Renovators delights, January 2004

RENOVATORS DELIGHTS

The paint is peeling, the kitchen is basic and the dunny is out the back – but the price could be just right.
Some agents in the inner city are reporting the cheapest prices for two years on “renovators delights”.
“There are some absolute bargains out there right now,” says Bresic Whitney Estate Agents’ Shannan Whitney. “Unrenovated properties used to be the easiest to sell, but now they are the hardest.”
Raine & Horne Newtown’s Roger Cull says there are small single storey unrenovated terraces in the Erskineville and Newtown area for less than $500,000.
Nolans First National’s Matthew Nolan says further out in the inner west, there are unrenovated freestanding houses available for less than $600,000.
“We’ve got a three-bedroom brick Federation in Croydon Park that’s selling for $540,000 to $570,000 and you can’t even get weatherboards for that price,” he says.
Real Estate Insitute president Rowen Kelly – who also runs Kelly & Sons in the inner west – says he has a listing for an unrenovated three bedroom terrace in Erskineville with a $425,000 asking price.
“You couldn’t have bought anything in Erskineville for less than $450,000 last year,” he says.
“Without a doubt prices have come back and when you start to see those kind of prices, then you have to start thinking it’s better to buy a house than a two-bedroom apartment for similar money.”

AFFORDABLE ENTRY

Unrenovated properties can easily become money pits, but they also offer a relatively affordable entry to the housing market.
“For a first home buyer, if they can get something that is on land as opposed to an apartment, then they will be doing better in the long run – land is what’s in short supply,” says Nolan.
Macquarie Bank’s Rod Cornish agrees, saying a buyer will be financially better off in the long term if they choose a house rather than an apartment.
“As long as you get an unrenovated property for the right price, then it is better as a first home than an apartment,” he says.
“A first home is not the final home you will live in and probably won’t be ideal anyway, but it will offer you something to upgrade from.”
Cornish says people need to do careful research before buying a house that needs renovation.
“Construction costs have risen substantially so people really need to be aware of what they have to spend in the future,” he says.
“You don’t want to be buying something completely unliveable that will ultimately cost you more than buying something that was already renovated.”

BUYING CHECKS

The best unrenovated properties will be in a good location which has potential for capital growth. In the long term, it can be harder to recoup renovation costs in houses on busy roads or in poor-demand suburbs. Archicentre’s David Lawrence says it is easy to buy an unrenovated “lemon” if you don’t know what you’re looking for.
“A lot of people don’t add up all the costs of renovating or they think that just because all the other houses in the street have a second storey then they will be allowed to do it, but that isn’t always the case,” he says.
Archicentre offer a pre-purchase renovation potential report for $425 which can advise buyers on the costs of renovating and what local council regulations will allow.
“There are so many people out there that have been burnt by not checking what the council will let them do, and then they are stuck with a property that doesn’t have the potential they thought it did,” he says.
Lawrence says the average Sydney renovation cost is between $2500 and $3500 a square metre – so if you need to renovate a 10 square metre room, then you need to budget $25,000 to $35,000.

WHAT TO BUY

The most in-demand renovators’ delights still have original features which cannot be easily replicated today.
“It’s the open fireplaces, high ceilings and polished floorboards that people like,” says Kelly.
Cornish says it’s important to find houses with a “scarcity factor” like original features, which will have good demand in the long term and offer better resale prices.
Kelly & Sons Zoran Zdravkovski, who just sold an unrenovated but liveable house in Chippendale for $500,000, says original facades that have strong street appeal will always have strong demand.
“People like the cute houses, the ones with nice features that have charm and look good from the street,” he says.
Sydney Property Finders’ buyers agent Dennis Kalofonas says the key to buying a good renovators delight is to find one that isn’t too dilapidated and was last renovated in the 1960s or 1970s.
“A lot of people prefer the totally original places, but some of those are extremely dilapidated and virtually need rebuilding,” he says.
“I would always advise someone to go for a place that has had the plumbing and wiring renewed and only needs some cosmetic work because that is much cheaper than rebuilding.”
Lawrence says terraces are expensive to renovate – especially if they are in the inner city and have poor access for trades and rubbish removal.
He says “despite the terrible prejudice Sydney has against weatherboard houses”, a timber house can be the cheapest to renovate.
“You can probably renovate a weatherboard place for between $1800 and $2300 a square metre, which is much cheaper than bricks and mortar,” he says.

THE RIGHT PRICE

Indeed, many agents say unrenovated properties can be relatively expensive compared to similar, renovated properties.
“There aren’t that many renovators delights out there so when they come on the market, people can pay a relatively higher price than a similar property that is in good condition,” Kelly says.
Lawrence says Balmain architects regularly joke that unrenovated houses cost more than many renovated houses as inexperienced renovators bid up the price, not realising how much it will cost to repair the house.
“People love absolute wrecks – a total wreck can be all things to all people so everyone who walks into them sees their dream home,” Cull says.
Ironically, houses that were renovated in the 1960s and 1970s – that are in better condition than completely original old homes – are the cheapest unrenovated properties to buy.
“The daggy 70s renovation is cheaper to buy than the absolutely unrenovated house where loads of people are competing,” Cull says.
“For some reason, people are more excited by the houses where people fall through the floorboards than your plain old daggy house.”

LAST WORD

Cornish says the price differential between a renovated and unrenovated property needs to be broader before he would consider unrenovated properties a “bargain”.
Kalofonas agrees, saying the unrenovated property needs to be at least 20 per cent cheaper than a similar renovated property after the renovation costs have been factored in.
“You really have to do your sums because renovating is hard work and you only want to do it if the numbers stack up,” he says.

CASE STUDY

Sarah Hicks bought an unrenovated two-bedroom terrace in Surry Hills last November for $570,000 – and she is confident that she can create a beautiful home as well as make money from her DIY renovating efforts.
“Why would you pay for someone else’s renovation and hard work if you have the creativity and dedication to do it yourself,” she says.
Hicks renovated an apartment in Rose Bay four years ago “and when I realised my apartment doubled in value in two years, I thought ‘I like the look of that’ and wanted to do it again”.
She plans to spend about $30,000 on the terrace to upgrade the kitchen, knock out walls to create open plan living space and create off-street parking.
“It would basically cost around $60,000 if I was to get people in to do it, but doing the hard yards yourself will save a lot of money,” she says.
“I find it inspirational and really satisfying – I love to look at the finished product.”
Hicks – who works for a fashion design company – says it is only worth embarking on the stress of renovation if the property is in a good location and has potential to sell at a higher price later on.
“There is no point using really high quality finishes on a kitchen if the house is two hours drive from anything and won’t appeal to another buyer,” she says.
“The key is to look at a house and see if it is easy to do things yourself to let in more light or create more space.”


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RENOVATORS DELIGHTS The paint is peeling, the kitchen is basic and the dunny is out the back – but the price could be just right. Some agents in the inner city are reporting the cheapest prices for two years on “renovators delights”. “There are some absolute bargains out there right now,” says Bresic Whitney Estate Agents’ Shannan Whitney. “Unrenovated properties used to be the easiest to sell, but now they are the hardest.” Raine & Horne Newtown’s Roger Cull says there are small single storey unrenovated terraces in the Erskineville and Newtown area for less than $500,000. Nolans First National’s Matthew Nolan says further out in the inner west, there are unrenovated freestanding houses available for less than $600,000. “We’ve got a three-bedroom brick Federation in Croydon Park that’s selling for $540,000 to $570,000 and you can’t even get weatherboards for that price,” he says. Real Estate Insitute president Rowen Kelly – who also runs Kelly & Sons in the inner west – says he has a listing for an unrenovated three bedroom terrace in Erskineville with a $425,000 asking price. “You couldn’t have bought anything in Erskineville for less than $450,000 last year,” he says. “Without a doubt prices have come back and when you start to see those kind of prices, then you have to start thinking it’s better to buy a house than a two-bedroom apartment for similar money.” AFFORDABLE ENTRY Unrenovated properties can easily become money pits, but they also offer a relatively affordable entry to the housing market. “For a first home buyer, if they can get something that is on land as opposed to an apartment, then they will be doing better in the long run – land is what’s in short supply,” says Nolan. Macquarie Bank’s Rod Cornish agrees, saying a buyer will be financially better off in the long term if they choose a house rather than an apartment. “As long as you get an unrenovated property for the right price, then it is better as a first home than an apartment,” he says. “A first home is not the final home you will live in and probably won’t be ideal anyway, but it will offer you something to upgrade from.” Cornish says people need to do careful research before buying a house that needs renovation. “Construction costs have risen substantially so people really need to be aware of what they have to spend in the future,” he says. “You don’t want to be buying something completely unliveable that will ultimately cost you more than buying something that was already renovated.” BUYING CHECKS The best unrenovated properties will be in a good location which has potential for capital growth. In the long term, it can be harder to recoup renovation costs in houses on busy roads or in poor-demand suburbs. Archicentre’s David Lawrence says it is easy to buy an unrenovated “lemon” if you don’t know what you’re looking for. “A lot of people don’t add up all the costs of renovating or they think that just because all the other houses in the street have a second storey then they will be allowed to do it, but that isn’t always the case,” he says. Archicentre offer a pre-purchase renovation potential report for $425 which can advise buyers on the costs of renovating and what local council regulations will allow. “There are so many people out there that have been burnt by not checking what the council will let them do, and then they are stuck with a property that doesn’t have the potential they thought it did,” he says. Lawrence says the average Sydney renovation cost is between $2500 and $3500 a square metre – so if you need to renovate a 10 square metre room, then you need to budget $25,000 to $35,000. WHAT TO BUY The most in-demand renovators’ delights still have original features which cannot be easily replicated today. “It’s the open fireplaces, high ceilings and polished floorboards that people like,” says Kelly. Cornish says it’s important to find houses with a “scarcity factor” like original features, which will have good demand in the long term and offer better resale prices. Kelly & Sons Zoran Zdravkovski, who just sold an unrenovated but liveable house in Chippendale for $500,000, says original facades that have strong street appeal will always have strong demand. “People like the cute houses, the ones with nice features that have charm and look good from the street,” he says. Sydney Property Finders’ buyers agent Dennis Kalofonas says the key to buying a good renovators delight is to find one that isn’t too dilapidated and was last renovated in the 1960s or 1970s. “A lot of people prefer the totally original places, but some of those are extremely dilapidated and virtually need rebuilding,” he says. “I would always advise someone to go for a place that has had the plumbing and wiring renewed and only needs some cosmetic work because that is much cheaper than rebuilding.” Lawrence says terraces are expensive to renovate – especially if they are in the inner city and have poor access for trades and rubbish removal. He says “despite the terrible prejudice Sydney has against weatherboard houses”, a timber house can be the cheapest to renovate. “You can probably renovate a weatherboard place for between $1800 and $2300 a square metre, which is much cheaper than bricks and mortar,” he says. THE RIGHT PRICE Indeed, many agents say unrenovated properties can be relatively expensive compared to similar, renovated properties. “There aren’t that many renovators delights out there so when they come on the market, people can pay a relatively higher price than a similar property that is in good condition,” Kelly says. Lawrence says Balmain architects regularly joke that unrenovated houses cost more than many renovated houses as inexperienced renovators bid up the price, not realising how much it will cost to repair the house. “People love absolute wrecks – a total wreck can be all things to all people so everyone who walks into them sees their dream home,” Cull says. Ironically, houses that were renovated in the 1960s and 1970s – that are in better condition than completely original old homes – are the cheapest unrenovated properties to buy. “The daggy 70s renovation is cheaper to buy than the absolutely unrenovated house where loads of people are competing,” Cull says. “For some reason, people are more excited by the houses where people fall through the floorboards than your plain old daggy house.” LAST WORD Cornish says the price differential between a renovated and unrenovated property needs to be broader before he would consider unrenovated properties a “bargain”. Kalofonas agrees, saying the unrenovated property needs to be at least 20 per cent cheaper than a similar renovated property after the renovation costs have been factored in. “You really have to do your sums because renovating is hard work and you only want to do it if the numbers stack up,” he says. CASE STUDY Sarah Hicks bought an unrenovated two-bedroom terrace in Surry Hills last November for $570,000 – and she is confident that she can create a beautiful home as well as make money from her DIY renovating efforts. “Why would you pay for someone else’s renovation and hard work if you have the creativity and dedication to do it yourself,” she says. Hicks renovated an apartment in Rose Bay four years ago “and when I realised my apartment doubled in value in two years, I thought ‘I like the look of that’ and wanted to do it again”. She plans to spend about $30,000 on the terrace to upgrade the kitchen, knock out walls to create open plan living space and create off-street parking. “It would basically cost around $60,000 if I was to get people in to do it, but doing the hard yards yourself will save a lot of money,” she says. “I find it inspirational and really satisfying – I love to look at the finished product.” Hicks – who works for a fashion design company – says it is only worth embarking on the stress of renovation if the property is in a good location and has potential to sell at a higher price later on. “There is no point using really high quality finishes on a kitchen if the house is two hours drive from anything and won’t appeal to another buyer,” she says. “The key is to look at a house and see if it is easy to do things yourself to let in more light or create more space.”