Home Truths: Do ups hard yakka but rewarding

Photo / Herald on Sunday

There are a large number of first-home buyers in the Auckland market presently, which can make buying seem hard, even when it is supposedly a buyer's market.

A low number of listings and everyone wanting to buy in the same area has added fuel to the fire. Some suburbs are hot, none more so than Westmere, followed closely by Grey Lynn, Mt Eden, Epsom and Sandringham. If you're up for a commute, or looking for something different, then there are still some easy deals to be found. That's because most buyers want something close to the city.

Buyers tend to want something they can move into straight away. Many entry-level properties are ex-rentals and are in pretty bad repair. Unlike in days past, most buyers don't want to spend the next five years living in a do-up. They don't have the inclination, time, or resources to fund ongoing renovations when they're working 50-hour weeks and commuting for two hours every day.

But do-ups can offer better value and can often get buyers into suburbs they otherwise couldn't afford. In the inner-city suburbs most of the value is in the land, yet people pay a premium for a renovated house. There is less competition for do-ups and you might also get some equity gain in the property from doing improvements.

I've looked at a few properties for myself lately that have come straight out of the movie Trainspotting, missing only the heroin addicts. We're talking 30 years of flyblow on the ceiling, 30 years of cooking fat caked to the kitchen, plus dirt and black mould on just about every wall.

They say you can smell a good deal when you walk into a house, literally - and it smells bad! The best deals are almost always marketed or presented poorly, and have owners who really don't care or have other things on their mind. The ideal candidate reads like "First time on market in 50 years ..." or will mention property developer and opportunity in the same sentence.

With extremely rundown properties, most first-home buyers are put off by the sheer magnitude of the problem. However, in reality, most of the work is superficial. As I see it, the challenge is to set some money aside when you purchase, find good tradespeople, renovate quickly to minimise disruption or downtime, and convince the bank that the property is a good buy. Banks will typically lend only 80 per cent on extremely run-down properties or where there are compliance issues. Therefore first-home buyers need first, a 20 per cent deposit, and second, to set aside a renovation budget.

A full makeover will cost from $60,000 to $70,000. This entails stripping a property right back to its framing and starting again. It includes rewiring, insulation, re-gibbing, new kitchen and bathroom, new flooring, new fittings, and painting inside and outside. Rewiring, insulation and therefore relining are becoming far more important and almost essential with any project.

You can start to see why the bank gets a bit nervous, but it's also a lot of money to try to put aside.