I've grown up my whole life hearing that property only goes up!

Discussion in 'Property Market Economics' started by Safe As Houses, 29th Oct, 2018.

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  1. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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    A rental with a fresh paint will no doubt make it more desirable over a similar with old but OK paint (no patches), but not so sure a renter would pay extra 50/wk just for that.

    In my personal experience with all my rentals, if its in bad need of fresh paint, the choice was between reducing the rent a bit from going market rate or give it fresh paint and get it out quickly at market rate.
     
    Last edited: 7th Nov, 2018
  2. skater

    skater Well-Known Member

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    There's lots of variables, and I'd say what works in one area, may not work in another, plus market timing for this sort of thing needs to be taken into account, but the one benefit that regionals have is the entry costs aren't so high.
     
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  3. Lizzie

    Lizzie Well-Known Member

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    Ah well - they will so not going to debate
     
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  4. kierank

    kierank Well-Known Member

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    In August this year, we had an IP (a 4/2/2 house in Wynnum West) become vacant. We decided to do a paint job on it, even though it wasn’t a dog’s breakfast.

    Rented it straight away to a lovely (hopefully long-term) tenant for an extra $40 per week, up from $500 to $540 per week.
     
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  5. The Y-man

    The Y-man Moderator Staff Member

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    The contra argument would be that without a control mechanism - i.e. a similar (or better an identical) property available at the same time in the unpainted state - the result is open to conjecture..

    Of course if it is an identical apartment in every way, we would need to run the experiment across a parallel universe. Actually, I guess we can (try to) find the parallel universe where you did try to rent it out without painting it.


    The Y-man
     
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  6. Tonibell

    Tonibell Well-Known Member

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    Cosmetic renos add value to a rental in the same way they do to a sale.

    There is a segment of the market that will pay extra for everything appearing shiny and new.

    The question is not "while you pay an extra $50 per week if I paint it" - it is about the people who will only rent it if it presents well. Lot of potential renters will just walk straight out if the oven is not clean.
     
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  7. kierank

    kierank Well-Known Member

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    No need for a parallel universe ... :D.

    We have owned that IP for 14 years, same PM for the last 10 years.

    When the previous tenants vacated, we asked our PM what should we advertise it for. She said same as previous tenants, $500 pw.

    Then, we asked her what would get if we painted it while it was vacant. She said $540pw.

    So, we painted it and got $540pw before the paint job was complete.

    So, in this little controlled experiment ;), rent improved by nearly $2,100 pa and value increased by say $52,000 (assuming a yield of 4%).

    Well worth the effort, me thinks.
     
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  8. Rex

    Rex Well-Known Member

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    Devil's Advocate:
    Did the new tenant indicate they would only pay the extra $40 if the paint job was done? If not then not really a controlled experiment; who's to say they wouldn't have rented it at $540 without the fresh paint?
     
  9. kierank

    kierank Well-Known Member

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    They inspected the property when the paint job was well underway. The PM showed them the property, told them the rent was $540 and they signed up.

    No mucking around :eek:.

    For me, this is not some type of experiment. This is real life as I run IPs as a business :D.

    The right thing to do for my stakeholders is to maximise revenue and profit.

    I don’t believe tenants are THAT stupid. It is easy to them to determine market value. It takes them about 5 minutes max.

    Besides, these new tenants are locals. The only reason they were looking for a new rental was their previous place was sold to someone who wanted to make it their PPOR. They knew fair market value.

    Plus I have a lot of respect for our PM. We would have turfed her years ago if she wasn’t supporting our business aims :eek:.
     
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  10. The lucky duck

    The lucky duck Well-Known Member

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    Who do you use as your pm?
     
  11. Justin_Z

    Justin_Z Mortgage Broker Business Member

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  12. Trainee

    Trainee Well-Known Member

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    This is the problem with a bear case with no realistic buy point.

    When the market is falling, the expectation is more falls. Why buy when it will get cheaper next year? Why buy when its above what you think is true value?

    because other people disagree with your definition of value.
     
    Last edited: 2nd Jan, 2020
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  13. kierank

    kierank Well-Known Member

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    LJH Wynnum.

    Not our best/favourite PM as they are a bit old-school and are lacking in the technology area (eg no landlord portal).
     
  14. # 1

    # 1 Well-Known Member

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    How much commission do they charge?
     
  15. kierank

    kierank Well-Known Member

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    8.25% (incl GST)

    Not the cheapest of our LJH’s PMs

    Could possibly get them to reduce it down to 7.7% and save myself $154 per year.

    For a saving of $3 per week, I couldn’t be bothered.

    But, if they stuff up, they’re gone.
     
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  16. The lucky duck

    The lucky duck Well-Known Member

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    Doesn’t sound bad! We looked at ray white they are 8%
     
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  17. Redwing

    Redwing Well-Known Member

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    Fixed the title :D

    I've grown up my whole life hearing that property only goes up!
    ...over the long term
     
  18. Sackie

    Sackie Well-Known Member

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    How wrong were some in this thread. Since the thread started, property has EXPLODED in Australia.

    Read all the posts. It's very telling who got it so wrong it's not even funny.
     
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  19. Trainee

    Trainee Well-Known Member

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    The ops for these are long gone, sackie.
     
  20. Sackie

    Sackie Well-Known Member

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    Many of the doom and gloomers in the thread disappeared. They must be in asylums now rocking back and forth " No....no...it can't be true....how....HOOW did this happen.....where's my craaaaaash.....NOOOO!"

    Some others in the thread who got it dead, dead wrong are still here. Not only did they get it wrong, but 1 or 2 oozzed with tremendous arrogance at the time. And still today.