My Property Journey

Hi All!

I'm starting a thread to share what I've learned on my property journey so far.

A bit about me...I'm a Senior Manager at a bank. I love stocks, property and just about anything that can generate wealth passively.

When selecting regions, I look for:
i) Land scarcity: Land running out, either in the whole region or in the central part of the suburb where I'm buying.
ii) Population: Region with a population minimum of 30,000.
iii) Gentrification: Growing numbers of higher-paying jobs, new retail brands popping up etc.

Property qualities:
i) Type: For most regions, I'll buy a 3 bedder/4 bedder house. For the inner ring of CBD's, a 2 bedder apartment is also fine.
ii) Affordable: Typically under $500k but exceptions can be made. Property must be affordable relative to the medium wages of the region.
iii) Condition: Looking for something run down that owner-occupiers can't fall in love with. Lots of room for immediate capital growth via renovations.
iv) Good land component: Houses depreciate, land appreciates. Ideally, I want to pay market value for the land and get the house for free (or near-free).
v) Good location: Near schools, public transport, shops and other amenities.

Property 1

So with that, I'll discuss property number 1 which my wife and I bought in 2020. This was a 2 bed/1 bath/1 car apartment in Pyrmont for $700k. 74 sqm interior plus a 12 sqm parking spot.

Initial specs:

• Good location, near to cafes. Short walk to supermarkets (but you can get groceries delivered now). 15 min walk into CBD through Darling Harbour which is a nice walk/lots of restaurants.
• The apartment has balcony views out into a little forest. Quite rare in the inner city.
• I could see value for the upside with a new kitchen and fixing up the bathroom.
• $700k was an affordable price point with a decent land component.
• No one else was bidding.

Renovation:

Renovation cost me about $20k, including labour.

• New kitchen (new cabinets, draws, marble benchtop, mirrored backsplash and modern appliances).
• Fix up the bathroom (repaint, epoxy bathtub, new vanity, new toilet, taps, showerhead etc).
• New tiles for kitchen and bathroom. The kitchen floor had lino which I pulled off. I tiled over the bathroom tiles.
• Some plumbing needed fixing and the electrical fuse box was upgraded.

Learnings:

• I should've used kitchenunder2k. Kaboodle is pretty much the same and I could've saved $3k.
• Painting over bathroom tiles is a great idea (ignore the negative comments online about this).
• Don't use second-hand appliances, get new. People don't feel bad about selling you broken items.

The apartment has been revalued (Herron Todd Whyte) recently at $875k. We could get it to $900k with a second toilet in the laundry.

I'd like to continue living here until we can sell for $1m-$1.1m.


Coming soon...
Albury, NSW renovation: WIP
Cloverdale, WA renovation: WIP

 

Property 2

3 bed/1 bath/3 car house in North Albury. Late 1950's/early 1960's build. Has fibro walls (interior and exterior) on circa 680 sqm.

The vendor wanted $250k. For this one, I'd hired a buyers agent who went to inspect. Not many people showed up for the inspection and those that did walked out quickly. We offered a tad below $250k (unconditionally) and the vendor accepted.

Initial specs:

• Albury's household income has been rising for many years.
• The Albury area is gentrifying with many more high paying jobs. I noticed lots of expensive coffee shops, lots of retail shopping, restaurants bringing out better menu's, housing quality is improving etc.
• Population of Albury Wogonda is > 90,000 people. Population growing more quickly than in the rest of the state.
• There's land available for development on the outskirts of the city, but as you go closer in, land becomes more scarce. The house and land packages are going for at least $450k which is much more expensive than some property in the centre of town. As such, I would expect the centre of town to rise in price over time as it's more scarce, closer to amenities and affordable.
• The property was well-positioned, in a quiet street with schools just across the road. Kids can walk home from school rather than parents having to pick them up.
• I reckoned the property could be worth $300k once renovated. If I assumed $20k renovation costs and $10k upside, there would still be upside left as equity. Local agents estimated the value at $330k.
• Positive cash flow. I reckoned $330 per week would be achieved. Local agents estimated $350-$360 per week. Vacancy rates are low so would be no trouble to rent out.

Renovations:

• Wallpaper issue: Bedrooms had wallpaper that didn't look appealing but would be hard to remove. We nailed in MDF boards on top which could then be painted.
• Paint all interiors: I used British Paints Primer & Undercoat and then a topcoat of Dulux Vivid White. Paint cost circa $1k all up.
• Install new kitchen: Old kitchen must've been 50 years old. Warped from water damage and broken in some parts. I bought the basic option from kitchenunder2k and paid a mate to drive it down to Albury. About $3k all up.
• Remove old carpet and sand/polish timber floorboards: Removing carpet was easy. $3k to sand/polish floorboards.
• Install a new toilet and plumbing in the bathroom: House had a thunderbox out back but no interior toilet. This cost a lot ($5k) as the plumber had to perform magic to get a pipe through the wall. He also put in new taps to allow a washer to sit in here.
• Redo the garden: The garden was a mess. Weeds everywhere, grass needed mowing, plants needed trimming/some were dead. Labour was about $3k and new plants circa $500. Now looks neat and green.
• Paint roof: Current roof colour looked terrible. Quoted $3k.
• I paid a builder to help out (circa $8k including materials). This bloke was worth his weight in gold and the project wouldn't have happened if it weren't for him.
• $1k in skips for rubbish.

I ended up a good bit over budget, circa $28k. Likely another $2k of odd bits before we completely finish, so $30k all up. Relative to the value, this was probably a tad much.

Learnings:

• Don't invest so much in the garden again. Demolish old garden and use mulch/pea gravel walk paths with some hardy plants will do fine. This will be cheap to maintain and more convenient for tenants.
• Old houses like this often have very nice floorboards under the carpet. Tear this away and sand/polish. Will cost as much as a floating floor or carpet but look better.
• Be careful about buying houses that need lots of new plumbing work as it's insanely expensive.
• The 'Primer and Undercoat' was fine as a primer but I wouldn't say it qualified as an undercoat as well. I still needed to do 2 topcoats.

 

Thanks for sharing Scotty! Interested in how you complete your region research / prioritize regions?

 

Hi Ben,

I read the local government plans for housing supply and the government labour portals to get data on which jobs are popping up in the area.

 

Hi Scotty - I like your approach on this one. If you don't mind will you be able to share the details of the Buyers Agent used in Albury region.

 

Sure, dm me

 

It seems like I don;t have the pm facility granted yet.

 

4 bed/1.5 bath/2 car house in Cloverdale, WA. 1960's build. Brick home but has some fibro around. Nice big house on circa 700 sqm. Could upgrade to 2 bathrooms.

House had a bar area, built-in BBQ and big shed out back - bit of a 'man cave'. Would be great for FIFO workers.

This was a trustee home for an elderly gentleman. Spoke to the agent prior to listing on REA and offered >$430k. Had to wait a week but eventually got the acceptance after nobody showed up for inspection.

Based on comparables I figured the land was worth about $380k, so got the house for $50k. Would rent for $520/$530 so gross yield is about 6.3%. Valuation looked fine.

Property values in Perth have been flat for almost 15 years now. I reckon there's scope for upside.

Initial specs:

• Cloverdale is nestled between Perth city and the airport. Like most metro areas (any CBD in Australia), the land eventually runs out. Good upside if demand grows (which I think it will).
• The area is great for FIFO workers (good income and only living there half the time).
• Perth itself is known as a mining town but has begun the process of economic diversification.
• Cloverdale is near the airport. However, I know people living nearby who say they don't even notice the planes (pre-covid). It's probably a negative, but just one negative relative to many other positives.
• Lots of primary schools nearby. Unfortunately, no high schools but is some near Vic Park which isn't far.
• I reckoned the property could be worth $525k once renovated. There are nearby 4 bedders at >$600k but are newer, better renovated and are further away from the airport.

Renovations:

• The wallpaper...all I can say is that having tenants live with that wallpaper would likely be a crime against humanity. As such, it was removed. Painted walls and ceilings with vivid white paint which looks fresh and adds the appearance of more space.
• Removed old kitchen and installed new. Kept old oven/cooktop as was new (worth about $800). Tiled backsplash added and dishwasher.
• Old carpet removed and added floating floors.
• Perth's hot summer killed all the grass. Got gardener to throw mulch all over and add some pea gravel paths. Planted cheap, hardy, 'easy care' plants.
• The bathroom wasn't in bad shape. Painted walls, fixed some tiles, new shower screen and new vanity.

Learnings:

• From Albury and Cloverdale, have learnt it's better to have a builder who also acts as a project manager - can get 90% of the work done for you with less 'show up' cost.
• Focus attention on renovations the agent recommends to maximise rent/value. Ignore the rest as it's a waste of time. Then use your creativity to get the renovation done for a good price.
• Mulch & pea gravel gardens are your friend. A bad tenant will ruin the grass so don't bother planting. Only put in cheap, hardy plants you don't care about.
• I probably should have kept the prior kitchen and just repainted the cupboard/cabinet doors. But I did want to have some decent triggers to prove it deserved a higher valuation and I wanted a modern look to compete with neighbouring properties.
• Don't worry about the shower screen, can use a curtain.
• Curtains for a whole house can cost $2k to install and add no value to the final valuation. Better to have the fixtures so someone can easily hang Bunnings ones ($16.90 EA). Door and trim repainting cost about $2k. Again, not sure how much value this adds.
• I spent about the same as Albury ($30k) for this one as it had no major electrical or plumbing issues, yet this house is 1/3 bigger. Fixing these issues doesn't normally add to the valuation so is wasted capital. Thankfully with Albury, the strong market forgave my mistake, but I might not always get so lucky.

I'm planning to refinance both Albury and Cloverdale in the coming months. Then look for new investments.

 

Great story. Cannot wait for the update.

 

Thanks! @wsliuzx

 

Just out of curiosity, if you are refinancing both properties (with increased equity of 180k), that would increase your debt level. I would assume that you have used up your borrowing capacity with the first three property ventures, which I hope that's NOT the case, are you refinancing by increased salary or the bank pays more attention on cashflow?

 

Great story. Thanks for sharing with us. Any reason that you choose WA?

 

I have lots of capacity left. A few things help:
i) High income helps. Both my wife and I are very lucky in this area.
ii) Good financial habits.
iii) Buying positively geared properties.

 

Got tired of getting my bids beat in Queensland .

But I think WA has a lot of upside and land is running out around the inner ring. Prices have been sleeping for 15 years but the overhang of the mining crash appears to be washing off.

 

It is a mining boom right now. Well done on your journey.

 

Hi Scott,
Thank you for sharing. What are the renovations that agent recommend to add value? How much is the kitchen reno cost you ?

 

They'll differ for each property but it's mostly kitchen, bathroom & painting.

I'll typically do a kitchen renovation for $5k - $10k including labour and appliances.

 

Updates to come - have refinanced and looking to add to the portfolio over over second half of the year and into 2023.

 

Great journey, can you please post the pictures of renovation ? it would be great if you have before and after as well

 

Perhaps one day, but I'm a little hesitant as it might reveal the exact addresses in which I have tenants. There are some crazy's on the internet and I wouldn't want any of my tenants being disturbed.