We had been looking for a fixer-upper around Sydney when we came across this gem, which we bought around October last year. The property had been on the market for a month but attracted no serious offers because the market was pretty slow at that time.
The owner was desperate to sell as she was moving to a nursing home up north. It was quite an old house located in an area where there was a growing shortage of rental properties.
It ticked all the boxes in terms of our criteria and we secured this beauty for just $210,000, well under the $310,000 median house price for the suburb. The house was located in Dharruk, NSW, a suburb around Mount Druitt that’s becoming sought after as it loses its stigma.
The property itself is quite old, and it showed. But the bones and the layout were conducive to a full renovation. It had a well-kept front and backyard and was located in a quiet street near shops and schools.
Buying criteria
- Must be undervalued. The house was purchased at $50k below asking price and $80k below market value due to a slow market and motivated vendor.
- Must be cash flow positive. Due to the low purchase price and high rental income, the property is generating around $73 positive cash flow each week before tax.
- Must have strong potential for capital growth immediately and in the future. Demand is rising and supply is tightening significantly as the suburb continues to gentrify. It enjoys a range of infrastructure and relatively affordable housing, making it an attractive option for renters and homebuyers alike.
Deciding what renos to do
Seeing that the house itself was outdated, renovation was absolutely necessary. We looked at doing just a cosmetic reno such as painting, installing new curtains and polishing the floor. However, as we probably needed to replace the kitchen and bathroom within a year anyway, we opted for a full renovation. We also wanted to make our house stand out in the market so that we could attract better tenants.
Getting the work done on time
The timing of the renovation was perfect. The market was pretty slow at that time and there were a lot of tradies looking for work. We enlisted an experienced company to help us project manage the reno because we were relatively inexperienced in doing the work ourselves.
It’s a personal choice. If you have the skills to do the work yourself, by all means do it. Just be aware that you will be handling all the hassles that come with the renovation.
The renovation project was completed without a hitch. Actually, it went too well – it was finished one week ahead of schedule.
The result was stunning. The ugly duckling had been transformed into a beautiful swan. The best part of it was that the renovation costs were kept to a minimum and the bank valuation came back higher than we expected, even though the valuer only did a drive-by and didn’t get to see my shiny new kitchen and bathroom. Nevertheless, the bank valued the property at $80k higher than the purchase price.
For two weeks’ work at a cost of $27,000, we’re very happy with the result. We’ve more than doubled our money and now own a property generating a handsome 8.09% gross rental yield.
