“I’ve finally finished my Noosa project,” Dean Zarif shares.
It’s what every avid renovator anticipates saying when neck deep in entirely transforming a property so that not even its past owners can recognise it.
But Dean’s undertone of having at last reached the finish line, which at times seemed to be shifting further away from him, is all the sweeter for the fact that he was tackling every property owner’s worst nightmare.
And that was before COVID-19 impacted the market.
“I was told it was severely termite damaged and ‘about to fall down’,” Dean says of the condition of the Queensland property when he first learned of it while visiting Sydney.
Nonetheless, with a string of successful renovations to his portfolio, Dean decided to purchase the property unseen and set about reviving it for its next reveal on the selling market.
Discovering the unexpected
The first time Dean stepped foot into the crawling nightmare, it was six months later in December 2019.
He stepped inside with his carpenter and two labourers – all geared for a six-week strip out and reframing of the entire house. At first, it sounds like it could be a repeat of that film, The Money Pit, where the staircase collapses and the bath falls through the second-story floor.
But once work had commenced, the property proved to be rather a gem in the rough.
“To our surprise, the house was only damaged in a few areas rather than the whole thing being impacted. We only replaced 30% of the framing so we were way under budget,” Dean shares.
The sailing was smooth all the way through to Christmas and New Years – a time during which Dean continued to work on the large-scale renovation, propelling it towards its completion in early February. The project was sealed in under three months.
Dean says, “It was too good to be true how everything went together under budget and ahead of schedule.”
Navigating a speed bump
However, when he decided that a luxurious feature would be installed in the backyard that the project faced its first major challenge. It delayed the property’s debut on the market by eight weeks, and setting Dean back an additional $5,000 in work that had to be re-done.
“While the backyard feature debacle was unfolding, I built a huge merbau deck with my chippy – it looks amazing. When the new concrete slab went down around the feature, I had it tiled with white travertine,” Dean shares of his choice in a sleek, modern design.
“I had the house appraised at low to mid $700,000’s before I did the backyard feature and deck. I was told it would fetch low $800,000 afterwards. The backyard is a smallish L-shape so I thought the [feature] on one side and deck on the other would make the best use of the space and make it look bigger.”
Dean says, in hindsight, this approach set him back. Not because he overcapitalised, he explains, but because the project’s consequential delay meant it was listed in the uncertain climate of COVID-19 – which has resulted in many buyers and investors being placed under financial pressure as they navigate their existing finances and loans.
A glowing valuation
Taking a look at the stats, its clear that even with the pandemic priced in, this is a highly profitable deal.
The fixer-upper in Noosa, Queensland, was purchased by Dean for $355,000 in 2019.
Purchase, holding and renovation costs came to $160,000, and altogether, the project cost Dean $515,000.
Under the current market conditions, Dean says, “I’ve been told that I can expect around $750k now, which is still a profit of $235k.”
“I love the finished product and my team have done an amazing job. The stagers exceeded my expectations also,” he says.
When it comes to sourcing good builders and tradies Dean recommends word of mouth, as well as checking online reviews.
“I’ve been fortunate to have found a great bunch of guys and I use the same trades on each project. Occasionally one of my tradies is busy or has left the industry so I’ll ask my other trades for recommendations,” he shares.
In the case that this approach doesn’t yield, Dean utilises Facebook community pages and is often able to secure a replacement for an urgent job within just a few hours after posting the opening. He has also had effective results over hipages.
Dean’s home is on the market at the time of writing listed at offers over $749,000.
How to find the right fixer-upper property
For a property to exude promising potential on the market post-reno, Dean says that it has to appropriately measure up to 5 criteria.
- The property has to be purchased well under market value. “As a rough rule, I aim to buy a property where I can make a 10% profit without touching it,” Dean shares.
- The property has to be in bad form – “The worse, the better.”
- The property must be surrounded by good quality homes. Dean says, “The worst house in the best street is ideal, however the worst house in a nice street in a decent area is great also.”
- The property’s existing layout has to be malleable. “Seeing as though the house will be completely stripped out, I look for property that can be reconfigured to add an extra bedroom and/or bathroom,” Dean explains.
“I have previously converted a huge home that was set up as a 3 bedroom with 1 bathroom into a 5 bedroom, 3 bathroom home with a clever reshuffle of the floorplan.”
- Adhering to a formula for cash-on-cash return. Dean says that his project must reach a minimum profit when he first sees the property advertised online or hears of it from an estate agent – and he factors this “minimum end profit” into his offer on a property and when negotiating a price.
“I always keep in mind that it is a business and the numbers need to stack up for me to do a deal,” Dean says. “I’m not afraid to walk away if my offer is at the upper end of where it needs to be for the deal to stack up.”
The average profit on one of Dean’s recent projects was $160k, and his current project is expected to make a profit of over $200k.