Our Portfolio

Why this buyer’s agent advises against renovating five connected properties

By Bianca Dabu
Renovation, renovating, property investment, investing

After seven years’ worth of planning and preparation, Smart Property Investment’s Phil Tarrant and his financial team have successfully purchased a $1,000,000-block of land with five properties, which almost instantly gave them a 7 per cent yield. But could that be improved through renovation? One buyer's agent says no.

The actual rents of each of the five properties range from $270 to $275, and while $5 may seem like a small amount, it definitely matters, according to buyer’s agent Steve Waters.

He explained: “Technically, it also helps serviceability, right? [As well as the] ability to hold.”

“There's a couple of reasons why there's a little bit of discrepancy there, [like] the … the length of the tenancy … [and the appearance of the property, cosmetically and internally].

“My advice is, now that this is settled … just to bed it in. Get the lay of the land, let's see what [the tenants] come to us as … [also] in terms of repairs and maintenance, if any. We can take it from there,” Steve added.

According to the buyer’s agent, putting up the rent by another $5 is not really worth it if it takes $10,000-worth of renovation.

Situational analysis

One of the possible ways to deal with the differences in rent is to boot out all the tenants from the five properties and install all new and identical kitchens, bathroom, carpets, gardens, and the like.

Is it worthwhile doing that? “Not at this stage,” Steve said. While this strategy would bring the properties value in line with other complexes in the area, it won’t necessarily make a significant change in Phil’s portfolio.

He said: “It wouldn't be something I'd be doing now … [because the properties are not] uninhabitable [that we should] do something right there, right then [to] increase its value dramatically. These are not that type of property. We've bought them well [and] we want time to do its thing here.”

In a year’s time, or even just close to the opening of the new university nearby, it might be more productive to do a renovation—a new coat of paint and new kitchens and bathrooms, hopefully, to take advantage of the ‘knock-on effect’ brought by the wave of students and workers alike.

Steve said: “In this market here, there's a massive demand sub-$300 per week … We're at $275—do we want to spend $15,000 each unit making them brand new to get an extra $10, $15 dollars a week?”

“That's a big expenditure … There's nothing wrong with these. They're more than habitable, they're doing their job, they're all rented. I'd rather use that $75,000 to perpetuate into something else,” he added.

Instead of doing a full renovation, a property investor with this type of asset may opt to do a minor weekend renovation—a strategy that has already worked for one of Phil's previous investment properties.

For his Mount Druitt property, Phil got everyone involved. He moved the tenants out on Friday, renovated the property, and moved them back in on Monday morning. It was basically brand new after the quick renovation—new kitchen, bathroom tiles, power points, light switches, carpet, paint, and much more—all for about $16,000.

According to the property investor: "That was good, that was really interesting. Let's do that [again]. I reckon when this campus comes along, we'll get our timing right."

"There'll be a point in the market where we go, 'Hang on a second, these things cost us $199 [but] we can turn them to $300,000-ers at a point in time.' Might be four, five years away ... [Just] drop $15,000 on it," he concluded.

 

Tune in to Phil Tarrant’s portfolio update on The Smart Property Investment Show to know more about the benefits buying in bulk, the purchases fundamentality for the portfolio, and the opportunities it will bring as a hub for economic growth and development.

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  ["id"]=>
  string(5) "18297"
  ["title"]=>
  string(72) "Mortgages in a tighter lending economy and why Brisbane is a good option"
  ["alias"]=>
  string(72) "mortgages-in-a-tighter-lending-economy-and-why-brisbane-is-a-good-option"
  ["introtext"]=>
  string(255) "

Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

" ["fulltext"]=> string(818) "

To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

Hear from\u00a0Son\u00a0about:\u00a0<\/p>\r\n

    \r\n
  • The pitfalls that he has seen people get into<\/li>\r\n
  • Interest only loans and if that is the way to go<\/li>\r\n
  • How the mortgage division supports the overall business of Rethink Investing<\/li>\r\n<\/ul>","clientImage1":"images\/podcasts\/Son-Pham.jpg","clientUrl1":"https:\/\/rethinkinvesting.com.au\/","clientName2":"OpenCorp","clientDesc2":"

    Whether it\u2019s building a successful property portfolio or investing in one of their Development Funds, Open Corp can help you through every stage of your investment journey. The team has 40 property specialists who collectively have been involved in over $4 billion worth of property transactions and the acquisition of more than 8000 homes and investment properties.<\/p>\r\n

    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

    In this episode, hear from\u00a0Michael\u00a0about:\u00a0<\/p>\r\n

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    • Why Brisbane is a good investment option right now<\/li>\r\n
    • How he wants to help clients take advantage of the current market<\/li>\r\n
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Mortgages in a tighter lending economy and why Brisbane is a good option
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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

" ["fulltext"]=> string(2483) "

In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
Mortgage Trusts, an alternative first step for property investors
Should a real estate title be in one person’s name only?

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A property investment plan years in the making
object(stdClass)#1183 (52) {
  ["id"]=>
  string(5) "18287"
  ["title"]=>
  string(75) "Regional Victoria showing up Melbourne in price performance, new data finds"
  ["alias"]=>
  string(74) "regional-victoria-showing-up-melbourne-in-price-performance-new-data-finds"
  ["introtext"]=>
  string(139) "

Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

" ["fulltext"]=> string(2323) "

Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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