You’ve got an old, not-particularly-inhabitable property sitting there collecting dust. For years you’ve been going on about doing it up and selling it, or perhaps rebuilding and moving in.
You know you’re sick of it sitting there empty, but you’re not sure what exactly to do with it. Well, now you do – here are your options, with our recommendations included.
What to do with your old fixer upper
You might have noticed there have been a lot of stories in the media lately about people selling dilapidated old houses for ridiculous amounts of money – especially in Sydney and Melbourne.
This trend is slowly but surely beginning to appear in Brisbane too; an uninhabitable shack in Newmarket recently sold for $1.275 million. Who knows… in the not-too-distant future, we could see the market for ‘fixer upper’ type homes explode into action in Everton Park too.
But what about right now? Well, if you’re currently sitting on an old, uninhabited home that needs a bit of TLC, you’ve got a few options to choose from:
- Cash out;
- Renovate and sell;
- Rebuild and sell;
- Rebuild and move in;
- Wait and see.
Let’s take a look at each of these choices.
Cash out and use the money
Assuming that the home itself isn’t really liveable, potential buyers would be looking for a fixer upper that they might be able to renovate.
It’s up to them whether they move in or sell it on, but for you this means being able to reinvest the money or use it to pay off existing debt.
You’ll want to talk to an accountant or financial advisor to work out whether to sell or not, especially if you’re looking to reinvest. While holding onto the old property would mean having another mortgage to worry about, it’ll also mean higher personal equity in the long term. Selling would mean less debt, but also less personal worth in a decade’s time.
Unless you’re really desperate to sell, we wouldn’t particularly recommend the option of cashing out right away. Land prices are only going to increase, so if you have time on your side, hold onto the old place.
Renovate and sell
This has been a pretty popular option for as long as we can remember, but it’s especially hot right now, thanks to all the renovation shows on TV.
The idea is simple: take the daggy old home and invest a little money into renovating, then sell it off for a much higher profit than before.
This might sound simple, and the TV shows might make it look like fun, but the reality isn’t quite as rosy. Renovating has a lot of associated costs, like council and builders’ fees, that these shows sometimes gloss over.
If you’re set on renovating, make sure you’ve done your due diligence and worked out (with an accountant, preferably) exactly how much more you’ll make versus selling the home as-is.
The bigger the renovation project, the less profit there is. In some cases, you might be better off rebuilding from scratch, which leads us to our next point.
Rebuild and sell
If renovations aren’t going to cut it (and let’s face it, no matter how much new paint you put on a shabby post-war bungalow, it’s unlikely to win any prizes) then you might want to consider rebuilding.
The plus side of rebuilding is that you’re able to start with a clean slate, so you can really think about what a potential buyer is going to want and/or need, which will get you a better sale price in the long run.
The downside is that rebuilding is going to cost you a fair amount. But seeing as you own the land already, you’ll only be paying for the construction and associated fees.
You might also want to consider rezoning, subdividing or redeveloping the land, although this again costs money, and in some cases might not even be allowed by the council. As with the previous points, our recommendation is to talk to an accountant or financial advisor to work out exactly how much profit is in it for you.
We’d also recommend doing some research into your local area’s short and long-term outlook in terms of property prices, including things like upcoming developments, infrastructure upgrades, and so on.A knowledgeable real estate agency like us (nudge, nudge) will be able to help with this kind of information.
Rebuild and move in
Assuming you were living elsewhere before deciding to rebuild the old home, you could choose to sell or let the current home and move into the newly rebuilt one.
This decision will all come down to the immediate financial gain from the sale, along with the projected appreciation on either property. The good part of moving into the rebuilt (or renovated) home is that your total financial outlay is a lot lower than if you were to buy a whole new property somewhere else.
In most cases, we’d recommend keeping hold of the other home and earning some rental income off it, but if you’re uncomfortable with all that mortgage debt, you could sell it and put the money towards covering your other debts or reinvesting elsewhere.
Wait and see
While it’s good to strike while the iron is hot, sometimes it pays to be patient.
As we’ve seen in the southern capitals, a little time can mean a lot of appreciation in value. If you aren’t itching to offload the property, we recommend investing a small amount (as in, no more than a couple of thousand) in keeping it habitable and renting it out.
This way, you are still getting some income out of it, but you aren’t committing to any larger action like selling or rebuilding. You will still have the freedom to renovate properly, sell as-is, or whatever you choose. And the good part will be that your small investment should boost the sale price, if you do decide to sell sometime soon.
The biggest part of this equation is the value of your land. If the house is more or less a write-off, the only thing we’re interested in is the plot it sits on, so the idea is to work out how to squeeze the most profit out of it – and this comes down to timing.
Keep an eye on the local market, look at similar and comparable properties and how much they’re selling for, and pay attention to long-term trends. Better yet, talk to the team at Madeleine Hicks Real Estate and we’ll give you the lowdown on what to do with the old place.