Manufacturing $61,000 In 8 Months.

Liam is an ambitious young man who came to us after reading Lloyd’s book ‘Positively Geared – How to build a multi-million dollar property portfolio form a $40k deposit’. And that is exactly what Liam wanted to do!

He had a $40k deposit and wanted to buy his first investment property and build a strategy with Lloyd for future property investments and developments.

The Brief

Liam had a small borrowing capacity, but he was in a good position, being young with no dependants. He had loads of energy and drive and some spare time up his sleeve so an older property with potential for minor renovations was a great fit for him.

We decided that regional NSW would be the best area, with potential for growth and instant equity from a cosmetic renovation. The town we chose is close to a major university, hospitals, multiple private schools and has a great café culture.

We found a large block (1000m2+) with an older style, 1960’s home. This allowed Liam an opportunity to perform some cosmetic renovations at a small cost, to gain instant equity on the property. The strategy allowed for Liam to then draw on the equity to buy his next property.

The large block also allows for the potential for further development down the track, when Liam is ready.

Challenges

Regional towns are becoming a popular choice for many investors and owner occupiers alike, as the market in major cities becomes much more unobtainable. This means that more people are looking, and as such the land becomes more scarce, especially large blocks with potential for development.

Our strategy for Liam included creating instant equity from a renovation, this in itself posed a challenge. We needed to find the right home with good bones, but one that would benefit from an upgrade and achieve a good rental yield.

 

Acquisition

After shortlisting a number of properties, we found a classic 3 bed, 1 bath weatherboard home on a large, flat block. The property was listed for $258,000 and we were able to negotiate a price of $229,000 saving Liam $29,000. That saving well and truly paid for the renovations and stamp duty.

We knew that there was good potential to increase the value of the home, as similar homes in that area had a median sales price of $337,000.

 

The Renovation

Liam was able to complete most of the renovations himself along with the help of some friends and family, which helped to keep the costs down.

The vast majority of the work involved updating the kitchen including removing a non-load bearing wall to increase size and to give it a more modern, open plan feel.

Liam was lucky enough to have a neighbour who is a plasterer, so he was able to get help from someone he trusted, with good rates.

He acquired most of the supplies from Bunnings, including the Kaboodle kitchen which he found easy to install himself. He removed the bulky overhead cupboards to make the kitchen feel larger and added a full-length pantry for practical use.

Liam was lucky to find beautiful hardwood floors under the kitchen linoleum. He sanded these which added to the aesthetics of the property while maintaining some of its original charm. Liam also gutted and fully renovated the bathroom including beautiful floor to ceiling tiles and a stunning free standing deep bath.

To further update the property, Liam painted throughout and added new window furnishings.

The Result

Liam had a valuation completed for the property, which resulted in an end value of $290,000. The general rule for renovations is that for every $1 spent you should get a return of $2-$3, and Liam was spot on.

He spent just under $20K on renovations and gained a $61,000 increase on the property value.

Before the renovations the property was rented for $310 per week. Liam was able to rent out the property immediately after the renovations and is now getting $360.00 per week. A $50.00 per week increase and a 7.5% gross rental yield.

Using this equity, he is now on the way to purchasing his next investment property.

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