WA Perth market 2019

You'll be surprised that dull and ugly looking 200sqm houses can sell for the same or less than shiny 120sqm houses so if you can afford one, you can afford the other, then the question becomes - which one do you want to buy?

 

Totally get what you're saying but yes as it will be PPOR first in needs to be somewhere I want to live.

 

Yes two in the structure plan. One is his PPOR he does not want to develop. The other is one he just completed and left room for another on the side . He didn't want to wait for the structure plan as it originally (and still has?) some very large rear setbacks

 

We bought a old crappy but monster house for our PPOR and have been doing it up over the years. I know what I will be telling my kids to buy. I've spent about 50k on it and it was valued over 150k more the others on the same street (prob because it's nearly double the size of the rest)

 

Bayswater is set to do well anyway so holding on to them will work out nicely.

 

This will hopefully be my rationale also. Buy something that isn't a complete dump (Because im not that skilled to take on a massive project yet) and do some minor renos to it. PPOR for a few years into a springboard when the time is right.

 

It wasn't a dump but tired/dated. It was mid 80s with good solid walls, roof etc and just needed a kitchen, bathroom , laundry Reno which we did one of each every few years. Even with a paint job , new blinds and my own landscaping (bought the grass back to life etc) made it quite liveable.

 

As most of you know I purchased 809sqm in Booragoon for $730k (settlement is on Wednesday) however I have the “property bug” and still looking at opportunities. The house we bought will be PPOR, full interior reno cost is $57k (relative owns a reno company saving a lot of $$) and stamp duty and fees approx $30k. All up Looking at $817k with expected move in date of March 29th (4-5 week reno).
After this, I expect the value we could achieve if sold could be close to high 900k’s to low 1 mil. I say that conservatively after looking at examples in the same suburb.
Last week on Monday a property in Davenport street came on the market which will have similar interior to ours except it has a pool and 80sqm less land. I called the Agent and arranged a viewing for Saturday but by Thursday it was under offer and home open cancelled. The agent said he would expect an offer with a “1” in front and couldnt say what the next number would be - assuming either a 0 or 1.
This piqued my interest as I have noticed fully renovated homes regardless of land size or whether street facing or rear block were building plenty of interest on the ground i.e multiple cars parked everywhere and literally 50-100 people showing up. So i began my hunt and looked specifically for homes in the Rossmoyne and Applecross school zones with 700+ sqm and old homes requiring roughly 50-60k worth of renos and I managed to find just two other options i thought viable.
My strategy is to purchase low 7’s, reno house, either rent out and use equity for the next one or sell and use the profit for the next opportunity. Are there any flaws to my thinking? Am i just dreaming or is there something i have discovered here worth pursuing?? TIA

 

Congratulations on the settlement. Are you talking about 34 Davenport? It has OO appeal for sure. While the reno and flip/extract equity has been a strategy forever, be very careful with your estimated end values and seasonal demand. Rossmoyne and nearby high school zones have always been in demand and plenty show up for each opening trying to score a bargain.

In this market, reno and rent is a bit pointless for the small increase in rent unless the place is a dump in which case it has to be made livable with the least amount of reno.

1. Reno and Sell - watch out for high CGT if you hold for less than 12 months or if Labor wins and the discount goes down to 25%
2. Reno and extract equity - Extract to 80% is easier than 90% but still have to meet servicing requirements.

At this stage, keep an eye on the market, finish your reno and get it valued and see what comes out of it and take it from there. Remember, once in a lifetime deal comes every month so don't be in a hurry to jump the gun.

Two biggest risks with reno projects in general are:
1. Over capitalizing (getting carried away with the renovations)
2. Over estimating the end values.

Be practical with the above and you can make some decent coin. Good luck.

 

Thanks for your reply, appreciate it. Yes it was 34 Davenport - under offer in just a few days. Definitely has OO appeal.
If I were to live in for 12 months then rent out would CGT be avoided then if we were to rent out or sell??

Definitely in no hurry. Just noticed the attention renovated homes are getting and got me thinking... our house was a bomb, total gut of both bathrooms, kitchen, laundry and all flooring, 3 walls coming out, one getting filled in, creating a theatre, WIR for Master and enclosed toilet for ensuite. I'd compared it to run down public toilets with a dusty unmaintained house but structurally all good. Will be interesting to see what the valuation is after reno. Most banks had it at valued at low 800k pre purchase.

I'm definitely more of an "overestimate expenses and underestimate end values" type of guy but lacking in the over capitalization area. What's a "must have" and what's not when renovating can be difficult to distinguish between but I often chat to prospective buyers when looking at finished products on the market to get an idea of what they're looking for and willing to spend. Very insightful information straight from a potential customers mouth!​

 

New handle....green thumb?

 

Can I ask what you are classifying as a full interior reno? Kitchens and bathrooms included? $57 is a steal if you can do it for that? My parents spent close to that if not more for one bathroom and a modest kitchen.

 

Love your work, but I disagree on a couple of things

1) Post APRA, it's really only the (larger) investors who can't borrow - not home buyers and particularly not FHB who would otherwise rent.
2) 'Normal' people can still build - it's larger development finance that there's not much appetite for. However those who aren't FHB (ie,desperate to stop renting and will live anywhere) are being held back by negative sentiment rather than a lack of available finance. They're all a bit scared to make a move.

Rents will rise because investors are savvy enough to understand that in Perth market right now, new homes in the new estates are like new cars - you lose on them the minute you get the keys. They're using the opportunity to buy existing, which does not necessarily equate to a larger rental pool if the property is already tenanted.

 

Yep. I had a nice house that I couldn't sell so put back on the rental market - had multiple applicants straight away and $50/wk higher rent than previously. Last time it took ages to get a tenant.

 

Hi Damo, you have done the best for the area over the last few years (maybe from 2016?). I have been bargain hunting in the area and had never see the deal you have made. Well done. In fact I walked past your home a few weeks ago and it was pretty solid. It is a rental property now I gather but the location, just a couple of houses to Riesley and just cross the road it's Garden City, it is a gem. You deserved to be crowned Buyer of the Year (best deal category) in Booragoon! Keep hunting, Rossmoyne is an area you will never regret, walking distance to Rossy Senior High would make you heaps given the latest HSC results.

Something like this would be interesting: https://www.realestate.com.au/prope...ep-pdp|sold-pdp:property-history-cta#timeline

 

1. If you live in it and sell then you get CGT exemption. May even be able to use the 6-year rule. Get tax advice.
2. Your place sold for what it sold for exactly those reasons, not many want or even have cash to inject for major reno. So you did good there. Stock on Risely st can be had for sub-$800k with triplex zoning, most other blocks are R20 so no dev potential.
3. For estimating end-value (if you sell not for valuation because those can be all over the place) you have to look at lower-end of what you can fetch and not "similar house but has these extra things" just to be pragmatic.

Once your reno finishes, get it valued, use the valuation as a sell point and test the market, if you get the price you want then I would exit and take the money and move on to the next project. A lot depends on your own borrowing capacity, risk appetite and how much cash you have to do other projects while holding on to this.

Welcome to the property hoarding club.

 

Great buying, congratulations. Careful about the reno costs - quite easy to underestimate. You must be earning good money to be in the realm of getting finance to purchase and accumulate multiple properties of that value in this credit environment, especially as a new FHB. See how you go with the first one but sounds like you could be on to a winning strategy if you have the time to put in to it and can get the finance.

 

I will post photos before and after but complete gut and brand new bathrooms, laundry and kitchen. Walls coming out, walls going in, flooring, paint, blinds etc.... I stated a relative owns a reno company and we managed to score a fair few freebies and a lot of "cost price and wholesale priced tickets which significantly reduced cost. This combined with our attitude for hard work (I work 2 jobs and 15-16hr days) I thought the Buy, Reno, Sell opportunities would suit our lifestyle. Hence why the discussion and interest in what I may be missing

 

Sounds good! Looking forward to seeing it progress

 

Hi, thanks, I do feel we snapped up a bargain although to the average person that came through the home opens it looked like a lot of work (and it is) to make liveable. The owner is still there and we get the keys this week so no one will be renting there as yet. I plan to move in late March and have two confirmed renters and will look to secure a third (plenty of trusted friends studying and living in the area) Rental income expected to be $450 cash a week. Im finding low 700k reno options in Bateman - not all viable but 1 or two every 2-3 months pop up on the "potential list". I have one saved at the moment below which I thought would be decent - reno bathrooms and kitchen and open up living area but asking price is not right - would be looking as close to 700k as possible as I would spend more on the kitchen than my Booragoon house (think new kitchen island bench etc)

21 Bartling Crescent, Bateman, WA 6150