Strategy advice - living in reno

Hey. First time posting on the property chat. Would appreciate honest opinions on my proposed strategy. I have been doing some research and thought of the below approach. My partner and I have a positively geared property in Adelaide and we are renting in Western Sydney. We don't know where we want to set up for the long term, but we can see ourselves staying in Western Sydney for the next 1.5 years at least. Thinking of buying an older house around the greater liverpool area and renovating it while living in it. Also thinking of building a granny flat in the backyard to add additional cashflow. After saving a deposit for roughly 1.5 years and revaluing the property, we would then find somewhere more permanent to live. What do you think? Thoughts of renovating to add equity while living somewhere? Thanks in advance

 

Renovating a property while living there is fine as long as:
1. You can handle no bathroom for 1-2 weeks while it is gutted and replaced
2. You/your partner can handle tradies arriving at 7am each work day and turning on their fav radio station at a volume they can hear over their power tools
3. You/your partner can tolerate dust & mess for many months
4. You can find somewhere to put yourselves while any asbestos remediation is done (if required)
..............and so on. Some people can do it, others can't. Some relationships cannot survive it, others can.

 

Agree with @Propertunity above.
Also please do up your numbers: How much deposit you have, the weekly mortgage, the initial capital outlay (Council, Contractors), the subsequent weekly outlay. Dont forget to factor in those occasional AirBnB you might need, additional transport cost to work etc etc.
Timing is also important. Do it in summer or winter, be aware of holidays period, rain and all that.
Be prepared to not to make big money since this is your first time. If you set your expectations at a reasonable level, you wont get disappointed and this helps with the relatinoship.

This is the sort of project I wish I got into when I was younger. If you are keen and willing to work hard, you will succeed!
Good luck!!

 

Thanks @Propertunity and @Pumpkin! Appreciate it! Love the brutal honesty

Will have to create some scenarios on excel.

 

@Shanny would love to hear how you go with this. Our situation and possible strategy we are considering sounds very similar.

My partner and I have a IP in Canberra that is starting to gain some useable equity. We currently rent in Sydney and whilst we both would prefer to settle somewhere quieter we will be in Sydney for the foreseeable future. I like the thought of adding value and extra cash flow through a granny flat and renovation. Possibly living in the Reno and then after a 5-10 years using any capital gains and/or equity to purchase the forever home somewhere quieter and cheaper than Sydney.

Good luck

 

Sounds like a great strategy , just don’t over capitalise on it. I would complete granny flat first then move into that whilst renovating the house to save on the headache mentioned.

 

I know someone who did this. It works a lot better than living in a worksite.

 

I have always renovated (DIY) my PPORs while living in them. It's a hobby that I am perhaps more enthusiastic about than my family. Most important thing is to establish a comfortable zone with no tools or anything to retreat to when you need to. Even if this zones moves around as the reno progresses. It's a mistake if you are living there to do every room simultaneously because you can never escape the mess. Time things like the kitchen and bathroom for warmer months when you can BBQ outside and perhaps set up an outdoor shower.

 

If you have a job, make sure you have a flexible boss! A friend was doing this and I think the surprise conversation went something like “how much leave are you going to take to wrap this thing up full-time so you can get back to focussing on work”

 

IMO it’s a great strategy, I’m just going into my 4th in the last 3-4yrs.

Basically I’d still be stuck on 1-2 properties fI was just purchasing and holding,

The reno’s And jumping from one to the next every 12 months through adding value and Re borrowing the next deposit has allowed me to keep moving in a flat market.

If your handy and can do some stuff your quite literally creating equity.

I’ve most likely saved over $40-$50k in stamp duty from buying each as a PPOR, always paid low OO interest rates, ability to shop around and work on the house slowly saving $$. (Just don’t skimp on the kitchen/bathrooms)

I see it as one of the best active wealth creation strategies aside from development & Will be continuing to do it for at least another 3-4 properties.

 

also, be aware that if you are living with your partner, your relationship is going to most likely be tested!

 

Silly idea...and putting you life risk..as it is almost likely there will be abestos and it will get disturbed during a reno. The better idea is to get someone to do it...

 

Think very carefully before you go down this path. We've reno'd PPORs many times. But they were PPOR's, not an investment acting as a PPOR for a finite period. If you are going to do reno's, ask yourself honestly "Do I have the skills to do most of this myself", because the minute you have to engage trades to do the work, you will be paying through the nose for the labour component of the reno. If the home in question is in Western Sydney, there might not really be much upside in equity if you need to pay trades to do the work, but of course, that depends on if you get the property for the right price as well.

Renovating is dirty & messy. Have you ever experienced just how hard it is to clear gyprock dust? It goes everywhere and is hard to clean up. Just yesterday I spend the entire day sweeping a 3-bed home, after finishing we'd finished patching walls. Admittedly, this was a vacant home, but the point I'm trying to make is that if you are living there, when this is going on, how happy will your partner be to find fine white dust covering every surface in the home.

And if you are anything like my Hubby, tools seem to migrate into every room. I don't know how, but they do.....and he gets angry when asked to clean the bloody mess up. Kitchens & bathrooms are a pain in the neck too, although easier if there are two bathrooms in the house.

 

Beware of selling soon after the reno is completed. It can mean the property isnt considered a main residence. Must continue to reside for 3 months at least. Also be wary of creating the impression that its a profit making activity. Doing it once is fine - fixer upper. Repetition isnt a good thing. Its then arguable that the property isnt a CGT asset and so is taxable.