Renovate before renting out

Hi Guys,

We plan to buy IP house, old house 95 years old and need to do renovation:
* filled out cracks on the wall and painting - cracks in every rooms
* changing carpet - so old and stinks, not sure whether we should pull out and polish the floor underneath or just put new carpet - any advise which one is cheaper option

Any suggestion for 1st timer IP house, what should we do before starting reno.
Do we need to get depreciation report before or after reno?
Can we use this renovation as tax deduction or capital depreciation?

Many thanks for all your suggestion

Vanvir

 

Renovate + Depreciation Report.
Note down anything you remove.
Photos are your best friend

 

Get the depreciation report after the reno, as this is when you'll have the new stuff in there that is depreciable.

The things you remove /replace won't be depreciable as the property was not a rental at that stage.

Generally painting and floor coverings are the best bang for buck in terms of making a property nice again. Looking into laminate floor boards as an alternative to carpet - its easier for tenants to keep clean. Depends on the area / target demographic though.

 

buy something else

 

Be prepared.

Renos can be much longer, harder and more expensive than expected. Personal experience talking here.

Make sure you have a good time and $$$ buffer in your budget.

 

Set a budget and stick to it but have a per-centage in the budget to allow for items that have not been accounted for and arise. Quotes - at least 3 to compare companies to ensure you are getting best value from the company.

Depreciation schedule after renovations as new items wont be accounted before the renovations.

 

What is causing it to crack?

 

If it's an old house and it's timber floorboards underneath, pulling off carpet and polishing is probably the cheapest option (and looks heaps better than laminate).

For IPs any surface that allows spills to be wiped up is the way to go.

 

This is true. I am 8 months into a 6 month renovation. Over time and over budget. At least 4 to 6 weeks to go.

 

Thanks guys for all your replies.
We want to buy it since it's very good location even though not a good house....
We got the building inspection to check the cracks and he told me it's the soil movement and confirm it's not a structure issue

so need a bit more work for patching the wall, fix the cornice and painting. Replace the carpet in the living room with new carpet or vinyl and leave the carpet in the bedroom - not a bad condition

Hopefully we don't blew the budget when we renovate - always thought this is investment not mine so don't put my feeling on this reno

Any recommend handyman for Sydney?

Cheers
Vanvir

 

Off topic but indulge me if you will..

You're a first time investor true? What is making you want to buy an investment property in Sydney at the moment?

 

cause property always goes up! der!

 

Cos its Sydney

I have to ask, if I was on Somersoft back in 2004 when i was a First Home Buyer, and asked about buying in Sydney would the same question be asked back then as it was now?

What what it's worth, property was just under $500k, interest rates at 7-8%, rental income of $280 per week (approx 2.9% yield).

Would it have been suggested to me to purchase in other states?

 

I was a noob back then and I purchased north of Newcastle. Went no where for a loooooonnng time. By the time I sold earlier this year the value had only increased around 20% and was still negatively geared (was down 20% at one stage too) and I had a worn out property after 13 years of tenants.

After that I purchased properties in Sydney starting from 2006 - 2013. Good times to be buying, rates were highish, not much competition and fairly easy to do value add deals. Now is not that time. You see a couple of cycles, you get older, you get smarter, you gain perspective.

 

We just had the floorboards in our investment property sanded. All finished with clear lacquer it worked out at $27 a sqm. Looks awesome now.

 

Start talking with some Quantity Surveyors now. There might be some value in a QS going through the place, and understanding your renovation plans.

Many players miss the opportunity for "scrapping". ie writing off costs associated with any potential life in the stuff you're getting rid of. think of it as a depreciation bonus!

I'm sure @Depreciator could help you.

 

Yep get a depreciation schedule done before you reno so you can write off anything before turfing it. No advantage in getting a QS after the reno cos he'll just value your reno based on the receipts you give him. There is another way which give maximum bang for your buck but I won't mention it because it's not considered ethical or legal.

 

Thanks for everyone input, really appreciated. The reason we want to get this house is because our house may be bought by developer soon and we don't move from sydney so thinking to use this house as an IP for a while and perhaps move it when we sell our house.

So before renovation, we need to get depreciation schedule ... nambis, i'm really curious now when you say there is another way that is not 'appropriate', would you mind sharing it or PM me, really want to learn how to get maximum depreciation. Thank you

Vanvir

 

If you think this IP might become your house you might want to consider making it your home straight away. You could then move out and renovate.

It could give you more options later on depending on how life pans out.

Basically the main residence exemption applies only if a house has become your home. So depending on how you sell and what happens it might be in your best interests to have this as your home, for capital gains tax reasons, straight away.

Just a thought.

 

The issue with the suggestion Ross made is then you MUST move back in after reno for 3 months. Failing to do that could pose a problem...You cant use the 6 year absence rule either. The MRE is lost for major reno's without the 3 month rule being fulfilled.