Renovations in a flat market

Actually BA, my g/flat cosmetic only took about 3 weeks, I am in Perth and someone from Sydney on this forum was kind enough to project manage the project. The hardest part was getting rid of the tenant.

MTR

 

Ah - sorry, in this case g/f meant girlfriend. You mentioned she was finding total turnaround time that long?

 

sorry yes, girlfriend, however the renovations included extensions to the home, so council approval etc. required for all her projects.

I will try to find one of her older deals and post it shortly just do give you a idea on numbers

 

It depends on the market, not all reno can improve values to the property. I had Reno done recently and hoped to have some improved equity to access from revaluation, but it looked nearly the same value as I purchased it 2 years ago. The current Perth market is very depressing, so the revaluation price looked close to my purchase price, I do not have any equity at all even though I spent 5% of my purchase price to do a Reno.

 

It depends on the market, not all reno can improve values to the property. I had Reno done recently and hoped to have some improved equity to access from revaluation, but it looked nearly the same value as I purchased it 2 years ago. The current Perth market is very depressing, so the revaluation price looked close to my purchase price, I do not have any equity at all even though I spent 5% of my purchase price to do a Reno.

 

In my honest opinion, there is only a very limited ability to make money from flipping (that is buy, quick reno, sell) in a flat market.

The cost of trades men, holding, capital gains tax, (or income tax if selling under 1 year), renovation budget blow outs for unexpected problems, real estate agent fees, basically erodes all of your equity gain at the point of sale.

To make a profit from flipping:
1. must be your PPOR so as when selling the is no capital gains tax to pay.
2. you are a handy person and do almost all of the work yourself.

And as others have mentioned above, buy well- although actually being lucky enough to 'buy below market value', however much it is talked about here, I've never been able to achieve myself. But, obviously it can be done, the easiest way I can see is the 'Affordable Homes Programe' for first home buyers, that meet income limits, can get access to X-housing trust properties being sold off- in most cases at a discount to current market value.





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I've heard numbers such as a minimum of $700,000 to make a flip worth it - high priced suburb with good variation in prices, say avg price $850k, purchase for $700k, structural reno $200k, sell $1.1m+, pocket $120k after expenses, hand over $50k to tax. Walk away with $70k from 4 months work. Makes sense.

 

i attempted this kind of renos maybe 6 years ago. buy 400K, sell 600k in 3 months for PPOR (no CGT). but nowadays it's a hard market for these to come along so it mainly depends on timing of mkt and reno. As mentioned my friend at work bought 600k and sold 900K 3-4 months in camberwell like just this month

 

My investment partner wants to buy something like this:

224 St Kilda Road Kewdale WA 6105 - Duplex/Semi-Detached for Sale #121207694 - realestate.com.au

and renovate it into something like this:

173a Lawrence Street Bedford WA 6052 - House for Sale #121040606 - realestate.com.au

He will do most of the work himself and I can help a lot but this will be his project, not mine.

Concerns I have:
- high initial asking price
- cost of renovations
- time to renovate leading to high holding costs
- low end value ($450k max?)
- potentially no demand for the proposed end product in this area
- dealing with the neighbour for drive upgrades etc

I can see the place has potential. Check out that metallic paint, and that kitchen!

Still, I can't see where the profit will come from.

 

The camberwell property - I hope you don't mind me asking, but what kind of property was it? Villa unit/unit/townhouse/etc?