Suggestions please - our first reno

People it's a mistake to assume that your properties are going to keep growing in value over the next 3-4 years. The latest unemployment figures in the Australian Financial review are pretty startling. Australia is in dire straits. The HIA which represents house builders wants a housing minister to ensure houses get built when in fact will increase the supply and cause prices to drop or not move. I don't know about you guys but I think that tradies are grossly overpaid in this country and I get livid when Goverment supports their jobs by flooding the housing supply and palming of the losses to property investors who then don't get capital gains due to housing over supply. The interest rates in Australia are low now not because the country is in good shape, it's because the countries economy is on the verge of collapse due to exposure to the sub prime crisis and quantitative easing.

Now is really not the time to do renovations, now is the time to pay down your mortgages and thus go and take a look at the calculators on the moneysmart pages and see what your Reno dollar is costing you.

 

Australian personal debt is the highest in the world, that is the elephant in the room that everybody should be dealing with . Property prices are unsustainably high for people who need to save for retirement, the situation you had up until 2005 has disappeared. It will reappear once people pay down their mortgages or inflation sorts it out. The banks will not allow inflation and so the option is to pay your mortgage to the masters and suck it up.

 

So, time for an update! A good handyman we've used before went through the house on Monday and rang to say he doesn't think it's worth renovating. He estimates repairs, cosmetic reno and painting inside and out will cost around $20k, twice what I'd planned to spend! He also feels the house needs a new kitchen rather than a cosmetic reno, adding to our costs.

He thinks the reno won't look that good in 2-3 years and we won't be happy with the result, so he'd rather not do the work than lose us as a client. On top of the $20k there's still $2k+ for floorboards and another $1k for other work. At the end of the day it is an old, small house with a small kitchen and bathroom, and will always look that way without significant work.

Given this, we're strongly considering taking @Ald 's advice and selling (as is). The property has appreciated a little since we bought it and we'll likely break even after our buying and selling costs. This will be an expensive lesson for us in opportunity costs - as our first interstate purchase there are lots of lessons to learn. We will replace it with another IP, but larger, newer and not requiring much reno (if any).

Your thoughts, including whether to sell as is or what to do to prepare for sale as a minimum would be appreciated; we'll also ask sales agents for their advice on preparing for sale. I'll look on the Buying and Selling section for Brisbane northside agent recommendations; please let me know of any you can recommend.

Thanks in advance,
GG

 

Why would you sell it? How does that fit with your investment strategy? Stafford Heights is a decent location, with good access to CBD, arterial roads and airport.

Why not just repair whatever needs repairing, paint whatever needs painting and just make sure everything is safe, functional and clean for a new tenant? That's just property maintenance, and should be done as a matter of course. I'd save your reno $ for the next time the area experiences a boom in prices.

Cheapest house for rent in the area is about $330/wk, and that's near a busy road. The next step up is about $360/wk.. so you're in the ballpark by the sound of it. Do you allow pets? That's a good way to attract tenants.

 

Agree that a paint job would do wonders to smarten up the place, a good boy of gardening and mulching also.

 

Green goblin if you are going to make a loss on this or just marginally break even then I really do not recommend selling. In that case your best option is to just scrub the place clean, the walls, get the carpets steamed twice and extracted, all floors steamed, a good commercial cleaner will take $1100. Spend $500 tarting up the garden. Paint it and then sign up with a tenant at a slightly lower price but tell him it's his problem to look after the place. Tell him if a toilet blocks it's his problem you are out of state. Ask him what will make him happy to move in there and look after the place for you for 5 years and not make it any worse. Have a long conversation with the guy see if you can develop some bond of honesty and a relationship with him and treat him well. You basically want him to manage the property for you and pay the rent so that you can forget about it for a few years. Pay down the mortgage as much as you can and move yourself up where you live by doing slow renovations and selling each time moving into better suburb. You will have plenty of time to invest. The next years are gold for paying down a mortgage.

 

If it's 8 km from Brisbane this will be a great investment in the end. What mortgage have you got remaining on the place?

 

@Ald you seem to have changed your thinking from your earlier posts (much like we're changing our thinking)

@Phase2 your points are good - thank you. Seems there was a miscommunication with our handyman.He's said the kitchen carcass and benchtops are old and worn, so not worth doing a cosmetic reno on. He suggests putting in a new kitchen - his rough estimate is $7k through a cabinetmaker he knows. He's also suggested tiling the kitchen floor rather than polishing floorboards (he'd need to remove lino and masonite and all the floor staples). I thought the stove was fine, but my wife feels that once we're redoing the kitchen we may as well put in a new oven, cooktop and rangehood (which would need to be ducted (into the roof?))

The handyman doesn't want to resurface the bath, believing it won't look good in 3 years or so. Again he suggests gutting the bathroom and putting in a new bath, shower over the bath with shower screen, new vanity and floor tiles instead of the terrazzo floor (it's a small bathroom). New toilet and tiles instead of the terrazzo floor there too, to match.

Wallpaper in the 2nd bedroom is an issue, as it could take a long time to remove. Not sure whether to just leave it or paint over it (and risk it bubbling). Replace the cheap, unfinished shelving in the two BIRs with melamine wardrobe shelving from Bunnings/Masters and add two standalone wardrobes to the main bedroom.

Our handyman estimates this will be a $25k reno instead of a $20k cosmetic reno, but we'll end up with a new kitchen, bathroom and toilet. Here's a floorplan of the current house:


Your thoughts on the above? How do you decide if it's worth doing a full reno or a cosmetic reno?

 

I'm not surprised at the costs quoted.

I would just use a cheap white gloss acrylic for the unfinished bedroom wardrobe shelving. Same for the inside of the kitchen cupboards.

I used Taubmans exterior and it did wonders for the shelves in my ip wardrobes and linen cupboard. Same for the inside of the kitchen cupboards.

Definitely replace the cracked windowpanes and paint the window frames and anything else that is flaking. Leave the cream kitchen - it looks fine.

Have you asked the agent what would be the most cost effective approach?

 

@GreenGoblin I just don't see the return on investment with those numbers for a full Reno.
I see repairs as a necessity to keep the property in good condition, but Reno's/improvements need to have a return on investment. Cosmetic has to be returned by additional rent in 3years max. I've never done a major Reno but it would need to return 150% on equity. E.g. $100k Reno needs to add $150k to property valuation.

 

You don't need to do what doesn't need doing.
See how it comes up with a decent paint. Are you going to do some of the work yourself?

 

Doing so on Monday. As you and others have suggested, we'll focus on what the agent says will increase rentability and rental.

Unfortunately not - we're in Melbourne, and much as I'd like to do some of the basic/prep work, it's not cost effective. A trip up to Brisbane for my wife and I for the weekend costs around $1,000. We're better paying a handyman that money!

 

I think the kitchen looks really good in the first photo. Paint it to get it back to that look. Sice all good. Perhaps new bench top will do the job.
How's the floor vinyl in kitchen? Just replace with viny don't sand and polish. Same for the bedrooms just carpet them ~1200

Get the pm to give you a list to get it to rent standard, that will give the must do's eg broken power points, glass

Paint the inside of needed or rooms that need it.

The bathroom is the tricky one, there is poly sheeting you can use on bathroom walls, might be worth investigating.

Under house leave the conc tub they're great, that and the kitchen have lasted 50 years! New stuff won't last that long!

Work out the long term plan for it.sounds like it's a good location and views etc. Tidy it up rent it and sit on it if need time to think. I wouldn't rush off selling it. Do the work in stages if necessary and as you see fit

 

@bob shovel Thanks for the suggestions. Happily the first photo of the kitchen is what it currently looks like. Presume you mean 'size all good' (it is smallish). We'll definitely look at new bench tops, though I feel stone is over the top, as it's an old kitchen. Resurface them with Rustoleum or replace, depending on their condition. Vinyl for the kitchen's an interesting idea - I had thought to polish the floorboards, but I'll have to pay a handyman to remove the lino, masonite and all the staples - time and money! If I'm sanding all the other floors, shouldn't I just do the kitchen at the same time?

The bathroom I'd thought to just go with white tiles (it's a small bathroom). I've only seen one other property advertised with untiled bathroom walls by the shower, so figured tiles were the go.

The concrete laundry tubs are old, rough and cracked in a couple of places, as well as not being properly secured. I'd planned to put in a simple metal laundry trough, though the laundry area is ugly (brick walls and exposed pipes).

Given it's a small house, our current thinking is to keep the reno costs to a minimum (though we still have to pay for all labour, being interstate). We will keep the property - just our inexperience with renos and feedback from a handyman used to seeing nice homes in upmarket areas confusing us. Feedback from everyone on this forum really helps!

 

Hi @GreenGoblin last year we had to do a freshen up too. It ended up being the best house in the 330 a week bracket for the area. Don't spend money on the place just freshen it up.
Here's a link
Sharing some pics

 

Is this the current kitchen?
Looks good!
Splash back, new handles and vinyl. Done! maybe sink while you're there

 

Ah no worries, makes it a bit difficult if you're not there.
But as long as you find people you can trust to do the work.

 

Thanks, @Phase2 Cosmetic it is for us, and playing catch-up on repairs not done by the previous owners (plus some additional ones).

Fantastic link, @Tranquilo ! What a change to the original property, and on such a tight budget! Great work.

Appreciate the quick fix ideas, @bob shovel .
@Taku Ekanayake has kindly shared details of his handyman, who'll go out and check what we can resurface/reuse and what must be replaced. Our other handyman thought the kitchen was too worn, so hoping that's not the case. I believe the benchtop's worn, so will replace that with a laminate benchtop (the forum consensus is that the Rustoleum resurface kits aren't durable enough/don't come up well enough). A new sink's more difficult, as it's a narrow benchtop (46cm), so non-standard. We'll retile the splashback, change the cupboard handles and either revinyl or polish the floorboards.

Thanks everyone for your feedback and advice!

 

Really? return airfares are as low as $200ea and ute hire for a long weekend should be less than $200. Sleep on an air-mattress in the house and you're done for $600.

Depends on how fast you can work though. If you're not particularly handy then it will take you longer, and might not be worth your while..