Renovate or sell as is?

I have a 3br house investment property in Rockhampton that I payed $120,000.00 for back in 2003. I don't have a tenant in there at the moment.

I got a valuation from an agent there at around $200,000.00 - $220,000.00 ish as is - or $265, 000.00 ish if it was nicely presented (fully renovated). To make it nicely presented it would take about 20 to 30 thousand to renovate.

A lot of nicely presented properties in the area are sitting on the market with no buyers.

As is now, I can get $200 to $220/pw rent.

My concern is even if I spend the money, I still might not be able to sell it.

If I sell it as is, buyers will probably want to pay closer to $200, 000 so they can make a profit on it.

What to do? Any advice please?

 

So its positively geared
Spend a few dollars to improve its appeal and rent it out
Unless you want the funds for a better venture

Dont bother spending to renovate if there's other properties in the area stagnating
It would be a waste

 

If you take into account the cost to renovate + time/holding costs + risk that it won't give you back money x 2 + the fact that the ATO will want some of those gains, then it might not be such a good idea.

I believe with renovating that you want to get 2 or 3 times back the money you spend on it.

Why do you want to sell it? Is it holding you back from another project? Does it make sense to still renovate it but then keep it and extract equity and get more rent for it?

 

I have had a number of bad tenants which has been a huge cause of stress. I have tried different property managers but they seem to just cater to the tenants. I am afraid that the property prices might take a dive and also the rent that I can get for it and then I will regret not unloading it.

I was offered $240,000.00 for it 4 years ago as it is and I was getting $265.00/pw. Now I would be lucky to to $200,000.00 to sell or $220/pw and the rental market is very slow at that.

I don't need the money for anything else, so I suppose I just try to rent it out again and just hold it. I think there is no point trying to sell it the way the market is at the moment.

 

You could do a minor freshen up - paint, new carpet (say a couple of thousand spend). Then, try the market?

If the market is going backwards, waiting might mean it keeps going backwards.

 

Even if you don't need the money for something else it can still hold you back.

If it's causing you stress, tenants suck and the area is in decline then it can be a good idea to get out.

I asked the questions to try and work out your motivation to sell. The additional information you have given me probably suggests a sale 'as is' might be the answer for you

 

Actually @hobartchic, a repaint and carpets will cost quite a few Thousand. Being interstate, the poster will most likely have to pay someone else. I am managing a similar proposition for an interstate friend. To do just that she was quoted more than $20K from two different companies.

 

Hello alshamy
I would suggest you get a few more opinions from other agents. If you post your question again in the Where to Buy thread with the word Rockhampton in the title, it will pick up some other investors who know the Rockhampton market. They can possibly help you with further.information. Best wishes

 

I didn't mean paint the whole house, just touch up say the living area. Carpet laid is fairly inexpensive though, assuming a budget choice and that usually would not include kitchen/ bathrooms.

 

With the changes to depreciation deductions, I wonder will investors prefer to buy unimproved properties?

 

Good point. But would investors want to buy in Rocky?

 

Carpet for a 3 bedroom house at $35 m2 plus 10%. say 80 x $35 = $2800
Painting $5000
Other $2000 + cleaning, blinds, plumbing, light fittings, garden

I would spend $10,000 even $20K to add another $50K to the value. But was the agent telling the truth? Is it worth it in this particular location?

 

just reading from the numbers in your post, $200-220k sell for it is, after $20 - 30k reno, then sell for $265k, plus the holding costs while renovating the house, and the stress, loss of rent. it does not seem worth it. agree with @Westminster

 

If I can get up there next year and do the work myself for about 10K including painting it, I think I could get the valuation to 250K. This is just from looking at the same type of house on realestate.com. I don't have a mortgage on the property. Only 7 houses sold in Rockhampton in 2017. Maybe if it is presented better I would get a better tenant in there.

 

What happens if before then interest rates start rising and the market takes a further turn south?

 

That's what I am concerned about. If it comes to the worst I will just have to move up there are live in it myself at some point. I don't see any case for a dramatic rise in rates. If they do, then rents should go up because less people will be able to buy. That is the theory anyway.

 

I don’t know, not an advice but from what you posted it seems to me there is limited upside in near to mid term future. Unless I’m planning on holding it for a long term, I would weight up the upside (if any) and downside risks and take action based on what I think is the most likely outcome.