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Property Investment Updates

Reading between the lines of your pest & building report

As part of our process, once we’ve located a suitable development site and if there’s an existing house on the land, is to order a pest & building inspection. Management of the renovation is part of the development process.  But to what degree do you renovate and when is it considered over capitalising?  In these regional areas, we are not looking to massively upgrade a house but to add cost effective value and maximise rental returns.
It’s crucial that we receive the pest & building report before our client exchanges on the property, so we always make our offers “subject to a pest & building report”.
When the report arrives, it’s usually around 30 pages long and for first time readers, can completely shock and turn them off a property. The report contains a lot of information that the inspector needs to explain and also to include in order to ‘cover’ himself.  It’s his job to point out all the things wrong with the house, but then it’s our job to sift through the data and explain to our clients what we believe to be acceptable or common in houses in this particular area and of this particular age.
Property Bloom has renovated many houses and we have picked up some common problems that may sound a bit scary but can be quite cost effectively solved.  Most of the houses that fall into the right price range – so that the numbers stack up to develop – would be over 50 years old.
And these properties do have defects, depending on the age and the general maintenance they’ve experienced, however the property usually still represent good value.
I thought it would be interesting to translate some comments we often find in the building report that can raise alarm bells. In our experience these ‘defects’ are actually are not too hard to fix by using cost effective renovation strategies.
Defect:  Various downpipes discharge rain water to ground and require connecting to storm water pipes or storage tanks.
Translation: a plumber can cost effectively connect down pipes to the stormwater for approximately $800.
Defect:  The external painting and finishes reflect an inadequate maintenance program and will require extensive preparation, detailing and painting to ensure long term qualities.
Translation:  most houses can be washed down and may not require painting.  If they do, we can usually have it painted for $2,500.
Defect: Roof mortars require repointing randomly to ensure further long term waterproofing qualities.
Translation:  Pointing is a substance that is used on the roof capping tiles. A quote from a roofer can be quickly obtained however if the roof is not leaking then it may not be required urgently.
Defect: Internal painting is in poor condition and requires professional upgrading.
Translation:  what one person’s ‘poor condition’ is another person’s ‘ok’.  We like to wash down internal walls and ceilings with sugar soap and they usually come up like new. What is acceptable for a tenant may be different to your own standards.  We can internally paint a house for around $2,000 and a new coat of paint does wonders to a house, so it’s worth considering.
Defect:  Asbestos linings were possibly present in some areas.
Translation: Asbestos materials remain serviceable and are considered safe as long as asbestos is not tampered with
Defect: There is sagging to the ceilings.
Translation:  Sagging ceiling are easily identified by the ceiling areas being wavy and not level and can be repaired by a handyman securing ceilings to partitions.
Defect:   There are variations in the floor structure and some bounce.
Translation: over time piers do sink or timber floor joists can deflect or bend.  Piers can be packed to stop some of the bounce and variation. To repair an entire house is usually not necessary but we always ensure the ant caps are on piers.  Bent joists can be replaced if required.
Defect:  Some damage due to wood decay fungi.
Translation:  Wood decay fungus is commonly known as wood rot.  The type of fungi encountered by pest controllers usually reside in poorly ventilated subfloors, below wet areas of the home, exterior timbers and in areas that retain waters in the soils. The durability and type of timbers are factors along with the temperature and environment. Removal of the moisture sources usually alleviates the problem.  Have a carpenter inspect and replace any rotted boards or timbers, most old homes will have some degree of wood rot.
So don’t be put off when reading through reports, if you have any doubts or don’t understand the information then discuss it with your building inspector as often a conversation can explain things in more simple terms.  
If your strategy is to create high yielding property then be careful not to over capitalise when you are renovating.  We base our renovation assessments on what’s required to bring a house up to the market standard and to make the house safe and clean.  Right now we are finding properties where just a few thousand dollars needs to be spent to increase the rent substantially due to the high demand in these town.   Once you’ve completed your house renovation and then go on to add a new dwelling, granny flat or even a duplex, the yield can be dramatically increased and equity can also be created.

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