Kent Lardner is the genius behind desktop valuations. He knows what makes the property market tick. We ask him about renovations and renovation suburbs. What makes a good renovation suburb, and is there such a thing?
Kevin: Kent Lardner from View.com.au, joins me once again.
Kent, I want to talk to you this time about renovations and renovation suburbs. What makes a good renovation suburb, or is there such a thing?
Kent: The call out for me is always know what your renovation costs are upfront, so you start with that and you get that out of the way. What we’re finding statistically is a lot of the higher value – so you look at the higher median price suburbs – they’re often the ones that are best to renovate if you can find the gem. The gem being a smaller house or an unrenovated property, because typically, these houses in the wealthier locations, they’re significantly more expensive and a lot of people may not seek to want to live in something and renovate it.
If you can find the smaller house or the unrenovated house in a lot of these more expensive areas, from a statistical perspective, they’re the ones that uncover the greatest capital gain.
Kevin: Would the same apply to units?
Kent: Units, for us, is a little bit more of a challenge, because obviously with houses, we can do what if analysis of plus one bathroom, plus one bedroom. With units, it’s a lot harder obviously to do that.
Typically though, we’re finding increasingly now, a lot of these well-placed older units are being renovated, and you can look at what they have been acquired for or what the unrenovated ones come on the market for, and compare those to the ones that have been renovated, and there’s a lot of market activity in renovating older units in prime locations in and around the city.
Kevin: If you had a choice, would you prefer to renovate a house or a unit, and why?
Kent: That would depend on my use case: what’s my objective? Is it for owner-occupied? Is it for a quick buck, or is it to keep long term? So, you’d really have to identify what your scenario is.
I would almost say if the objective for me is to try and unleash the greatest capital value, there is no single formula; it’s about finding the property. It’s about the right property, at the right time, regardless of location.
Kevin: In a renovation project, are there areas that will generate a bigger bang for buck – as in a bedroom or a kitchen, or an additional bathroom?
Kent: Yes. We do a lot of this. We measure this and store these values in each location as a co-efficient. We mentioned that in an earlier episode. Typically, we store a price for every one-unit change in a bedroom, or a price per every one-unit change in a bathroom, and we look at these locations, and usually, as expected, the highest values are those wealthier suburbs where prices are higher. So, that is a given.
Certainly, those locations where I can find that one-bathroom property in an expensive location and add that bathroom, that’s traditionally going to give me the greatest return for the extension. Absolutely.
But then again, you can find other houses that are under-valued. What we traditionally do – and we’ve been doing this a fair bit in recent months – is we’ll find properties that have been listed for sale, and what we do, is we’ll match up, through a matching algorithm, the three best comparable sales.
Typically, the algorithm will pull back properties based on time and distance and size, and we’ll have three comparable sales that are served up and matched to a listed property. We’ll take that listing price, we’ll compare it to those three other properties, and if those three other properties are all higher in value than the listing price, we say this may be a bargain. What we do then is we list these down and we go and look at them, and we say, “Yeah.”
Typically, what we have found is we’re listing these down, we can produce hundreds of these each week, we go and look at them, and then what was this process is doing is, obviously, uncovering those renovators’ dreams, and some of them, truly you can see, just be looking at a few tiles and a bit of a paint job, it truly, truly is an opportunity.
Kevin: How can we access these properties?
Kent: At the moment, we’re just producing them bespoke, as a media article for a bit of fun. Obviously, in the coming months because we are getting such good feedback, we’re looking at actually making it ongoing service and adding it as a product of View.
Kevin: We should make that available through Real Estate Talk, I think. That would be a great idea.
Kent: I think we can do one of those in the next week or two, Kevin.
Kevin: That should be fantastic. Hypothetical now, I’m doing a renovation. I’m thinking about adding an extra bedroom. Is there a tool that you could point me in the direction of that will indicate to me, if I add another bedroom to this property, what will it do to the value?
Kent: Visit View.com.au. There’s a link there that says Property 360. From that, you can enter in your address and find your own property. We have a landing page for every house in the country, every address in the country. You can then look at that; it’ll present a tool that allows you to change the bedroom count from, say, two to three or three to four, or change the bathroom count. And then once you make those changes, hit Submit, and that will serve up a new price estimate and also serve you up comparable sales.
From that, then you can cycle through and pick the best three matching sales that are based on either (a) the way the property is today or (b) the way you think the property will be after you renovate, and that gives a great idea of what the likely price will be.
Kevin: Okay. That website again is View.com.au, and from there…?
Kent: And follow the link to 360.
Kevin: Thanks, Kent. We will talk again soon.
Kent: Thank you, Kevin.