Rental Guarantees | Prices predicted to fall by 2017 | The Reno Kings’ tips | How depreciation affects capital gains tax? | Renting to Family Members

Rental Guarantees | Prices predicted to fall by 2017 | The Reno Kings’ tips | How depreciation affects capital gains tax? | Renting to Family Members

 

Australia’s house prices are expected to begin declining in 2017 according to a new report from economic forecaster BIS Shrapnel. Michael Yardney gives us his take on that situation.

The Reno Kings – Paul Eslick and Geoff Doidge – give us their all time top 10 road-tested tips to get the most out of a renovation.

We invite Brad Beer from BMT Tax Depreciation to answer Gary’s question about having to pay back depreciation claimed on a property when it is sold.

Another topic we are asked to touch on from time to time is about managing a property when it’s going to be kept in the family. An expert in her field talks to us about some of the complications that can occur and how to best manage the situation.

As the old saying goes, if it sounds too good to be true it probably is. If you come across a property marketed with a rental guarantee, tread carefully according to Damian Collins who outlines why he is wary of properties offering ‘the deal of a lifetime’.

 

Transcripts:

Damian Collins

Kevin:  Ask any wise investor and they will tell you that if it sounds too good to be true, then it probably is. Now, this can apply to rental guarantees. Let’s find out what they are, first of all, how you should be a little bit wary of them, and what you should be aware of before you start to get involved with rental guarantees.

Joining me is Damian Collins from Momentum Wealth. They are buyers agents in Western Australia. Damian, firstly, tell me what a rental guarantee is and why you think we should be cautious of them.

Damian:  Kevin, a rental guarantee is usually provided by developers, whether that be residential property, sometimes serviced apartments, or hotel operators. What they’re providing to the investor is a guarantee of the rental return over a period of time. Sometimes they range from one year, sometimes even up to three, four, or five years.

What it effectively does is it means that the investor gets a certain level of return over that period, so they’re not subject to the vagaries of the market going up and down. It sounds good in theory, but obviously, there are reasons why the developers offer it.

Kevin:  Why do they offer them?

Damian:  Well, it’s to give their investors certainty. Nervous investors – particularly first-time investors – in the market think, “Well, what do I do if my tenant leaves? What happens if something goes wrong? What happens if the rents drop?” All those things, they provide them with that certainty of the rental return.

But, of course, nothing is for free. Any developer offering those sorts of rental returns has factored that into their sales price, so as a buyer of one of those properties you’re going to be paying for, that rental guarantee is going to be loaded into the sales price.

Also, importantly, I think what we often see is that the rental guarantees are not necessarily reflective of the market. When you come to getting a loan for the property, you often find that the valuers and the banks will only take the actual income based on the real market value, not what you’re getting offered as a guarantee.

Importantly, you have to understand that when that guarantee period runs out, you’re going to go back to the market levels. I’ve seen them offered at 6 and 7% returns on properties where the real market value is probably closer to 4.5 to 5%. Investors get lulled into a false sense of security thinking they’re going to get that rent forever, but the reality is that it’s over market, and you’re paying for it. One day, you’re going to have to pay the price when it comes back to normal market terms.

Kevin:  Damian, is it drawing a long bow to say that you could apply that to all properties that offer rental guarantees?

Damian:  Look, definitely. Nothing is free in this world. Anyone offering a guarantee is either struggling to sell it and they need to offer some extra incentive for people to buy it, hence, it might be overpriced, or alternatively, some other developer offering it, they have their profit margin they need to make. If they are going to pay 1 or 2% extra rental return for a couple of years, you can guarantee that there could be 4 or 6% in extra cost out of their pocket. They’ve put that in the price, as well.

There’s certainly nothing for free in this world, and one way or the other, you’re going to pay for a rental guarantee.

Kevin:  If I were to see a property that seemed to be fairly reasonable on the surface in terms of its price and that rental guarantee looked fairly good, how should I proceed to make sure that I’m not going to get trapped?

Damian:  The first thing I would be asking, Kevin, is why are they offering the guarantee? If the property was that good and stacked up on its own, why are they offering the guarantee? What’s the purpose behind it? What am I missing here? What’s hidden?

I’d certainly be doing my own thorough market research on what is the proper and fair value for that property without any rental guarantee. At the same time, I’d be looking at also what is the fair rental market without this inducement of the rental guarantee. Do your numbers based on that.

The guarantee is a nice little additional bonus, but most people do get lulled in that false sense of security and end up paying too much for it because of that security. Do your homework, find out what’s the real market value of the property, what’s the real market value of the rent, and if the numbers still stack up, well, it’s worth having a look at. But in my experience, the vast majority of them, that guarantee is loaded into the price.

Kevin:  We’re talking here about rental guarantees, of course, but could you draw the same conclusion from a property where they may offer you a Mercedes Benz with every unit that you buy or an overseas holiday? Could you draw the same conclusion from those?

Damian:  Definitely, Kevin. Again, there are two reasons why. People offering a Mercedes or offering overseas holidays, it’s simply one or two things. It’s that they can’t sell them at the price they want and they need to load that in, so it’s over priced for the real market value and they’re using those as additional incentives. It’s either that, or they’re really just looking for other ways to maintain that price.

Nothing is for free. Developers factor that into their project. Holidays, Mercedes, anything over and above or just to buying a normal property on fair market terms and conditions, at the end of the day, the buyer is usually paying for one way or the other.

Kevin:  Good advice there from Damian Collins from Momentum Wealth. They’re buyers agents in WA. Damian, thanks for your time.

Damian:  Pleasure, Kevin.

 

Michael Yardney

Kevin:  According to a report by economic forecaster BIS Shrapnel, Australia’s house prices are expected to begin declining by 2017. It’s a fascinating report. I want to get an insight into this.

Joining me to discuss that, Michael Yardney  from Metropole Property Strategists. Michael, you’ve seen that report. What’s your take on that?

Michael:  Well, BIS Shrapnel has got a good track record of predicting markets, I guess, as good as anyone else. Sometimes they get it right, sometimes they get it wrong. But I think this time, the claim that this cycle will end in 18 months to two years is pretty spot on.

Kevin:  What’s the trigger behind this, Michael?

Michael:  Well, let’s maybe talk about what’s going to be ahead, and then we can see what’s going to cause it. I think this next year or so, we’re going to have some interesting times economically in the world. Recently, Greece has had its financial problems, and then China has. The world is having some economic challenges, which will impact on Australia.

Some people are even suggesting Australia is going to need one or two months of recession where our economy slows down in response to that. What that means is interest rates are going to remain low and probably drop one more time.

In that context, I believe that our property markets are going to continue doing well, driven by lowish interest rates, but there will be some challenges with some consumer confidence, just with all the bad news happening.

But what will eventually finish this cycle – like every other cycle – is when interest rates go up, and that will happen when eventually, after all the bad times, the good times start occurring and our economy starts to pick up and our property markets go up even further. So, there are some good times ahead before the markets ease.

Kevin:  Michael, I’m going to ask you before we conclude our chat here today to take a long-term view for me and tell me what you think is likely to happen in the future, but I’d just like to know how we can prepare ourselves for a market slowdown if it’s ahead.

Michael:  The market is made up of multiple submarkets and multiple states, so when eventually things slow down, different segments will be affected differently. As interest rates go up, I believe that the first-home buyers will have their challenges. It’s likely with some economic challenges that regional and smaller areas and areas not underpinned by multiple pillars of the economy are going to have their challenges.

One way to prepare is owning the right properties in markets that are going to still remain strong. Avoid first-home owner markets. Avoid second-rate properties, which end up having challenges when the markets turn. Avoid regional areas. And really be careful of off the plan because one of the things in the BIS Shrapnel report is that in the future, they see an oversupply of the inner CBD apartments that are being built, in particular for the overseas investors.

Correct asset allocation is number one, Kevin.

Kevin:  Number two?

Michael:  I wouldn’t speculate, and definitely, don’t over commit financially. Like every other property cycle, this one is going to leave some investors who bought near the peak financially embarrassed.

The problem is currently our markets are strong, enticing a whole lot of new people into the markets. Therefore, be cautious of what you’re buying and make sure you have substantial financial buffers to see you through. In other words, have a line of credit or an offset account, so that if the market slows or the rents don’t go up as much or more, particularly, if interest rates go up, you can cope with it.

Kevin:  Excellent. Correct asset selection, don’t over speculate, and that financial buffer, Michael, that’s fairly important, isn’t it? I’ve heard you talk about that before.

Michael:  Well, it is. What tends to happen is that people budget and push themselves to their limits with today’s interest rate, but could you cope if interest rates go up a percent or two? Fortunately, the banks are protecting us. No one likes it when the banks say no, but more banks today are actually factoring that in to make sure that you can weather the storms ahead, because this too shall pass.

Kevin:  This too shall pass. I’ve heard you say that before, too.

Michael, just in closing – another minute or so – could you just get the crystal ball out, and what’s ahead?

Michael:  Well, I believe that this next financial year, 2015/2016, we’ll see much the same as what happened in the last year. Melbourne and Sydney will be the leading property markets, but Brisbane is also going to catch up a bit. Melbourne and Sydney won’t grow as much, but will have single digit capital growth.

I think that Perth is still going to have a year of flattened, slightly falling property values. Adelaide is going to be steady as she goes, probably going along with inflation. The smaller markets like Tasmania, Darwin, and Canberra, there’s nothing really behind them to drive strong capital growth at the moment, Kevin.

Kevin:  Michael, always good talking to you. Thank you for your insight there. Michael Yardney from Metropole Property Strategists. Of course, you can catch up with Michael’s blog, just the address there, Michael?

MichaelPropertyUpdate.com.au, and we now have an app that you can get on the iTunes or the Google store to get daily blogs, as well.

Reno Kings Part 1

Kevin:  When it comes to renos and you want to know some top tips, you only go to one place, don’t you? You go to the Reno Kings. We have Paul and Geoff on the line.

Good day, guys. How are you?

Paul:  Great, Kevin. How are you, mate?

Kevin:  Fantastic, thank you. I’m really looking forward to your top ten tips. I asked you to put them together. Hey, Paul, do you want to lead off? What’s the first one?

Paul:  Not a problem, Kevin. Look, one of the first and best and easiest ways to add value is to add a front fence. It’s the best reno you can do. The fence is the frame around the Mona Lisa, guys. Anyone can build one, or you can get someone in to come and do it for you, or even do a course at a local hardware shop.

For existing tenants, it gives them security and helps hide in their children and hide in those pets. A lot of landlords don’t like to have pets. I’ll tell you what, Geoff and I, we love to have pets. I don’t know of anybody who doesn’t have a pet who is a tenant, and that can raise the rent.

You can put another tip here, guys. Go on and put a kennel in there. You can raise the rents and also depreciate it at the same time.

Another reason for putting in a fence is the valuer. The valuers these days are doing a lot of RA, which are restricted assessments. They’re driving past at about 60 kilometers an hour. They like to look at street appeal. One of the best things to do is put a fence up there. It will look fantastic.

Another reason you put up a fence around the front there is your banker. They like to see where they’re money is parked at a polished residence. Putting a fence around the front of your place, it just gives it street appeal. It makes it look fantastic, Kevin.

Kevin:  Talking about street appeal, what about that front veranda?

Paul:  Kevin, that’s exactly right, that front veranda. A lot of enclosed verandas look terrible and they have no street appeal. That’s come since the Second World War, when they had to enclose it to create more inner space after the War. They had a baby boom, so what they’ve done is they’ve enclosed it and left it like that.

I’ll tell you what you do. You go in there and you open it up. It goes back to the original, and it looks so much more street appealing. You get the breezes. You get to know the neighbours. It’s a no-brainer.

Most of the existing balustrades, handrails, just check that they’re in good condition. They’re already sitting there. All they’ve done is framed on the outside and enclosed it in the there. Open that up, and you’ve opened up yourself to a great, big amount of capital gain.

Kevin:  The tenants love it, as well, don’t they, Paul?

Paul:  Of course. You know why? Because they can sit out there. They can look. It gets the breezes. The idea of having a veranda wherever you go is to give you shade, to give you some outdoor breezes. You don’t have to have the air conditioning on. You’re outside, enjoying life.

One of the best things that we always do when we have a veranda, or even a deck, is go there and put in a barbeque. That can also increase the rent and, at the same time, make sure the people dine out more than inside and make that kitchen last longer.

Kevin:  Geoff, what about you? Have you got a tip for us?

Geoff:  Yeah, I have one. It’s a very simple on. I agree Paul with the street appeal. The other one is that you know how long it takes to paint a house. I bought this house. It was very heavily shaded by trees and so forth. What happens, when you get that, is you get mold build-up. All the [3:13 inaudible] were black. There was mold over the walls. I hired a guy. He was ridiculously cheap. In an hour, he went around with his chlorine wash and cleaned that place up.

Just to tell you how good this was, I did other renos as well, and I got a valuer in to value the place. He said, “Fantastic paint job you’ve done here.” I hadn’t painted. I didn’t say anything. I just nodded. I got a really good value for that place. It’s so easy.

I’m not an accountant, but if you paint the house in the first 12 months, you might not be able to claim that on maintenance. Check that with the accountant. But this way, it was almost as good as a full paint job.

Kevin:  Paul, Geoff’s talking now about painting. Paint is really a great way to improve a place, isn’t it?

Paul:  Kevin, it’s one of your best bang for your bucks. I don’t know of anyone who can’t paint. I can tell you, one of the best tips here, if you’re going to get out there and paint, get your head around an airless sprayer.

I painted a three-bedroom house internally, all the rooms, in 63 minutes. I’ll tell you what, it looked absolutely fantastic. You can hire those for about $100 a day. Get lessons with water before get out there. Do that with the hirer. It’s a dangerous tool, so make sure you follow the instructions. What we do is you always use water-based paints.

No matter what, painting is your best bang for your buck. Whether you use an airless spray, you roll it, or you use the old-fashioned paintbrush, you can get in there and get out quickly. If it’s a rental property, it’s a business. Don’t go in there with your thoughts of what you’d like to see in that property.

Go in there and paint the whole thing the one color. If you want to pick out some feature walls, do so. We don’t any more. We’re in and out quickly. It’s a business. I’ll tell you what, I’ve never had a tenant come around one of my rental properties and say, “It’s all the same color. I can’t rent this.”

Painting, Kevin, is your best bang for your buck.

Kevin:  I’ll tell you what, I think the first place where I ever saw the two of you was on A Current Affair, when you ripped through a house and you painted it in no time at all.

Paul:  I can tell you that Geoff stood still for a second, and I painted him by accident. Look, you have to move when I’m in there with that paint. Kevin, people just don’t understand the value of a paint. I’ve got a thing here with paint. When I go and pick it up, I look for the heaviest can, because I think the heaviest is the best quality.

 

Brad Beer

Kevin:  I had a question sent in, which we’re going to answer now, from Gary. Thank you for the question, Gary. I’ll just quickly read through it and then introduce the person who will answer it for you.

I have an investment property that I claim depreciation on each tax year. Can you please advise what happens when I sell the property? Do I then have to pay back everything that I’ve claimed? Does this mean all of the deductions have to be paid back?

For example, if I get $5000 worth of depreciation and I’m on a 30% tax bracket, I get approximately $1500 back. Do I only have to factor in the $1500 or the full $5000? How does it work?

Well, Gary, let’s get an answer on that question for you from Brad Beer from BMT Tax Depreciation experts.

Brad, thanks for your time.

Brad:  Thanks, Kevin. It’s nice to be here.

Kevin:  Can you answer Gary’s question?

Brad:  Look, I can. The question relates a bit to his situation. It’s a bit of an accountant whirl, but I’ll give you the how depreciation affects capital gains tax answer really, and in this particular scenario, I can give you pretty close to what it would be, definitely.

Kevin:  Fire away.

Brad:  Now, it is a very regular question I get. We’re the quantity surveyor that works out the depreciation. We don’t do the rest of your tax return, but I kind of know how it works.

When you claim depreciation what happens is and in this example, he’s saying, “If I claim $5000 worth of depreciations, I get that back at my tax rate at 30% at $1500.” Now, if or when you actually sell a property, what happens is that that $5000 actually gets added to your cost base for the purpose of capital gains tax. What’s going to happen is you’re going to pay more capital gains tax based on what you claimed.

However, usually, under the current rules, what happens is you get a 50% exemption on that capital gains tax payable, providing you’ve owned it for 12 months or more. What that means is that in this scenario, there’s $5000 additional income added to the end value from a cost base perspective, and you’ll pay additional capital gains tax at half of that marginal rate. In this scenario, he’ll pay back $750 of his $1500 effectively on the sale of the property.

Kevin:  There’s still a net benefit, though, isn’t there?

Brad:  Yes. The fact is he’s made a deduction, he’s got $1500 in the pocket, and then if he sells the property, for that year, he’s going to pay $750 of it back to the tax office. Now, that’s only half of it.

There are different tax brackets and things like that, but what happens is in most scenarios, because you’re only paying that tax at half the amount, it pretty much always works out that it’s worth actually claiming it on the way through, and then at the end, when you pay some additional capital gains tax, you’ve put more money in your pocket on the way through.

The other thing is also about the time value of money. If I get a dollar in my pocket today, it’s worth more than a dollar in my pocket in a year or two years or three years’ time. Capital gains tax is something you pay if you sell or when you sell, which will – I assume – be at a later date. You get to use that money. You can put it into reduce debt and do things on the way through. You just need to have some more available at the time when you potentially sell the property.

Kevin:  As always, though, Gary, make sure that you check with your accountant. I’m sure you would agree with that, Brad. Just check with your accountant. Your individual circumstances may alter that advice.

Brad:  Definitely.

Kevin:  Brad, can I just ask you, at this time of year, any advice that you might have for property investors?

Brad:  Well, Kevin, it’s interesting. Over the last few months, there’s been a fair bit of heat in a lot of markets around a lot of the country – not everywhere, but a lot of the country. One thing that makes me think about is just making sure you’re crunching your numbers properly. If prices have moved forward, the cost of owning that property is a little bit higher than it used to be, and really have a good look.

It’s all well to follow what a lot of people are buying and feel like you really need to get into the market right now before they go up too much, but you still have to make the payments, you still have to hold the property over time and make money or wealth out of that property in the future, so make sure you crunch your numbers – depreciation estimates are one part of that – and see what really is going to cost you to hold that property.

Consider that interest rates could go up in the future at some point when you do that, so make sure you do some scenarios both ways to make sure you could still hang onto it so that if it’s not quite so hot, you are still safe.

Kevin:  Very good advice from Brad Beer from BMT Tax Depreciation. Brad, thanks again for your time.

Brad:  Thanks, Kevin. Appreciate it.

 

Carolyn Majda

Kevin:  In your attempt to find the best possible tenant, sometimes it’s a temptation to pick a family member and maybe rent to them. You think, “Oh, well. I’ll put Aunt Mary in there, or our little cousin, or even our son or daughter, because I know what they’re like.” There are some things that you need to be aware of. Let’s find out what they are.

Joining me now is Carolyn Majda from Terri Scheer Insurance. Carolyn, do you see this very often?

Carolyn:  We do tend to see it. I wouldn’t say it’s the most common form of renting, but certainly, we do see it, especially if people are in the country – rural areas – and their children might move to the city for studies or things like that. We often see it.

Kevin:  Of course, there’s nothing wrong with doing it, provided you treat it like a business and are prepared to treat them like a normal tenant.

Carolyn:  Absolutely, and it really depends on each family’s circumstances, obviously. But I think keeping the emotion out of it and making sure that you do remember it’s an investment property – you’re investing for a reason – and make sure that whoever the family member is does respect the fact that it is a rental property and they still have obligations whether you’re their mother, or their aunt, or whoever you are.

Kevin:  Give us the ground rules. What should we be aware of if we are going to go down that path?

Carolyn:  Certainly. Make sure that you have a proper lease in place. A verbal agreement is all well and good until something goes wrong, and things can go wrong. You never know what’s going to happen with family, so we would certainly recommend having a lease in place.

Appointing a property manager even takes it a little step further in having somebody managing it for you. The property manager is looking after it on a day-to-day basis, and you’re not having to get too involved. That keeps it more of a business-type relationship as opposed to an emotional family relationship.

Kevin:  Yes, because the temptation would be great there – wouldn’t it? – given that it’s someone you know to say, “Well, look. We’ll just do this rental agreement between us and manage it myself.”

I mean there’s one thing about managing a property with a tenant you don’t know, but it’s probably even worse with someone you do know.

Carolyn:  It really could be. Some of the things that we see, of course, is people who don’t pay the rent on time because it’s mum or dad or whatever. They’ll say, “Look. You just hold me over this month, and we’ll get it to you next month.” Then next month becomes the following month, and suddenly, you’re in a bit of strife.

Similarly, with caring for the property and keeping it neat and tidy – whether or not the owner would actually do inspections as often is because they might have seen that because there’s a family member in there that they’re looking after the property properly. It’s not a given that that does happen.

Kevin:  For any owner of an investment property who wants to manage their own property, what services do you provide through Terri Scheer Insurance?

Carolyn:  We do offer an insurance policy for self-managed landlords. Previously, it was only available if you had a property manager, but we do recognize that there are a lot of investors who almost have their own little business in investing and know how to look after a property. There’s certainly insurance available now to assist to help cover those things that you just can’t control. That’s things like your loss of rent and the damage that can be caused by tenants.

Kevin:  What are some of the classic areas where you’re finding claims coming in, where people are being protected?

Carolyn:  Loss of rent is obviously the most frequent claim that we have, and there are various reasons that people might not be paying their rent. It could be something like hardship where they’ve lost their job or something like that and they’ve been released from the bond obligations, right down to your absconding tenants, things like that. Loss of rent is certainly right up there.

Quite often with a loss of rent claim, there will be a malicious damage claim, as well, especially if a tenant has been evicted. They might be very angry about that, and so their parting gift to the landlord – if you like – is a couple of holes in the walls or something like that.

I spoke with a property manager once who was telling me that he served notice on a woman, and she had just come back from doing her grocery shopping. She had a carton of eggs in her hand, and she proceeded to throw the eggs all around the lounge room walls and up into the ceiling fan. There was just egg splattered everywhere.

They’re the types of things that can happen. You just don’t know.

Kevin:  No, you don’t know. I think it gets back to what you said right at the very start, too – no matter what you’re doing, whether you’re managing it yourself or whether you’re getting an agent to manage it for you, you must treat this like a business because that’s what it is and to make sure that you get the leases in place and run it like a business.

Carolyn:  Absolutely. I think the other thing, too, is making sure that if your tenants do get behind in their rent that you act really quickly to try to reduce that loss. Generally, with a landlord insurance policy, you’ll need to show that you’ve taken steps to try to mitigate that loss. You can’t just let it go and not serve notices on tenants. Whether they’re your family or not, you still need to do that if you’re running it like a business.

Kevin:  Very good advice. I’ve been talking to Carolyn Majda from Terri Scheer Insurance. Carolyn, thank you very much for your time.

Carolyn:  Thank you.

 

Reno Kings Part 2

Kevin:  Earlier in the show, you’ll recall I was talking to Geoff Doidge and Paul Eslick, who are the Reno Kings. They’re giving us their top-ten renovation tips. Let’s continue that series now.

Geoff, let’s talk about adding something to a property. What about a carport?

Geoff:  Now, we’re talking rental property here. The most important thing I’ve found for a tenant is a vehicle. Quite often, that’s why they haven’t bought a house, because they’re still paying off their cars. They love their cars. If you can appreciate that and protect those cars, then you’re ahead of the game. I’ve done this so many times now.

How you do it is you get a professionally engineered shade sail and put it up as a carport for a couple of thousand dollars. Make sure it is properly designed, none of this pulling a few ropes and those saggy, baggy sails that you bought from the local hardware store. Get it professionally done, and do it with tension. They have turnbuckles and so forth. Make it look really good.

Quite often, even if there is a garage, I put them up. People put their car outside and they use their garage for other purposes, maybe rumpus room or whatever. There’s no council approval, because it’s with shade cloth. It’s high-density shade cloth. In fact, it keeps most of the rain out. You might get a few drops through. So no city council approval. Check with the town planner.

You can actually do this over decks and other areas, as well. It’s just so powerful, adding a carport.

Kevin:  What about a bedroom, Geoff?

Geoff:  Well, you have to have a bedroom.

Kevin:  Can you add a bedroom? Is it worthwhile doing?

Geoff:  We keep on saying, “This is the best tip,” but this absolutely is the best tip because it brings you so much equity. If you go and look on any real estate search engine and compare a two-bedroom to a three-bedroom, you’re going to find a difference – depending on the suburb – of $50,000, $80,000, $100,000, just on that.

Now, when you’re going out and looking for property, have a look for a big combination lounge/dining room or a little area off a hallway. If you can put up two walls and a door, voila, you’ve got a bedroom. Just put a few electricals in there, a light socket, and your power point.

Normally, it would cost me about $2500 to do and be done in a day or two. They’re non-load-bearing structures, so no engineering required. Just make sure you use a registered builder to do it.

Kevin:  Indeed. The other thing I want to talk to you about too, Geoff, and I know you’re a great believer in this, is actually bring the outdoors in or combining the two, just opening a house up like that.

Geoff:  Yes, it’s a balance between what I was saying before when you’re putting a bedroom in. What you do is to compensate for using that lounge/dining room. If you can find a window leading to an outdoor area, any external window can be turned into a door, because it’s already supported over the top.

You basically cut down from the sides. You turn your window into French doors or just a normal door. Make sure it’s clear glass so you can look outside. You walk outside, even you have to walk down a couple of steps. Then you pave that area there. Put your shade sail over the top. Put a private fence around the outside. You’ve got a private courtyard. A private courtyard adds so much value. It gives you that indoor/outdoor look that flows through living area to the outside.

Kevin:  Paul, I just want to get back to you, if I may. Some of the big-ticket areas, like kitchens, they’re well worth doing up, aren’t they?

Paul:  Let’s put it this way, Kevin. If this room isn’t renovated, then the house isn’t renovated. That’s according to my better half. I wouldn’t fight her any day.

If the carcass is okay – and that’s what the door swings off, that’s what the drawers slide into, and that’s what the benchtop sits on – then don’t rip it out. What you have to do then is either replace the doors or paint the doors. You can paint them with a laminate paint. Change the knobs and handles on all the doors. That’s all you have to do. It’s very easy. They’re cheap as chips, $1.30.

If the splashback is of tiles, go and get some tile paint and paint the back of tiles. Polish the sink. Go and get some professional stainless steel polish, probably from a marine supplier. Go and polish that. What you can do then is just go and get a [5:01 inaudible]. You can get those for $30. Put that in there. All of a sudden, it’s going to look fantastic.

Put a new light in there. I like the circular fluoro lights. Give it plenty of light. The window furniture, just take the old-fashioned ones off. Open it up. I even like venetians, because you can let light in. You can see in. Also, at the same time, you have some security and privacy yourself.

Updating a kitchen, it’s a real expensive area, but if you go about it the right way, gee, you can make a lot of difference. I know of a bloke who spent $240 just using laminate paint, changing the window furnishing, and painting the splashback, and I think he increased the value of that kitchen by about $6000. That’s for $240. That’s the power of just doing a minimal on an area that costs a lot.

Kevin:  Paul, what about that other big-ticket area, the bathroom?

Paul:  That bathroom, I can tell you, that’s another area, if it ain’t renovated, then the house ain’t renovated. You have watch the costs in those areas. Of course, there’s a lot of plumbing in those particular areas.

What I do is if I go into a bathroom… If you had a house that was painted pink, would you demolish it? Would you get rid of it? You wouldn’t. You’d go out there and you’d paint it. So what? You go in there, and you repaint that funky pink bath. You paint it white.

You can get a professional in there or you can do it yourself. Lots of products out there. Go and Google it, have a look at it. Paint those yellow shower tiles with a white tile paint. It looks fantastic. Anyone can do it.

Destroy that shower curtain. I’ll tell you what, they are just disgraceful. Replace it with a clear glass shower screen, the 6 millimeter clear glass in a white frame will do. You don’t have to go frameless here, to cut down the cost.

Renew that vanity basin with a new covered one. Go white and go polymarble. It looks fantastic.

You can get a pan and cistern these days for about $139. Why get on your hands and knees and try and clean all that up when you can just go and get a new one? Make sure the old fitments fit into the new ones.

Open up the whole lot with a good paint job. Make sure you paint that bathroom white because of three things. It makes it BBC – it makes it bigger, brighter, and cleaner.

Kevin: I’ll bet too, Paul, that you and Geoff have been into many renovations, lifted up the carpet or the liner, and found those beautiful timber floors just waiting to be polished.

Paul:  That happens all the time, doesn’t it, Geoffrey, with that sanding and polishing?

Geoff:  Yes. Don’t do it yourself.

Paul:  I’ve done the dance once, so I can tell you. You can hire a machine. You can hire the edger. You have to make sure you hammer those nails down. You can do the dance. I’ll tell you, after doing it for a long time, you only have to do two and you’ll never do it again, because you get a professional in. They can do it quicker, easier, and better.

I can tell you, the difference is that after you’ve done it, you really know the difference between the floors. You can have a look and just try a small section of the floor there before you do it to make sure it’s going to be okay.

Sometimes you get a lot of borers that are a quarter of a millimeter under the surface. Once you strip that first quarter of a millimeter off with the sander, it’ll expose that and it’ll look horrible. Sometimes you’ll go back to carpet. But if you test it and it looks okay, polished floorboards, man, don’t they look fantastic in a house?

Kevin:  Wonderful stuff, guys, here. They’re top ten from the Reno Kings. Geoff and Paul, thanks for your time, guys.

Geoff:  Thanks, Kevin.

Paul:  Thank you very much, Kevin.

 

 

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Kevin Turner
kevin@realestatetalk.com.au
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