Questions Before Buying Renovated House

Hello all!

My partner and I have been solidly in the boat of waiting to see what happens with the next election/economy/etc before buying our first house, but we came across our dream home this week and I was hoping for some advise.

The house we just found is a beautifully renovated Queenslander on the outside edge of Brisbane City Council. It's not one of the more popular suburbs and has average house prices well below the more inner city ones (3 bedrooms $378,000, 4 bedroom $420,000). The house was only bought last October for $206,000, but it's obvious they've spent the last 6 months doing amazing renovations. It's now built in under, beautiful new kitchen, 4 bedrooms, one bath upstairs, one bath downstairs, and generally just gorgeous. It's price is listed as "Contact Agent", and it has about half as much land as the majority of houses in the suburb.

When I rang the real estate about the price, they said the owners were hoping for high $500k low $600k. I can tell they put a lot of effort into the house, but that seems a bit steep when considering the price of the suburb. A small handful of houses have sold over $500k, but all of them were either 2-4X as much land or brand new developments that I would assume foreign investors were overpaying for. The closest other house I could find that sold recently was $460K, and while the renovations weren't as nice, the land was 200 square meters bigger.

Mostly I'm just wondering if you think they're over reaching with their price or if renovations really can add $400k of value to a property in a lower-end suburb? If that's their expected price range, would it be a dick move to offer $400k-$420 considering it would be my starting price for a nice house in that suburb?

We are young(ish) first home buyers, so please forgive any ignorance on my part.
Thank you!

 

Compare against recent sales and quizz The agent if you think it's over priced

 

Gday chanceo,
So last sold for $206k in Oct 2015, the owners are hoping for high $500k - low $600k. You say avg is $378k-$420k for the suburb. AND you say the land content for this one is about half of the majority of other houses in the suburb...
Why are you even looking at this house instead of other houses in that suburb?
Regardless of what the perceived value is, what's your budget?

 

Depends why you want this property I guess. If you are using this as a launch pad for a future rental portfolio (including possibly renting this one out later) I would say totally wrong property (You should be looking at a plain jane below suburb-median brick box on decent sized block). But if you want this as your PPOR nest for the next 5-10 years I can understand your emotional interest. Even so IMO yes it is a **** move trying to lowball in the way you are thinking.
Put yourself in the seller's position - they want to cash out of their project asap and move onto something else, but no-one likes silly offers, especially early in the campaign.
In a situation like this if you represented to the agent that you had serious interest in the mid-high 4's, and you had your finances ready to go and not subject to the sale of anything, then they might even ask you to commit to a written contract on the spot. So in essence you need to get fair dinkum or stop dreaming. It took me many times of missing deals through similar actions as you describe to actually figure this out - to get a transaction you actually have to deal yourself into the main game.
Your lack of confidence in knowing the true value of this property is causing you to under-bid in all probability - not conducive to a result. Solve this by firstly getting to know the value better, and then if its in your sweet spot decide to either go after it or walk away.
But don't panic - the deal of a lifetime comes along just about every week anyway. General opinion only - not advice.

 

This is good advice.
Plenty of people day dream, but what do you think is going to happen when they haven't got anything sorted yet? Oh sure, we'll wait 3 months until you get your finances in order.

 

If it's got land about half the size I bet there's another new house out the back or at the side of it that used to be the land for that Queenslander.
Personally I always try to stay away from these ones assuming it is like that. I always feel a bit ripped off as the work is done and you end up with the scraps as far as the land is concerned
It is possible though that they aren't being greedy about factoring in the cost of the renovation. It can be very expensive to build in and renovate. But if that is the case then let that overcapitalisation be their problem not yours.
Some suburbs will sustain an expensive renovation eg new farm yes you can renovate to the extreme. But far out suburbs the land to house ratio becomes too out of balance.

 

Thanks everyone for all the info! It was great having a bit more info and idea of what to expect. They weren't even accepting offers under 600k, so we walked away. The neighborhood was also more rundown than we were expecting, so it would likely never gain much value. Here's the link to it 59 Ducie Street Darra Qld 4076 - House for Sale #122520682 - realestate.com.au, no risk of someone snatching it out from under us now .

We are looking to buy just as owner occupiers and we are really hoping to stay under the 500k mark so we can benefit from the first home owner stamp duty concession since around 500k is about our budget anyway.

We'll just keep with our current plan of looking for a place to renovate ourselves. I just got all caught up in finding one renovated just how I always pictured.

Thanks again everyone!

 

How much did that one end up selling for?
Wouldn't you want a bigger block of land buying that far out? 551m2 seems a bit small.

 

Far as I know, still hasn't gotten any offers. It was still bigger than a lot of the inner city lots we'd been looking at, so we were willing to overlook that. But, that's when we thought the area was moving towards smaller lots with nicer houses, which seems to only be at the beginning stages.

 

Yeah good decision to cross that 1 off your list. The house does look beautiful though. But there's a lot of better options for $600k. I'd recommend a tidy 3 bed house that doesn't flood inside 10km of city. Should be easy enough to find something.

 

Yeah, that sounds more like it.
Definitely doable too, not sure for how much longer though.

 

Sounds nice

DANGER, DANGER WILL ROBINSON. That's going to either be in the boonies or high crime/no land value (e.g. forest lakes)

Aaaand surprise, its Darra!

Have... you ever been to Darra before? How did you not already know this? You're bordering on Wacol & you're right next to inala.


At that kind of price, they need to be about 5-7km further north toward the river in preferably Oxley, but maybe Mount Ommaney on a big block.

I love those big old queenslanders, I would prefer one of the ones on the quiet streets around Kangaroo Point or East Brisbane though. For now they are way outside my budget for a PPOR & don't make sense as an investment. While not as bad as wood boats, wood houses do require a fair bit more TLC than plaster or double brick homes. Also IMO tenants and polished wood floors don't mix. They won't polish them ever & they won't care about their furniture scratching them.

 

Like this

 

Or keep their large dogs off them, which tends to lead to scratches etc...

 

They want to know if they can buy a dump for $206k, reno it and flog it off for the high $500k low $600k?

@chanceofrust I am putting a vote in for overpriced. It would be very unlikely they get their wish price.