Crumbling, dilapidated dumps in Melbourne’s premium suburbs are smashing reserves to earn lucky sellers multimillion-dollar windfalls.
Owner occupiers are paying “crazy” prices for decrepit doer-uppers in a bid to break into the city’s sought-after markets, agents say.
Some of the homes sold post-lockdown are in such a state of disrepair they are unfit for human life.
It is close to High Street shops, elite schools, had mould patches on the ceiling, cracked walls, flaking paint, and was overgrown by climbing plants.
It also came with a litany of heritage controls.
Kay and Burton agent Grant Samuel said the buyer, a young family, planned to spend between $3m and $5m fixing it up.
“It surprised us in terms of the interest in it,” he told the Herald Sun at the time.
The buyer planned to “do as much as they can to bring it up to speed” before working out what else to do with it, Langwell Harper agent Arthur Korf said.
A dated pad at 19 Lisbon Street, Glen Waverley, in the Glen Waverley Secondary College school zone had “nothing nice to look at” but mountains of development potential, Harcourts Judd White agent Andrew Dimashki said.
An overseas buyer with plans to live in it before demolishing it to build their dream home down the track snapped it up for $2.741m in April.
It had peeling vinyl floors, stained, water damaged walls and cracked and missing bathroom tiles.
Fletchers auctioneer Mark Fletcher said the buyer, a young woman, would bulldoze the home to build a new one.
“For that money it was crazy,” Mr Fletcher said.
Buyer’s advocate and Advantage Property Consulting director Frank Valentic said buying a renovator’s dream could be a good way to inch into ritzy postcodes.
But he cautioned fans of hit renovation television shows such as The Block and House Rules to get proper project costings before splashing cash on a run-down property.
Renovating could “add instant value” if it was done tastefully, he said.
But the price of trades work could quickly get out of hand, and demolishing to rebuild was a costly endeavour.
“It can be a bit of a money making strategy. For my clients that spend a dollar, I generally see them make two or three dollars back,” Mr Valentic said.
“(But) I often find people start with a renovation budget of $200,000 and it ends up going up to $400,000 or $500,000 very easily. So just make sure you cost things properly.”
Wakelin Property Advisory director Jarrod McCabe said heritage protections on older homes added an extra layer of complexity to the renovation process.
As well as ensuring all planned work to the home fit the regulated guidelines, he said buyers could inherit extra costs if they discovered work completed by a previous owner wasn’t compliant.
“If they aren’t up to standard and need fixing, the onus may fall back on you as the new owner,” Mr McCabe said.
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A FAMILY AFFAIR
Ben Campbell and Vicky Young know their way around a renovation.
As the owners of Building Evolution, a company that specialises in the restoration of heritage homes in Melbourne’s north, the pair are passionate about preserving the city’s architectural history.
They bought the decaying 1900-built home at 39 Barry Street, Brunswick, about $70,000 above reserve for $752,000 in July 2019.
Ms Young said the home was so unsafe they weren’t permitted to inspect it before they bought it.
But she said she and her husband saw bringing the “old girl” back to life as a challenge, and each of their four kids, including their eldest, Sam, who is a carpentry apprentice, was playing a part.
“I think for us the entry price for the property was reflective of its uninhabitable state and only a few people contested at auction,” Ms Young said.
“The opportunity for us to do so much of the work ourselves means we could realise greater value. Watching the market, we know that similar properties as our proposed development are going for over $2m.”
The couple plan to complete most of the work this year and move into their new home early next year.
Sustainable energy components including batteries and solar power will be installed.
Modern additions to the rest of the home will also be blended with traditional features, including a 150-year-old claw-foot bathtub.
PROS AND CONS OF RENOVATING
– Less demand means unrenovated homes are cheaper
– Renovating may be cheaper than building a new home
– Avoid paying a premium for renovations completed by the previous owner you don’t like
– Create equity by adding value
– Grant programs may help with the cost of fixing up a heritage-listed home
– Heritage Victoria can help pick the right materials to use when working on a heritage home
– Timber and other materials are in short supply due to COVID-19
– Heritage overlays can add further costs and complexity
– Structural issues can be expensive to fix
– Objections by neighbours can lead to delays
– Older homes may have asbestos
– May not be able to use generic fittings from a hardware store
– Work by a previous owner may not be compliant, meaning you have to pay to fix it
– Banks may have extra lending criteria to satisfy if seeking a loan for a heritage property
– Insurance premiums may be higher
Source: Frank Valentic Advantage Property Consulting / Jarrod McCabe Wakelin Property Advisory
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