What would you do with $150k equity

Hi,

We will be inheriting a house freehold (in a flood zone) in a small country town in NSW.

It is uninhabitable at the moment (bathroom and kitchen were ripped out for renovations that never happened, but otherwise in reasonably good condition), and was valued at $190k last year.

We've been quoted between $20k - 50k to finish renovations, depending on the level of finish.

We would expect to get around $280 in rent or $240k if we decided to sell (although, being in a flood zone might make this difficult).

We're after some advice and different perspectives.

If you were trying to build your property portfolio to create an income stream to support a family of 4, what would your next step be?

We are currently renting, have loads of debt and only 1 source of income (self employed).

Thank you!

 

Uninhabitable? Or inhabitable?

 

Town or decent sized regional centre?

 

I guess the obvious question is can you afford the renovations?

 

Oops, UNinhabitable... I updated the post.

 

A "regional rural centre" would be a better description.

 

Well, if you go down the reno route, I'd go closer to the ~20k spend rather than 50k because the property is at the cheaper end of the market and 20k can still get a lot of bang for buck. A kitchen does not need to cost more than 5-6k to buy and install.

 

Population?
Industry?
Vacancy rates?

Too many variables

 

Population: 21,000
Top Industry Sectors: Healthcare and social assistance, Retail, Public Admin & Safety
Current vacancy rate: 1.48%

 

As Gockie indicated I would try to keep the reno costs down, expections of interior fit out is different in regional NSW at the lower end of the market compared to a capital city.
I'll assume you are talking about Goulburn? Maybe someone here can expand a little further?
Population wise I wouldn't look at a place smaller than 30000-40000 and preferably at least 50000. They are more volitile and can suffer more due to over supply when new estates are built or industry closing etc so I wouldn't buy there IMO but I would consider holding.
If you can obtain 280 per week rent and borrow against this property your servicability and equity postion will be improved. The equity could be used for a deposit elsewhere.
Where to next depends on your income and personal cashflow.
I would then look for a lower priced sub 300k property which is cash flow neutral or positve in a capital city, probably outer Brisbane or southern/northern suburbs of Adelaide.

 

If you have access before probate, I would renovate. It would be equivalent of 30 k Reno debt on 15 k approx gross income per year.

Pay off your personnel debt to get that aspect under control, then reassess. If you sell , with Reno it will be easier and possibly higher than as it currently is.

 

Lower the better. I would try to get it done for under 20k. You can do a bathroom and kitchen in a decent fashion for 10k, then that leaves 10k for paint, flooring, blinds and electrical/plumbing. In a regional with generally lower labour costs should be doable.

 

Do this.
Would be a great start to building a positively geared portfolio.

 

[QUOTE="DaveM, post: 103021, member: 7"In a regional with generally lower labour costs should be doable.[/QUOTE]

Regional costs even more, (less competition)

 

I own in regionals in NSW and VIC and trades are significantly cheaper due to lower cost of living. YMMV obviously

 

First of all Congratulations!
Could you find out what kind of demand a renovated house in that area would have?
How long would it take to rent?
How much rent could you get?
Conservatively?
What kind of maintenance would be required?
Could you get insurance ( Flood?) etc.
Are there good Property managers nearby? (some agents don't like managing in some locations)
I hope this helps!

 

Let us know what town, someone may be able to recommend a suitable good value handyman, i.e. I know someone in the Albury–Wodonga area.

If any good at DIY perhaps take a week or two off work and go tackle most of it yourself (what I'd do)

 

Exactly this ^

Get it done up as cheaply as possible, even if that means going down and doing some of the work yourself.

Then rent it out. Get it revalued at 200k, pull 160k equity out which is deposit on 2 more houses to do the same.

 

Have a chat to a financial professional, "maybe" get your debt sorted out, use some for a PPOR to stop paying rent (someone else's investment).

Whilst you've lost someone, it's put you in a very fortunate position for your future, it's not a massive amount, mistakes and temptations can be very costly, make the most of it, get a good structure in place, ride it for a couple of years, see how it plays out before jets ski's, trail bikes, new car, furniture etc...