still looking for a reno

[arriety]

I have been looking around in my area (adelaide hills 30 mins from city) because it's close and handy and seems to have good CG. I have seen 2 houses which might be good value although I'm not sure how much work I should do. Both are urgent sales (house 1 gone to NZ and first contract fell through at $330ish). House 2 have bought interstate) Here are the 2 options:

House 1 (1940/1970)- stone and timber - 2 story - downstairs : small new kitchen, 2 small bed, I bath, sep toilet, I small lounge. Upstairs 2 small beds, I toilet, large living area with balcony. Views - nice leafy large block 780sqm. Everything except kitchen needs renovating. asking price $320 - could offer $280??

House 2 (1969) - rendered double brick - solid. Huge block (1600sqm), treed and leafy but with lots of concrete (mostly cracked) around the house. all rooms are in original condition including kitchen but beautifully looked after - kitchen would only need updating, bathroom re-enamelled. However the garden is huge and has a large empty swimming pool which is cracked and not working, heaps of old fencing, old shadehouses, bits of concrete blobby things (??). Asking $310 - offer $270??

Now I've check out the streets around here and nothing sells for much more than $400K even when done up, so not sure if the above are such good buys. I don't think either have any structural problems (though need building inspections) but need things like decent heating, curtain and carpets etc. I guess I'm wondering what sort of houses make the best renos? I've read all the books but they are always set in Melbourne or Qld, Adelaide seems so different.

 

[yadreamin]

arriety
The key with both of the properties is URGENT SALE.
Are you going to hold or sell?
Maybe once you do some number crunching you will work out the best option.Neither of the homes sound like they need major repairs mostly cosmetic.
But do get building inspections if you are going to buy.
There certainly seems to be an oportunity for low ball offers.
I dont know Adelaide areas, maybe Duncan can help you out there.
Good luck
cheers yadreamin

 

[skater]

What I do when looking for a reno is to work backwards. By that I mean you need to know what value you are going to achieve for the finished product. Then you need to work out what you are going to do to the house & how much it is going to cost. Don't forget to factor into this your hold costs, stamp duty, CGT if selling, Agents fees if selling. When you have added up all your costs & taken them away from your final value, if you have a $ amount you are happy with, then you have found a possible purchase.

Of course the better the buy price, the better the end result and you have said that the two places you are looking at have been on the market for a while, so I would go in with a lowball offer.

Is the asking price a realistic price for the houses, as sometimes when they have been on the market for a while it is because they are overpriced. Your proposed offer on either one of them is $40k below asking price. Why is that? Is it just a number you came up with, or are there reasons behind it. If the market is really slow, you might be able to knock more than $40k off the ask price.

Do either of them serve a higher purpose. Maybe the one on the large block is sub-divideable. If so, that might change the amount of $$ you are willing to spend.

Get in there & ask questions, do a little research & price what your reno is going to cost, then come back & let us all know what you are going to do.

Good luck.

 

[arriety]

Hi guys and thanks. Yes I've worked it all out backwards and decided I need to get those places for not much more than the prices I've put down as offers, so that I can make $25K profit at least. But now that I spent today looking at places that have been done up in same area, I'm more confused than ever. They don't seem to be going for much more. $375K with new bathroom and kitchens- what sort of profit do you think is a good profit? I aim to sell not hold. I want to see what I can do in terms of 'fix and flick' is that what Peter Spann says? I also so another fixerupper better than house 2 but the agent who turned out to be someone I know told me that the prices in Adel hills are currently overpriced and so many houses have come on market this month with more to come he suspect and the prices will have to drop. I suppose I better hold off.

 

[arriety]

PS - no subdivision allowed in these part of hills - pity as the blocks are huge. The one I saw today was 1600sqm

 

[geoffw]

Renovation may not be an especially good tactic in the current pahse of the cycle. To do well, you REALLY need to know your market properly.

 

[arriety]

Renovation may not be an especially good tactic in the current pahse of the cycle. To do well, you REALLY need to know your market properly.

Darn, I'm just dying to get into it! I was kinda hoping the market here had flattened enough but looks like it might drop a bit. The agent I spoke to said many of his clients were just not realistic about prices. They still think there is a boom but they've missed it (especially with the run down houses). the worse the house the more they are expecting to make. Probably think there are mugs like me out there just itching to buy a reno!

 

[Merovingian]

Just my outside point of view...

If you, say, come in with a low-ball of $260K for property 1, with a cheque attached and minimal conditions that are hopefully favourable to the vendor, (leaving room to negotiate), renovate the property, would it be advantageous to rent it out for 12 months, hence not losing so much to CGT? Surely, if it is negatively geared, these losses wouldn't total the amount saved by utilising the 50% CGT discount? Although, you wouldn't be able to sell for 12 months to realise the gain...

 

[geoffw]

The agent I spoke to said many of his clients were just not realistic about prices.

Learn about your chosen area. Don't rely on an agent. Research, and find out yourself how the prices compare between good, bad, fantastic and horrible properties.

There will be different opportunities at different stages of the cycle.

DO NOT just take what I said ("Renovation may not be an especially good tactic in the current pahse of the cycle") as a reason not to pursue (I couldn't even spell "phase").

Just research, very carefully, and draw your own conclusion. Take other opinions into account- but just as in life, draw your own conclusion.

 

[arriety]

Learn about your chosen area. Don't rely on an agent. Research, and find out yourself how the prices compare between good, bad, fantastic and horrible properties.

I really thought I knew my area well as I lived and worked here for long time. However I find it hard to compare prices and houses. The blocks are all different and there is such a mix of houses. I'd really prefer a different suburb but because this is so close, it would be easier with a reno.

Merovingian - I think you are right. I would need to hold for 12 months, otherwise there is not enough profit. growth is going to be slow anyway for next 12 months so by then if I get a place that needs cosmetic reno, I might get a bit of equity up.

I think I definitely need to go slower and do more checking. It's coming up to winter and the hills are a bad time for vendors during the wet rainy cold months.

 

[lizzie]

if they do not let you subdivide in your hills area - why not look at an area that allows you more flexibility.

the main area i invest in is 25mins drive from where i live - mainly because it is high density, friendly council and a trendy area to live. it's not somewhere i would like to live as i like my space, but my own area and council are no conducive for "higher purpose" development, but i can almost always guarantee a profit from a reno, subdivision or small development (i say "almost" because i have never not made a very good profit there but i am sure someone inexperienced can make a loss if they try hard enough).

what is the best area, that you can afford, in your city to invest in? learn that suburb back to front and upside down - then make a move. don't feel you have to stay close to home.