbourne where affordability is more of a concern.

 

Yeah, I know my financials look pretty shaky to you, but it depends from which angle you want to look at it !
- My current equity of the current house wich worth around 550-560, is about 170 K. If I sell it, I have to pay around 20-30 k for agent, commission, tax, etc. I would have around 140 k in my pocket.
Then I have to buy a 5 bedroom house in the same suburb ( not even closer to the city) around 900-1000 k. considering stamp duty, moving cost and etc my mortgage for new house will start around 800k ! But If I just extend the current house my mortgage would be around 680 k. 120 k extra on mortgage for the same quality 5 bedroom house isn't a loss?

 

haha, I am 45 y old and my kid is just 9 years old !