Join Australia's most dynamic and respected property investment community

Would you buy an IP with DIY-looking extension?

Discussion in 'General Property Chat' started by Catalyst, 27th Aug, 2015.

  1. Catalyst

    Catalyst Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    296
    Location:
    Perth
    If you are looking for a buy-and-hold, would you buy an IP with extensions at the back of the house? The ones that look like the vendors didn't get council approvals. Some of them are turned into family areas, some are bedrooms. Some of these add-ons make no sense to the overall flow of the house. Some don't even look safe.
     
  2. rhinsor

    rhinsor Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    439
    Location:
    Perth
    Yep, you could always check with the council, knock it down, ask for a price reduction, leave it.
     
    Catalyst likes this.
  3. Leo2413

    Leo2413 Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    5,848
    Location:
    Sydney
    Unless the deal was exceptionally good or I was going to demolish it anyway.. most likely I wouldn't if I knew it was illegal. Some reasons:
    1. Council if made aware could possibly make you pay to have it comply to regulations.
    2. Insurance problems (may not be able to make a successful claim)
    3. I would fear being told to do remedial work or demolish.
    4. Not sure if renters are hurt by unsafe buildings, what kind of ramifications it might have..especially as you said some don't look safe.
     
    York, larrylarry and Catalyst like this.
  4. shorty

    shorty Well-Known Member

    Joined:
    24th Jun, 2015
    Posts:
    85
    Location:
    straya
    My whole house looks like that
     
    Dan Donoghue, Esh, fossill and 2 others like this.
  5. Bran

    Bran Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    3,229
    Location:
    At work
    Yep, I have. They have been there for a long time. Adds flexibility in my case (and the worst tiles you have EVER seen).
     
  6. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,593
    Location:
    Sydney or NSW or Australia
    Go for a substantial discount equivalent to what the house would be worth without any of the 'improvements'. ie deduct the cost of demo, make good etc. or have them get retrospective certification for the works.
     
    Catalyst and Leo2413 like this.
  7. York

    York Finance Broker Business Member

    Joined:
    24th Jun, 2015
    Posts:
    1,624
    Location:
    Sydney
    I was in a situation where I made an offer on a property pending BP. The report found a large part of the house at the rear had a ceiling that was too low by 100mm according to building code. I called the council to see if this was approved (didn't think so). They said that a DA went in for an alteration/addition a few years back, but was never actually done. So there was no council inspection and approval. Little did they know that the vendor actually did the addition but obviously used an unlicensed/non-complying builder who built the ceiling too low thus would never get the approval. So they never got an inspection done. Then tried to palm off the property to a sucker (me). It was an IP. So I knew if tenants were to have an insurance issue, the insurance company would reject the claim as the structure was not to the specs of the building code.
    It was originally advertised for 465k. The offer I made was 460k. After I pulled out it went back on the market. After about a month it sold for 440k.
    Obviously the next purchaser picked it up too and went in low. Vendor realised this was a dud and let it go.
    Great lesson for me. Always do a BP.
     
    Catalyst likes this.
  8. Chilliblue

    Chilliblue Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,579
    Location:
    Australia
    Unless it was being demolished my answer is no
     
    Catalyst likes this.
  9. WestOz

    WestOz Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    626
    Location:
    WestOz
    This is yet another frustrating flaw with law, as a buyer with an accepted offer to purchase you'd think you could approach the local council, show the O&A, have it verified by the agent, and order whatever plans they have on the place or at-least ask "just want to make sure this addition is approved", however until your the legal owner you can't get this information (or at-least I couldn't from my local)
     
  10. neK

    neK Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,280
    Location:
    Sydney
    Half of the properties in Sydney meet that criteria.
    Just part way through renovating my sister's place, the water from the 2nd shower doesnt even drain properly. The pipe just hangs over an open drain cover.
     
  11. Catalyst

    Catalyst Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    296
    Location:
    Perth
    Hmmmm....can the B&P pick up the issues that are related to non-compliance?

    Sounds like it's better to avoid these properties
     
    Leo2413 likes this.
  12. Chilliblue

    Chilliblue Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,579
    Location:
    Australia
    The real issue comes to whether your insurance company would cover the works and in my experience many don't. @brettc could go into more information.
     
    Leo2413 likes this.
  13. mcarthur

    mcarthur Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    539
    Location:
    ACT
    Sounds like a pure risk - chance of falling down and injuring someone, possibly can't sell again in the future until remediated, cost of remediation (factoring in that noone could live in it while fixing perhaps), etc.

    Having said that, I have one that is illegal under current building regs, but because it was legal when built and hasn't been modified since then I don't have to bring it up to current code. This is nice since it's 3 bed up, 2 bed down, and under isn't legal head height and doesn't have a firewall between the upper/lower flats.
    I decided to work with council before purchase and get a written decision that it doesn't have to be modified to current code and I can rent it out as-is. Solicitor was very happy :)
     
  14. Leo2413

    Leo2413 Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    5,848
    Location:
    Sydney
    Hi @Catalyst Often the inspectors are builders or ex builders etc who know the rules and when they see overt disregard for building regulations they can know its been done on the quiet and therefore caused some issues visible.. I have had inspectors even note that on the B&P report.
     
  15. Catalyst

    Catalyst Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    296
    Location:
    Perth
    Great outcome :)
     
    mcarthur likes this.
  16. Catalyst

    Catalyst Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    296
    Location:
    Perth
    Thanks @Leo2413. Will seek out B&P recommendations on PC when the time comes :)
     
    Leo2413 likes this.
  17. Azazel

    Azazel Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    8,113
    Location:
    Brisbane
    Depending on the state, you can ask your conveyancer/solicitor to do a search with the council to see if it was approved.
    I would probably avoid it if it wasn't approved.
     
    Leo2413 and Catalyst like this.
  18. Kashmir

    Kashmir Well-Known Member

    Joined:
    5th Aug, 2015
    Posts:
    76
    Location:
    Sydney, NSW
    If it was very obvious, wouldn't you expect your valuation to pick it up as well?
     
  19. York

    York Finance Broker Business Member

    Joined:
    24th Jun, 2015
    Posts:
    1,624
    Location:
    Sydney
    I actually called the council myself. They answered all my questions regarding approval.
     
    Catalyst and Leo2413 like this.
  20. Azazel

    Azazel Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    8,113
    Location:
    Brisbane
    Good stuff.
    What state was it in?