To renovate or detonate
Before making a decision to purchase an older house Timothy went through several sessions of one-to-one mentoring to ensure all their specific questions about buying an older house compared to an apartment or newer property. These included:
- the upfront capital budget needed for required repairs and renovation
- their ability to fund the construction of a 2 bed granny flat at the back of the property
- expert opinion from a builder on the potential for future maintenance
Client property criteria:
Property to be in a more affordable in Sydney that is likely to experience capital growth from the spillover effect from suburbs that have pushed buyers outwards. Some renovation work to bring large increase in value. Desire to have land in order to build a granny flat
Cash flow criteria:
Positive cash flow within 12 months. Ability to pay in $50-$70pw initially.
Budget:
Sufficient cash and savings to purchase up to $750,000
Location:
West of Sydney
WHAT YOU NEED TO KNOW
Locations further from CBD, but close to transport and amenities
Purchasing property that is older and on a sizeable block of land in Sydney requires that you move further away from the CBD. Your property can still be close to transport, amenities and large employment nodes which support significant economic growth. For some investors venturing out to different suburbs outside of what they are used to is daunting. For others it can be exciting. Remaining objective and having no attachment to one day living in the property is key.
Avoiding strata has its pros and cons
Houses tend to offer better cash flows than apartments in Sydney due to lower strata fees. However, there will be more ongoing maintenance costs to an older property and some large unexpected expenses may crop up.
Capital growth of new property is more moderate in early years
New property is priced a lot higher than older property. If you buy in the right street and location, you are likely to earn more capital growth for an older property that you fix up compared to a new property. The premium price you pay for a new property could far outweigh the maintenance costs and renovation work you do to an older property; provided you choose right.
Stick to high demand, highly liveable locations
Sticking to high demand, owner-occupied areas will serve you well when looking for older properties to renovate. There needs to be a shortage of property and land. Owner-occupiers tend to be willing to pay more for a renovation if they are emotionally attached.
Managing houses compared to apartments
There is more hands-on decision making as there is no body corporate to look after the ongoing issues of taking care of a property or managing disputes with neighbours. Managing a renovation requires small everyday decisions which if made incorrectly, could result in massive unexpected expenses. Having time to consider your options and experience to make the right decisions is key to this property strategy.
If you’d like more information, please sign up for one of our property education workshops.
