Revisiting a post from many years ago, after I had finished my first full house renovation and uncovered many old mistakes that had just been waiting to happen again.
Begin With The End In Mind
Is this place going to be a rental or your home? Structure your spending based on what role the property will be fulfilling, you only need a functional and not a dream kitchen if the place is going to be tenanted.
Don’t have the electrician getting in the way of the painters. Ripping out the vanity after the tiling is not a good idea.
Be aware of what a large task you are undertaking, from the purchase details through to the moving address issues. Plan expenditure and be aware that it can be more expensive than you first thought.
When the new shiny tiles are in place you are really going to need to replace the old stove and vanity as well as they are now very out of place.
It’s better to pay an expert than to waste time and do a poor job yourself.
When negotiating the power of cash can talk, near money is dear money.
Warn The Neighbours
Noisy renovations can be a pain for neighbours, a word or warning can go a long way towards understanding.
Look After Your Health
Renovating is very stressful. Be aware of the changes in diet and role of stress in your life, from the takeaway food to the lack of sleep, it all adds up.
Work Out Where You Can Cut Costs
A new kitchen or just a touch up with paint? Saving money in one area can allow you to spend it on something more important elsewhere.
Learn Some Lessons
I’m fond of this quote about life….. Try stuff. Some works, some doesn’t. So what?
Refine & Repeat For Wealth Creation
I can see the value in renovating. Done with skill renovating can be a fast way to transform a house from undesirable to valuable and inject extra equity into your portfolio.
…. All these lessons are personally verified from my own mistakes…
Signed…. Improving renovator!
Later this year there are likely to be significant changes to the Brisbane town plan brought into effect. An interesting revision will be the change in minimum lot size from 405 to 300 square meters, this will mean that a standard residential block of 600 square meters in a low density zoning with a 15 meter frontage will be a candidate for subdivision into two lots.
The push to higher density for a growing population means that you somehow need to address the most significant cost of bringing on new stock, this cost is the land itself. More information about block size minimums and town planning changes at the Brisbane City Draft Plan 2012 site
The change in minimum lot sizes is like most change, a massive opportunity for those who see the potential and are able to act on it.
It costs a fortune to build and maintain infrastructure in cities. The good thing about new building from an investors point of view is that it takes some time to complete, is very easy to forecast what might happen and you can position yourself in a strategic location to benefit from the building work once it’s completed as the out performance in capital growth can last for some time after the building work has finished.
At Allen Real Estate we especially like key transport infrastructure such as trains and dedicated bus ways, the ability to walk to and travel conveniently on reliable public transport is worth a premium and that premium is only likely to increase in the future as South East Queensland continues to grow.
Tracking where the large infrastructure projects are going to be built is an easy task these days. Local and state governments do an excellent job of providing forecasts and updates about where your tax payer dollars are going to be invested, it’s a case of watching the money flow and being prepared to follow.
A useful site to bookmark and monitor for your investing is the ASX Target Rate Tracker site
You can see a forecast 18 months ahead of what is expected to happen to the cash rate, which is a very important indicator of what will happen to your variable rate loan, based on what market participants are saying with their wallets, and not their mouths. To make a complex subject relatively simple I will make a few points.
1) This prediction tool is constantly revising it’s view and adjusting it’s ‘forecast’ based on latest information available
2) It’s a snapshot best prediction at a point in time only and even though the best tool out there it’s no magic crystal ball
3) Economists and pundits would mostly go broke if they were forced to trade their opinions against the market. Strangely enough this never stops people craving the views of someone who can portray themselves as an ‘expert’
In terms of deciding whether to fix or keep part or all of your mortgage debt variable it’s likely better to view this decision purely in terms of a risk control measure, something to consider doing when you can’t afford to take on interest rate risk. The reason this is such a powerful strategy is that attempting to profitably time interest rate fluctuations is chaotically difficult.
Mr Market is forecasting little interest rate cutting in our future as of March 19th 2013, simply watch the tracker website and monitor how he changes his views!
A few more samples of properties purchased by Allen Real Estate on behalf of investors during 2013.
These deals all contain three of the most requested features from our investor clients:
1) Proximity to the Brisbane CBD and major activity centres in the town plan is viewed as a positive.
2) Potential for capital growth is the highest priority but attention to a strong yield is also important.
3) A low maintenance set and forget high quality growth investment, not looking for a renovator or problem property.
The start to 2013 has been annoyingly strong if you are buyer, competing against home buyers is never fun and means you have less scope to bargain the price down or to wait a seller out. Great deals are still out there however and just take more work than we have been accustomed to over the last few years to find them!
A two year old freehold town home with it’s own street frontage
$165,000 land value
$520/wk rent = 6.0% yield
6.1k from the CBD, suburb benefiting from very significant infrastructure building nearby
Short walk to dedicated bus way
This was a two year old freehold town home with it’s own street frontage, with no body corporate fees and large depreciation benefits the cash flow on this property is superb for a newer property this close to the Brisbane CBD. We had previously missed out on the other half of this duplex build and managed to secure this half for $8,000 less than the other side. This property was well constructed with oversize bedrooms, a study nook with city views (not mentioned in any advertising) and elevated aspects from all bedrooms.
Walking distance from a bus way with an easy commute into the CBD is a definite plus, we especially like following the train lines and dedicated bus ways as a key pieces of infrastructure at Allen Real Estate. This suburb will also benefit from affordability pressures in the future as the suburbs that are closer to the CBD are priced significantly higher.
This property was purchased to satisfy a 300k budget and the need for a strong holding income. The ability to both increase the rent and build some equity after minor cosmetic upgrades means that this property is a very solid starting point for building a portfolio.
Motivated sellers allowed the price to be negotiated to a price point which makes it one of the cheaper houses in the whole estate.
Set in an elevated location this 2 bedroom 2 bath ground floor unit is typical of many properties we target for buy and hold investors, the following boxes are all ticked.
> High walk score, in particular train and shopping
> Solid structure and low maintenance, set and forget investing
> Reasonable to strong yield with potential to increase
> Smaller complex, six in this particular case
> Elevated location with a good aspect
This property was located in an excellent suburb and had the following three twists.
1) Land size was 720m2 yet only advertised as 696m2 by both listing agents.
2) Under the new town plan coming into effect in 2013 this block will make an excellent candidate for subdivision into two lots.
3) The large commercial facility at the back boundary of this property will in time relocate and the land is earmarked for residential development, these properties would come online in today’s dollars as 4 bedroom brick houses selling in the mid to high 5’s and set on significantly smaller lots = all good news for this buy and hold investor.