Alan is our first competition winner for Property Investment Tales! Congratulations to Alan Cutmore...first winner of our Property Investment/Buying & Selling Tale competion.
In this anecdotal piece, Alan bravely shares with readers some of the DIY dileemas and dramas he endured with his first ever investment property in Queensland...
I thought I would write a short article on the mistakes I made with my first investment property which I purchased in 2001, renovated and resold in 2002.
The property was a 3 bed post war timber house in Wavell Heights, Brisbane, about 8km north of the CBD.
House after renovations...
In 2001, I was searching for my first investment property, which we would live in and do up as quickly as possible (so the profit would be tax free).
I hoped that the proceeds of the sale would help us leap up the property ladder and get into bigger and better property.
After offering asking price on a property in Kedron but losing out to a cash buyer(very annoying), my wife found the property in Wavell Heights. It was owned by the local druggies and was consequently in a very poor state. Even though it was a dump, I could see the potential for a quick cosmetic makeover. I couldn't believe no one else had bought the house because the market was hot. But it seemed to be the only people who showed any interest had insisted on a discount on the asking price, which the owners weren't prepared to give. I offered just about asking price and secured the property.
Then came my first mistake; planning and budgeting.
We planned on a cheap cosmetic renovation costing $5000 and taking 6 months, doing all the work ourselves.
It actually cost $7500 and took 15 months!
In other words 50% over budget and 2 ½ times as long as planned!
The reasons for the overruns are numerous and hopefully by documenting some of them, I can help others avoid the same mistakes;-
1. Polishing the floors first.
We were chomping at the bit to get started so we organized to hire the floor sanding equipment from Bunnings on the day of settlement. Without delay, at midday we collected the keys, arrived and started throwing carpets out of windows!
Ina few days we had sparkling polished floors (except the kitchen, more on that later). Then it came time to start prepping for painting. An hour later, I realized we were ruining our nice new floors with the ladder and dropping paint all over them.
We should have polished the floors at the end.
2. Trying to polish the kitchen floor boards which weren't in good enough condition.
The kitchen floor had lino laid on top of fibro, which was nailed to the timber floorboards. We assumed we could simply take this up and polish the boards underneath, big mistake!
We found that the fibro didn't want to come off. It had hundreds of nails holding it down and a lot of them were rusty and broke when we tried to get them out. The head would break off, leaving the nail shaft sticking out, which also often broke when we tried to use pliers to get them out.
I think the fact that the nails were rusty should have given us a clue about the state of the floorboards underneath.
When the fibro was finally removed, we found most of the boards were damp and very bowed, in fact when you ran the floor sander over them, it only caught the edges and the boards were virtually untouched!
To make matters worse, the bits of rusty broken nail we couldn't get out would catch on the floor sander and ruin the sandpaper, which cost us a fortune in wasted sandpaper.
There was also a hole in the floor and 2 boards were so damaged that they had to be replaced with new ones, which I couldn't get to match.
All up we wasted a week and ended up with a poor result. I also later found out that the lino and fibro probably had asbestos, so we put our health at risk too.
The moral of this story is, don't waste your time trying to polish dodgy floorboards, just get some new lino!
3. Removal of waste, don't underestimate the cost!
When you start renovating, normally the first thing you do is rip out the old floor coverings, kitchen and bathroom. This creates a lot of waste. One of the first things that caught us out with our first renovation was the cost to remove this waste. Our original renovation budget was $5000 but we did not include waste removal.
Our skip hire eventually totalled $800, and that did not include what we managed to dump ourselves.
A decent sized skip can cost $200-300, which can be totally filled by cutting down one tree! Therefore it is very important to work out the waste costs before you start.
4. Trying to save money by building the kitchen.
In my first renovation I actually built the whole kitchen myself from melamine board. I don't recommend it! The reason I say this, is that it took weeks to do and really needs specialist equipment to get a professional result.
I also wrongly assumed the floor was level, but when I fitted the kitchen, I found the doors didn't operate correctly. It wasn't until I put a spirit level on the floor that I realised my mistake (after I had already fitted the kitchen!)
Lesson learned:- It is much quicker to purchase a kit kitchen, which you can either fit yourself or get the manufacturer to install for you. Maybe I will get the next one from Ikea!
5. Wasting months in the yard.
Like most old houses, the house had some good and bad plants in the yard, it also had the usual array of dodgy concreting and a huge steel reinforced concrete BBQ.
Trying to save money, I spent months removing plants, clearing up, replanting, etc. The huge concrete BBQ alone took me about a week to remove with a sledge hammer. It not only was a ridiculous waste of time, but I ended up seriously hurting my back lifting chunks of concrete into the skip.
Since then, I have discovered the wonders of the bobcat…what took me weeks could have all been done in one day for about $500. In fact, looking back I should have just got a bobcat to clear the entire yard and re-turfed. It would have taken me 2 days instead of 2 months!
Finally my last and probably costliest mistake was actually selling the house.
After paying $119,000 for the house in April 2001 and spending $7500 doing it up, we sold it for $226,000 in July 2002.
Not a bad result for 15 months work. Which made me feel good for the first couple of years, but in 2006 it resold for $354,000.
Today it would be worth over $400,000 and would rent for $320 per week.
Of course I walked away with $100k tax free and went on to build a nice house with the proceeds, but really, that house should have been the start of a portfolio of houses. I will definitely teach my kids to hold onto their houses and not make the same mistake I made! Special Offer - 2 Great Property Books Our 2 most popular books at a reduced price of only $50 How to Grow a Multi Million Dollar Property Portfolio - in your spare time is a must read for all property investors, both beginners and advanced. + Secrets of Property Millionaires Exposed - will show you how 13 top property investors have made their fortunes. All property investors can learn from them. Click here for more details or to buy your books today
How to Leverage Yourself Into More Top Performing Properties PropertyUpdate.com.au, Residex, API magazine and Investors Direct is sponsoring this series of seminars that deliver …. Unconventional Insights From Industry Insiders Property Investment Strategists from Metropole (Jack Henderson, George Kafantaris and Bryce Holdaway) will share with you their experiences on how to select high performing properties and how to make your properties work harder for you. Finance Strategists from Investors Direct will share their unconventional view on finance which has helped many of their clients take their financial thinking to a whole new level. Senior partners from Chan & Naylor will teach you about Asset Protection, Trusts and Tax These multi speaker events will be held in Click here for full details including the free bonuses and to reserve your place.
To share your property investment story and have the chance to win a fantastic book bundle prize to the value of $60, please send your story to editor@propertyupdate.com.au.
+
