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Renovations before settlement?

Discussion in 'General Property Chat' started by Bran, 16th Mar, 2016.

  1. Bran

    Bran Well-Known Member

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    How comfortable are you guys with renovating before settlement? I have been given access (nothing is on the contract, but I got given the keys and a "you can do what you want once it's unconditional).

    My newest is unconditional, finance all approved - should be fine.

    I've done lots of hard yakka myself, with minimal financial cost, and I didn't mind the exercise. AN electrician has already done his bit.

    But - I'm about to pay a painter and roof restorer... to the order of maybe 6k total, all pre-settlement.

    Would you? It lets me advertise and get in a tenant from day dot, but it's a small risk...
     
  2. neK

    neK Well-Known Member

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    Personally I wouldn't because I don't think it worth the risk.

    For example, if it takes 3 weeks to do the reno.
    Loss Rent = $500 x 3 = $1,500
    Reno Cost = $20,000.

    For me it just doesn't add up.

    I normally ask for access to visually inspect / measure up.
    This allows me to plan the reno, get tradies in quote and have them ready to go the day after settlement.
     
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  3. Dan L

    Dan L Member

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    If you are happy to assume the risk, go for it. I have seen sellers die before settlement however or there is a risk of a bankruptcy event before settlement. Unconditional is never quite unconditional.
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes there is no guarantee that the contract will ever complete.
     
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  5. Nemo30

    Nemo30 Well-Known Member

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    I have, but I had to sign a licence to occupy which stated what I was and wasnt allowed to do.

    we painted ourselves, so there wasnt a great loss if it fell through. We also cleaned and got rid of mountains of rubbish.

    I was putting in a new kitchen, which was measured and ordered prior to settlement, however the old one wasnt pulled out until after settlement.

    Essentially got everything ready, tradies quoted, all the running around etc prior and then blitzed it after settlement.
     
  6. Bran

    Bran Well-Known Member

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    You guys aren't really telling me what I wanted to hear ;) (but that's why I posted - I was running with it until I pulled myself up today).
     
  7. albanga

    albanga Well-Known Member

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    Do lenders ever want to perform a second valuation prior to settlement? For example if it were a long settlement?

    If so then probably a bad idea as they may come in mid walls being knocked down and you have to find the shortfall of the new unfortunate Val.
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Valuations have an 'expiry' period - which may be about 3 months. After this a new one may be needed.

    I had one loan client who removed the kitchen before settlement, and before the valuation. The valuer went in and seen it had no kitchen so made comments on the report and the lender refused to lend. Client had another kitchen ready to go in but he couldn't gain access! He nearly lost his 10%, but it got through in the end somehow.
     
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  9. eng

    eng Well-Known Member

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    So the risk is that anything can happen before settlement, and the property might not be yours. Or you loose all the money you put into the reno. Is this correct, thus the precaution?
     
  10. Johnny Cashflow

    Johnny Cashflow Well-Known Member

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    Have tired this before but was denied. I would do it for painting I think it's fairly low risk
     
  11. Bran

    Bran Well-Known Member

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    Everything I'm doing is an immediate improvement. Nothing structural.
    Garden clear out
    Old stuff removed
    Paint applied
    New grouts
    New/washed curtains
    Roof restore + paint
    Exterior paint
     
  12. joel

    joel Well-Known Member

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    I did the same thing with the first house I ever purchased. Had to accept the place "as is" to do so, and then found out the air con needed a new motor and the oven was stuffed. But if youre already unconditional then theres little risk.
     
  13. Inov8ive

    Inov8ive Well-Known Member

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    I have done this before. Got permission to paint and do floor coverings. I did that, along with a full kitchen and bathroom reno. Rented straight away. Highly recommend.
     
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  14. JK200SX

    JK200SX Well-Known Member

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    Sam thing happened to someone that I know recently.
     
  15. JK200SX

    JK200SX Well-Known Member

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    Would a caveat protect you?
     
  16. Bargain Hunter

    Bargain Hunter Well-Known Member

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    I would be happy to do some basic clean, tidy, paint however I would not commence any demo/major work until settlement for the reasons outlined by others.
     
  17. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    It would help (Black v Grnock), but not protect you. If the vendor dies the transfer may not be able to complete for example. Similar with bankruptcy.

    There would be an argument under the laws of equity that the improvements belong to the person who did them, but this would be an expensive argument.
     
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  18. Bran

    Bran Well-Known Member

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    I'm now only 2 weeks til settlement, and both major trades cannot start before next week, with both doing a weeks work. Thus there should only be a week in it, and therefore not worth the gamble, albeit low risk.
    The PM is very firm that given the type of property and a fairly limited market, that we get it perfect before advertising, and I have to agree.
     
  19. Liela71

    Liela71 Active Member

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    I painted before settlement and only requirement was that I take out my own building insurance and I had to provide a copy of this to the REA before I got the keys.
     
  20. dabbler

    dabbler Well-Known Member

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    I have always done it, but only cheap cosmetics that are time consuming like painting, it is only another calculated risk.

    PS unconditional or not is still a small risk, for instance, if you did major renos the vendor could also decide not to complete, if vendors solicitor is doing a reasonable job they would already advise against any major renos.