QLD What would you do.

Discussion in 'Property Analysis' started by Noobieboy, 28th Jan, 2018.

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I would

  1. Do nothing. Just rent it.

  2. Add a toilet 3/2/1

  3. Add a carport 3/1/2

  4. Add a bedroom 4/1/1

  5. Landscape it

  6. Upgrade driveway (redo)

  7. New fence

  8. Repaint inside

  9. Repaint outside (or touch up brick if brick)

Results are only viewable after voting.
  1. Noobieboy

    Noobieboy Well-Known Member

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    I’m reading a lot here about renovations, touchups and upgrades. It’s all pretty awesome, I was wondering thought what would be your first point of attack.

    For simplicity assume that you have a 3/1/1 IP that is old but rentable.

    Let’s also assume you can just do One thing. I’ve tried to put all the options but let me know if I missed something.
     
  2. wylie

    wylie Moderator Staff Member

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    I chose "do nothing" but we've never been able to do nothing. We've always bought old (but rentable) houses. But the people who would rent a house with brown shag pile carpet in the lounge, green shag pile carpet in the bedroom, nicotine dripping down the walls are not the tenants we wanted.

    This particular house I've described was rented for 15 years to heavy smokers before we bought it, and we ripped out carpets, cleaned the walls and ceilings and painted throughout. We put in a new kitchen as the old kitchen was one bench and sink.

    So I'm imagining for a house that was not so bad as the ones we tended to buy (because that is what we could afford) I'd just rent it.

    If a coat of paint would freshen things up, that is the easiest and cheapest way to go.
     
  3. Noobieboy

    Noobieboy Well-Known Member

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    Thanks. So you don’t see any significant ROI for adding a bathroom or carport, generally speaking?
     
  4. datto

    datto Well-Known Member

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    Noob. I went for add another bog. Nothing else can beat it.

    Adding a carport would be my second choice.
     
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  5. Noobieboy

    Noobieboy Well-Known Member

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    Yes. I thought the same. I’m renting and a property with two bathrooms definitely wins, big time.
     
  6. wylie

    wylie Moderator Staff Member

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    Without knowing more about your place, how it compares to similar places in the area, what renters are looking for in your area, what your house is missing compared to other similarly priced rentals in the area... it is too difficult to answer.

    We do find having a second toilet is a bonus and I think it makes the house a little easier to rent out (and in two houses our second toilet is downstairs under the house).

    Whatever you spend would need to bring at least enough extra rent to cover the cost of the loan taken out to do the work. Eg. $20k for a full second bathroom if you have room to fit one would cost $1k interest only per year without paying anything off the loan taken out to do it.

    We looked at spending that to turn the downstairs toilet into a full bathroom. We had no idea the rentals in the immediate vicinity had dropped and our rent dropped from $615 per week to $500 per week just to get tenants in.

    We've just rented that same house for $600 per week (three years later). So, had we spent $20k on a second bathroom, we would have possibly got an extra $20 per week rent, but I doubt it because it is a one living area house. In this area, it wasn't worth spending the money when families large enough to need two full bathrooms really want a secondary living area.
     
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  7. Angel

    Angel Well-Known Member

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    It always depends on the individual property. In one place, the bathroom/loo will need attention, in a different property you add a carport, in another place you recarpet.

    The very first house we bought in Lawnton in 1980 was freshly painted, but the bright yellow colour gave me nightmares. It was fully repainted inside within two weeks. The outside colour - well I didnt have to eat or sleep looking at the exterior walls, so they weren't repainted until a few years later.

    If it was going to be a rental, I would have left the paint and improved the kitchen - three 1950s mission brown cupboards on one wall, with green and orange wallpaper behind them, and a thirty-five year old rusted stove with one working hotplate.
     
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  8. Noobieboy

    Noobieboy Well-Known Member

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    Thanks @wylie and @Angel . I understand it is specific to each property. If something is really horrible then it needs attention first. I don't own yet but scoping the possibility of an IP. Was wondering if I should buy say an older property and add a bathroom/carport etc to quickly add value to it.

    It does make sense that DYOR is applicable, but I thought there might be general guidelines that add value, like for example a property with two bathrooms, or freshly painted etc.
     
  9. Angel

    Angel Well-Known Member

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    Any of the above then.
    A repaint is very quick and easy when the house is empty. If you buy the house as a PPOR, you can live in it yourself and gradually renovate it after work and on weekends. This way you cut out a lot of labour costs. If it is to be an IP, it is usually better value to pay someone else to blitz the labour for you in just a week or two so you can get the tenants in asap. I guess the rule is to buy something that has potential to easily improve, rather than pay a top dollar for the previous owner's profit.

    Last year we spruced up a large 15 year old house that we had owned for several years. It was already a 4/2/2 but for an outlay of about $9000 we increased its value by a conservative $20K, increased the rent by $20 a week and got A Grade tenants immediately in a suburb that is surrounded by an oversupply of smaller, cheaper rentals.
     
  10. Angel

    Angel Well-Known Member

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    Another thing to consider with bathrooms is that you dont want to be digging up the concrete slab to create another bathroom in a slab house. When you see the potential to add a bathroom, select a highset or stumped house with easy access underneath the floor, unless you can access the exterior wall for all your new plumbing. A large laundry can sometimes fit a spare toilet.
     
  11. Illusivedreams

    Illusivedreams Well-Known Member

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    In a 3/1/1 scenario with room for an extra Toilet in Laundry do you feel its a benefit.
    House is on Brick piers with good access.
    Sydney Lurnea area (liverpool)
     
  12. Sackie

    Sackie Well-Known Member

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    First thing I would do is a cost/benefit analysis to see if there is anything worth doing in the first place.
     
  13. Invest_noob

    Invest_noob Well-Known Member

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    At $20 a week it will take you 8.6 years to recover the 9k. Am I looking at this right?
     
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  14. Angel

    Angel Well-Known Member

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    We paid cash for the work. Wylie mentioned above that $20 a week covers the interest on a loan.

    In our case, you would not have been able to rent the house at all without replacing at least the carpets as there are something like 100 houses available at any one time in nearly suburbs ( all much smaller homes and further away from facilities) for up to $100 per week lower rents. The other expenses were all the "nice to do things" and $$$ to replace carpets in heavy traffic areas (who carpets the main hallway?) with tiles and the associated extra expense of removing some existing floor tiles near the front door as they could no longer be matched exactly.

    It is like replacing a dead HWS. You just have to do it - I dont think about the future dollar value of rent increases or depreciation, because these are location-dependant rather than a one rule fits every scenario.
     
  15. Angel

    Angel Well-Known Member

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    Sorry, I cant answer about Sydney demographics. I look at it this way - to purchase and install a loo is maybe $500 outlay. Would that make the house more attractive to tenants? Would it help with resale value in a slow market? That is why I suggested it as an easy improvement.
     
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  16. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    IMO in this order.....
    1. Value improvement
    2. Rental $$ improvements
    3. Minimal cost impact
    4. Tax benefits ?

    No simple answer. Over capitalising for a tenant is silly BUT if it enhances value and you want equity then maybe it works even without better rent. Sometimes costs are unavoidable. If a property lacks tenants as its a shole then the investment is obvious.

    Badly done DIY work may impact both 1 and 2 where a extra spend using good tradies may increase 1 2 and 3 and deliver marginal benefits to 4 if any are repairs. Overspending using a tradie to do a $15K bathroom fitout however makes no sense if it enhances rent by $10pw and does little to value.
     
  17. Tom Rivera

    Tom Rivera Property Manager Business Member

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    I voted 'do nothing' because you need to approach improvements holistically, and of course it's heavily contextual. That said, if I had to pick an improvement it would be to add a toilet.