Creating Positive Cashflow Properties-Anatomy of a makeover

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Why makeover a rental property?

•Targeted spending can improve the overall investment return (both cashflow & capital value)

•This reduces the shortfall between rent paid by the tenants and interest costs

•Importantly, it improves an investors position to acquire their next property

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A case study

Making over Hotham St, Ballarat

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Background- Purchase price: $198k

- Existing rent: $160 per week (4.2% yield)

- Condition: Very poor, house appeared to be leaning, smoke stained walls and ceilings, old/stained carpets, brown wall paper and paneling.

- Locale: 150 m to Lake Wendoree, 800m to city, 500m to hospitals

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The Makeover•Straighten front porch post (house wasn’t leaning at all!)

•Paint internal and external

•New floor coverings & light fittings

•Update bathroom (cosmetic only) and kitchen (2ndhand)

•Simple landscaping & heaters in rooms

Timeframe: two weeks (some work before settlement)

Budget: $19,000

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Before and after photos

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Before

After

Before AfterSecondhand kitchenCost: $3,400 installed

The Numbers

Before After

Rent $160 pw $245 pw

Yield 4.2% 5.9%

Value $198,000 $260,000

LVR 93% 74%

Equity $14,000 $57,000

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What the client said:

“Making over Hotham St. completely changed how attractive the property was as an investment.

Not only did we improve the yield by almost two percent, but we also added about $60,000 of value – all for a $19,000 investment. This meant our LVR was even stronger than it was before we bought the house, putting us in a stronger position for our next purchase with the bank.”

C. Kingston

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Risks for makeovers•Sourcing reliable tradespeople

•Time blowouts (leading to lost rent)

•Insufficient research/analysis

•Cost blowouts (selective enhancements)

•Structural integrity, unidentified works required

•Asbestos

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Some of our other projects

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To find out more, contact Richard on 1300 768 949