It’s been a busy few weeks since the last post and I’m pleased to say that everything went well and the property settlement went like clockwork. Although it always seems like a mad rush towards the end with getting all of the paperwork complete it’s great to have a reliable support network around you to ensure that everything happens as it needs to. Between conveyancers, property managers, owners corporations, solicitors and bank lenders the communication happened as it should and last week I collected the keys to the new house. Out of all of those people though it was my parents that eventually saved the day by helping me get the final piece of paperwork through on the day prior to settlement when I was unable to be in town…phew! Although I’ve been in the property investment game for over 14 years it’s still great to have a ‘first’ and last week it was the first time I’ve seen a brand new property built to add to the portfolio. It was so exciting to walk through the front door and have that new house smell (a slightly more expensive fragrance but similar to a new car smell). Everything was where it was meant to be and aside from a few small issues which I expected with a new build, everything was fantastic. The best thing though is to actually see it rather than read about it so check out my grand tour below!
Although I’ve been absent from the blog over the Christmas and New Year period I’ve had the calculator not far away as I’ve done the final figures on the renovation to see if the time and effort put into the project was worth it. Whilst I’m not endorsing sharing all of your finances in a public forum like a blog I think it’s important to delve into this project to show that it’s something manageable by most people and that it won’t break the bank. For that reason, following are the basic figures about the purchase, renovation, financing, valuations and leasing of the property.
Purchase Price = $112,000
Deposit = $11200
Mortgage Insurance = $1664
Conveyancing = $1875
Total Purchasing Costs = $14739
Materials = $5187
Trades = $791
Utilities = $270
Total Renovation Costs = $6248
Mortgage amount = $102,000
Weekly Mortgage repayment = $121
Rental Amount = $160
Management Fee = $10.56
Weekly net rental = $149.44
#1 = $165k – $175k
#2 = $145k – $155k
#3 = $140k – $150k
So what does this all mean? The total cost to purchase and renovate was just under $21,000 (including the deposit). If I just purchased the property and did nothing to it but rent it out it still would have cost $14739, still would have been worth $112,000 and would be lucky to rent for $130/wk. With the renovations the valuations showed quite a range. While the first one was clearly an overestimate (get me $175k and I’ll sign on the dotted line!) finding a mid-way point and doing the comps with what is for sale at the moment (see this similar unit currently for sale) $150k would not be unrealistic. The rental amount also rose with it being snapped up for $160/wk within a few days of being on the market.
So for just under 3 weeks work the $112k property rose in value $38,000. Take away the reno costs and purchase costs (excluding the deposit) and it’s a nice profit of $28,000. Looking back now it’s great to think that for each day of work the value rose about $1500. I can imagine most people would be happy earning that!
Noting that I’ve decided not to sell but to lease it out the net rent is $149 with mortgage repayments of $121. The remaining rent totals $1456/year which will go towards rates and maintenance. Factor in the depreciation at tax time and I’m confident that this will be a positively geared property. And with over a 7% return you’ve got to be happy with that! Although there are a lot of numbers to digest, I hope that this demonstrates that investing and renovating doesn’t need to cost the earth and you can still make a tidy profit with a bit of hard work. So now it’s time to focus on the next project which was already in the pipeline whilst the renovation was going on. More on that soon…
After sorting through over 600 photos I have pulled together a few of the first and last ones to show some great before and after shots from the renovation. I hope that it provides an idea of the amount of work that was put in and the significant impact that a short-term cosmetic renovation can make on a place. Also, great news from yesterday is that we already have a tenant signed up to move in! I’m taking it as a good sign that in less than a week of being posted online and after the first inspection someone was immediately willing to sign up. Fingers crossed it all goes well. Enjoy the before and after shots!
After almost 3 weeks of work the renovation is now complete. Today I walked out of the property for the last time and I was incredibly proud of the transformation that has taken place over the course of 19 days. Starting with a property that really needed a lot of love, the place is now completely revived and livable. The last day was all about finishing off small jobs and the biggest job was packing up and removing all of the tools and equipment that had gathered in the place over the last few weeks. It’s amazing how invested you become in every element of the work being done and while there are still some things I would have liked to do I had to draw the line somewhere and call it finished. I thought that I may have been sad when I left today as there has been a huge amount of hard work and sweat put into the place but I was just really pleased with the end result and now it’s time for someone else to enjoy it.
I could not have done the job in the time that it was done without the never ceasing help from my father (and I can’t forget mum as well in keeping the team going throughout the project). More than just the foreman, he kept me sane throughout when I was about to have a meltdown over things such as a dodgy hinge or an ill fitting door handle (yes, I need to chill out). I continued to learn a huge amount from him and may have just taught him an odd new thing or two as well (he was skeptical with the bench tops but amazed with how well it worked out). My advice if you ever take on a project like this is to make sure you have a great support team, it really made this a much more enjoyable project.
I won’t ramble on but wanted to say a big thank you to everyone that has followed the work for the last few weeks, I continue to appreciate all of the great feedback. This week I’ll sit down with a calculator and do the sums. I’m really looking forward to presenting the numbers to you all and showing that it really doesn’t take much to pull off a very successful project with property investment. The property is now open for inspection and the first few prospective tenants are inspecting the place tomorrow, wish me luck!
This week I’ll be putting up a post specifically with before and after shots as I’ve had a few requests and I also love to see how the place has transformed. Clicking the original sale listing will give you a taste. But for now I’ll leave you with my final tour though 4/11 Vale St.
The penultimate day of renovating! Even if I wanted to do more the property is now up on the internet for lease (click here to see the listing) and the clock is loudly ticking.
Today was a mad rush of trying to finish off the many small tasks that remain to be able to say that the property is truly finished. This morning was time to complete the tiles by putting silicone around the edges and where they join the bench tops. If I thought the grout was messy yesterday, the silicone today was even worse. Mainly because the stuff sticks to everything and it’s a real challenge to get a nice clean edge. Several cloths were well and truly ruined in this process and tonight I’m sitting here still finding silicone (of course in the “Havana’ shade) over my arms and hands. It did finish off the tiles nicely though and the kitchen is now largely complete.
Other tasks today included finishing off the front garden, completing the wooden tiling in the veranda which I’m thrilled with, finishing some painting in the bathroom and installing a blind above the toilet. If a tenant was to move in tomorrow I wouldn’t expect any complaints from them but I’m aiming to squeeze in the very final day this coming weekend and then walk out the door and hand over the keys knowing it’s completed to the standard that I’ve been aiming for.
Today I also had a visit from Jamie my property manager to complete the photos for the internet listing which is now up (a whopping 14 views so far) and I’m looking forward to seeing how this goes. I also had a visit from another agent to complete an appraisal on the property and the value today came in at a very different value to that which I got yesterday. This really is highlighting the importance of getting a variety of opinions as just between two appraisals so far there is around a 20% difference. I must say I think I know which one is more realistic. I’ll talk more about values next week when a few more figures are available.
In the meantime check out the listing and keep your fingers crossed that tenants come flocking in!
After having 5 days back at work I’ve managed to score a highly valuable 3 and a half days back at the property due to ‘the race that stops the nation’ the Melbourne Cup (see picture to the right for my run-in this week with the actual cup itself…probably worth more than this property that I’m putting so much effort in to!). So with a weekend, a rostered day off and a public holiday I’m back renovating for a good few days in a row which I’m thrilled about. Now that I’ve got the finish line in sight (horse racing pun intended here) there almost seems more to do than ever. Not to worry though, a few major things to do in a day or two and then the rest is a range of little things in order to finish it off to the level that I’d like. The challenge I’m having at the moment though is where do I stop? It’s important to remember that it’s intended as a rental and although I will make sure it looks great it’s important to remember that it’s not going to be my home and at some point soon I need to lock the door, walk away and be happy with the finished product. Not quite yet though, let’s hear about today.
Due to other commitments this morning it was 2pm by the time I set foot in the door again and I had a big project that I wanted to complete today, getting the splashback tiles in to place. As I mentioned last week there are a lot of things I’m comfortable doing and feel skilled in but laying tiles is completely new to me so after researching as much as I could it was time to get in to it. I originally had a multi-coloured mosaic pattern in mind which you may have seem in a previous photo. With the success of the benchtops coming out as a speckled colour I thought it might be all a bit too much going on so I decided to go for a single colour. Tile adhesive at the ready I got to work. After marking out the area to ensure straight lines it all happened reasonably quickly as the mosaic tiles are in large sheets. The wall behind the oven was straight forward and it got a bit fiddly across the top of the sink and around the power point but as it all comes in a sheet a pair of scissors cut it into shape and you can barely see where one sheet joins the next. I’m confident this will further be blurred once I get the grout in.
The project probably took about 3 hours to do and I’m really pleased with the result as it’s really showing what the finished product will look like. The big question now is do I go with white grout or coloured grout to match the tiles? Any thoughts appreciated.
Tomorrow I’ll be tentatively opening the front door in the hope that they have all remained on the wall overnight!
Now that things are on the home stretch and I have a maximum of 6 days left before I have to go back to the delights of my full time job, I’m starting to get a bit nervous about the amount of stuff I have left to do. Probably not so much that there is a lot, more so that what is remaining is fairly time consuming and not necessarily things that I have done before. Whilst I feel pretty confident with a paintbrush, screwdriver or garden shovel in my hand this week will test my skills with some fun activities planned for the remainder of the kitchen and bathroom!
Today though saw two exciting things happen in the property. First was the removal of the hideous brown veneer bench extension that sat between the kitchen and the lounge and secondly, the first of the new floor coverings was delivered and installed…a momentous occasion! From the day I saw the pictures of this place for sale on the internet I immediately disliked the bench extension. Not only was it dated, it looked out of place with the rest of the kitchen being both a different colour and a different height to the other benches (it felt like more of a breakfast table). The other thing was that I felt it made the place feel smaller (it’s small enough as it is) and anything to make it feel larger and more spacious I think is a good thing. So out it came in about 5 minutes. I was so thrilled once it was gone and you can see from the photos below that it instantly made a great difference in the space.
A quick clean of the floor (which was soon rendered pointless anyhow) and Errol the vinyl installer arrived ready to go. Initially it was discussed that when installing the vinyl they would simply go over the top of the old stuff but upon further inspection it was decided that it should go. Most of it was loose-layed anyhow so it was removed pretty easily. The preparation seemed to take the longest amount of time here and Errol was pretty busy for a good hour or two making sure the surface was prepped and ready to lay the new vinyl. The selection of the vinyl is something that I don’t think I’ll be certain about until I see the place completed at the end of this week. Initially I was eager to go for a wood look but was convinced otherwise by the flooring supplier to go for something that would not as clearly show any damage over the years, this design I was told is easier to repair if you have to and not be noticed rather than something with a distinct pattern in it. I took the advice and whilst I’m 90% happy with the end result I’m keeping the other 10% up my sleeve until the end of this week. The great thing was that there was also a lot of large off-cuts so I’ll be putting them to use later in the week. I’ve got to admit though, it mad a HUGE difference in the kitchen and once I paint around the kick-boards under the cupboards that’s pretty much all of the hideous brown skirting gone…hooray!
Tomorrow will be the last day we need to look at the stained floorboards.
You wouldn’t be wrong if you said that property investment and the subsequent property management that goes along with it can be a competitive business. It can take a good amount of research and experience to decide on what your criteria is that makes the ideal property manager for your requirements. Whilst my property manager Jamie and his team always do a great job, it’s also interesting to see some different approaches that property managers may take. Coral Sea Property Management in Townsville, Queensland, have certainly gone down a different path with their recent advertising of properties to rent and it’s caused a bit of a stir in the community. Whilst it’s given me a good laugh I’m not too sure if I’d want Monica out the front of one of my rental properties, what do you think?
Click here to view their complete range of rental posters, full marks for creativity!