Sell? Renovate & Rent It? What Should I Do

• 

  oscargamer on 11/07/2021 - 14:11

  +1

  Sell and reinvest

  You need a poll

• 

  Seraphin7 on 11/07/2021 - 14:13

  +4

  If I sell now…un-renovated, I would expect to make about $800-$850k.

  And what would you expect to sell it for after renovating at a cost of $100k or whatever you think the right number would be?

  • 

    StulteAprilis on 11/07/2021 - 14:16

    Yeah thats a good question….I just dont know. I dont think I would be able to make the $100k back. But that could just be me not understanding the nuances of the market.

    • 

      Seraphin7 on 11/07/2021 - 14:31

      +1

      Well, simple logic says sell it as is.

      It's either take $850k now … or spend $100k and take $900k (i.e. $800k effectively).

      You then say that whatever proceeds you make will go into non-property assets. Fair enough. It sounds like you effectively want to exit the property market, so doing so on terms that maximise your immediate return is the plan.

      • 

        StulteAprilis on 11/07/2021 - 14:52

        +2

        yeah…exactly my thinking. Just so uncertain about it!

        • 

          Seraphin7 on 11/07/2021 - 18:46

          +1

          @StulteAprilis: You need to adopt a logical thought process. Don't get emotional about property (or any other specific or class of asset).

          Work through something like this …

          Do you want to be a property investor?

          If no, then you simply need to get out of this one in the best financial state possible, per the above logic.

          If yes, then you need to consider likely rental and capital return from the current property in its current state, vs. the return if you spend on the reno as you've described.

          You may still determine that an exit from this property (whether pre or post reno) is still the best option, but then you need to find other property that meets your investment requirements.

          Whatever you do, don't hang onto this property because of "an emotional connection" if you are attempting to maximise your investment return.

          If there is an emotional connection and that connection causes you to hold onto the property, that's fine … but that's not investing!

• 

  screensaver on 11/07/2021 - 14:20

  -4

  It is not making you anything now except capital gain. Set your reserve high and put it to auction.

• 

  garetz on 11/07/2021 - 15:19

  +3

  It depends on the tax implications. If you need to pay tax on the profits doesn't really sound worth it.

  It might end up being a lot better financially to renovate, live in it for 12 months+ making it your primary property, then when you sell it you do not have to pay capital gains. Could save you 50% tax in the next 1-2 years.

  If you inherited the property you might be able to get a significant tax reduction if you sell it within 12 months. Probably best to speak to an tax agent/accountant.

  99% of the time its better to minimize your tax requirements.

  • 

    CrowReally on 11/07/2021 - 17:15

    +2

    It's highly unlikely that moving into a property for 12 months and making it (now) become your primary place of residence (PPR) will exempt it from capital gains - speak to your accountant with a timeline of events (when you got the property, and for how much, what you've been doing with it, when has the property been your PPR).

    The more likely set of numbers will be the % of time the property was your PPR will be the % of the CGT proceeds that are tax exempt.

    • 

      azonki on 12/07/2021 - 08:08

      Yes.
      Speak to your accountant or financial advisor.

• 

  Stewardo on 11/07/2021 - 15:40

  The $100k Reno, would be tax deductible if you were to continue to rent it out.

  • 

    spal on 11/07/2021 - 18:29

    Not that straightforward. You would get a deduction on the decline in value whilst it is used to generate income, and remaining unspent depreciation will reduce your cost base for capital gains calculations when you sell. But, do some research on GST on residential property. It is payable on any new residential property which has not previously been sold or lived or rented for at least five years. New also includes renovated property. Don’t take my word and do your own research. When you will claim deduction on renovations, you are effectively sharing your GST liability information.

• 

  rektrading on 11/07/2021 - 16:17

  Real estate prices in the major cities can only go up from here. It would financially justifiable to keep it.

  AUSTRALIA'S NATIONAL HOME VALUE INDEX FOR JUNE
  National - up 1.9 per cent per cent (month), up 13.5 per cent (annual)
  Sydney - up 2.6 per cent, up 15 per cent
  Melbourne - up 1.5 per cent, up 7.7 per cent
  Brisbane - up 1.9 per cent, up 13.2 per cent
  Adelaide - up 1.6 per cent, up 13.9 per cent
  Perth - up 0.2 per cent, up 9.8 per cent
  Hobart - up 3 per cent, up 19.6 per cent
  Darwin - up 0.8 per cent, up 21 per cent
  Canberra - up 2.3 per cent, up 18.1 per cent
  Combined capitals - up 1.9 per cent, up 12.4 per cent
  Combined regional - up 2 per cent, up 17.7 per cent
  https://www.dailymail.co.uk/news/article-9744209/How-Austral…

  Borrow against the asset, accumulate more assets and hodl is how people win this game.

  • 

    JIMB0 on 11/07/2021 - 18:16

    Too much leverage can also send people broke.

• 

  bitesized on 11/07/2021 - 17:16

  Even if you renovate it and decide to sell eventually, the renovations will only bump the sale value up.

  Unless you need the liquidity or plan to re-invest profits in other assets, just hold on to it.

• 

  Sum-Ting Wong on 11/07/2021 - 18:25

  +2

  Do you really need to spend $100k on renovations? Was this the opinion of a real estate agent or property manager? Or perhaps your sentimentality for the property makes you want to have more pride in it than is necessary?

  If you don’t believe you will get all of that $100k back if you renovate and then sell, what makes you think you will get a ROI on those renovations if you rent?

  The reality is that there are plenty of sh*tty, rundown properties for rent. Ultimately, if it is in a good area, it will find a tenant.

  • 

    morse on 11/07/2021 - 19:39

    Yep, I had the same thought. Can some be diy? Can you just do the essentials for now?

    If so, I’d probably hold onto it. My reasoning is that you may not be able to buy into the same area later. If you like the area it may be worth keeping and renovating gradually.

    • 

      xylarr on 12/07/2021 - 10:35

      The thing about DIY is that it will necessarily take longer. Time, in this case, is literally money - money you're not getting while it's not rented.

      If you do renovate, I'd quickly get some plans together, hire a builder, and go from there. The expensive bits will be the bathroom(s). A new kitchen is a must, but you can do relatively cheaply with IKEA - check out their appliances such as cooktops and ovens - good value. Get an installer to put the kitchen in. How old is its, you might have to do some significant electrical work to bring it up to modern standards. Does it have airconditioning? Do you want to install that too? Does the roof have insulation - get that stuck in.

      But the market is pretty buoyant at the moment, I reckon just sell it. Owning property can be a pain - you have to manage tenants and repairs etc. Plus the holding costs are huge - rates, repairs, real estate agent fees etc. Sure, you can do things such as depreciation on the new thing you add, but it's still a bunch of cost. Also, because you already own it outright, there is no negative gearing available to you. Holding the equivalent in shares costs you nothing - and the return from dividends and capital gains will be greater, plus there is no maintenance etc - it can truly be a passive asset.

      • 

        morse on 12/07/2021 - 10:38

        Yes, you make a good point about time = money. $100k seems like a lot though - I guess we don’t know what condition it’s in.

• 

  82norm on 12/07/2021 - 09:02

  +1

  What do you think would be the minimum amt to spend to get it to a rentable state? If it’s under say, $30k, then consider that option vs $100k. Don’t look at the short term outlook, but long term. Property, if in a well sort after area WILL go up. Once you get out, if harder to get back in, without spending more.

  Not knowing your entire circumstances, but just from experience, family and friends, unless the property was in a crappy suburb and you don’t need the money, I’d keep it for sure. The number if of times, people sell and look back a few years later and only they had wished they kept it…..

• 

  Darayus on 12/07/2021 - 09:37

  -1

  Not sure how do you arrive at $ 100K renovation. unless you want to replace the roof and structure. You mentioned that its townhouse then have you got your starta approval to make structural changes and if the roof needs to change then it would be strata.

  don't engage a contractor or builder to do the job because they charge 50% service fees. The best is to find a good painter, electrician, tiler or flooring guy and fix all things and you can get it done within 12-20K by managing project yourselves unless you are trying to gut down the whole things and rebuild completely new.

  • 

    xylarr on 12/07/2021 - 10:40

    If you need to redo the bathroom, that will be at a minimum $15k, more likely $20-$25. A cheap kitchen will be $10-15K. Painting will be $4K. $2-3K for new carpet. $5-10K for wooden floors depending on the area and if you do stairs. Plus the million other little things will add a few K on top. I reckon it will be hard to do it for under $50K if you really are doing the whole place.

• 

  LFO on 12/07/2021 - 14:42

  The property is in a state where it requires at least $100k renovation in order to rent it out…

  As seems to need A LOT of work done, how about rent it out for a very low amount?.

  I'm guessing those struggling with high rents might accept a good location but substandard conditions in return for substantially lower rent charges.
  There is a lot of people out there and some might like it as is.

• 

  HeWhoKnows on 13/07/2021 - 14:13

  100K reno to make it rentable
  Who told you that?
  Somehow I dont think so

  Its amazing what a coat of paint, new carpet some new cupboard handles and a good clean can do for a place. You can even paint the kitchen cupboard doors or even replace them for peanuts