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From Roaches To Riches

Seeing beyond the horrors of a dilapidated duplex in New Plymouth has paid handsome dividends for a resilient investor, writes Joanna Mathers.

By: Joanna Mathers

31 March 2022

Cockroaches. Fleas. Drug paraphernalia. When Sanjay Raj first viewed the 1970’s duplex in Marfell he was met with a litany of horrors. One side of the duplex, which was unoccupied, had been used by gangs for cannabis growing: a bedroom closet contained tubes and leftover drug growing apparatus.

The other side of the duplex, which was inhabited, was just as bad. “There were hundreds of cockroaches living in it, and when you walked on the carpet, your legs would be covered with fleas,” Raj says.

Drugs and insects weren’t the only problem. The entire property was a mess: there were holes in the walls, filthy and dated toilets and bathrooms, and kitchens that hadn’t been cleaned in decades.

“We had a meth test, which was clear, so at least there wasn’t any meth residue to deal with.”

The asking price was $330,000, but when Raj went to view it, it had been sitting on the market for months without a bite. He knew he could get the price down ... and he saw potential.

Essentially, he had the opportunity to buy two properties for the price of (less than) one. And at 1,100m2 , there was plenty of room for potential development.

Raj initially offered $310,000, with a 15 working days due diligence clause. But a building report revealed the roof needed to be replaced, so he managed to secure the property for $295,000.

He also brought in the experts: finding out that the property was able to be subdivided into three, and that two additional dwellings could be built. But this was a longer-term plan. In the meantime it was important the duplexes had a quick renovation and went back into the rental pool.

Everything in the duplexes needed replacing. The dated carpets had holes and needed to be pulled out, with new, durable carpet laid.

Forty per cent of the exterior cladding was rotten, so this needed to be removed and replaced. The house needed to be painted inside and out, and the plumbing upgraded. The kitchens and bathrooms also needed a lot of work to get them up to scratch.

Rotten Floorboards

Raj was able to achieve significant cost-cutting by painting, rather than replacing, kitchen cabinetry.

“I talked to many experts about it and they said it would be easy and cheaper to repaint the cabinetry and just replace the bench,” says Raj. “I ended up buying new benchtops for the two units for just $500 from Bunnings.”

Rotten floorboards were another problem, and they had to be replaced. Both units needed new curtains, switchboards, and light fittings. The living rooms of both units had old fireplaces, which were closed in using gib.

The interior walls of both units were painted in Resene Double Alabaster. Outside, the exterior paint was found to contain lead, so they needed extremely good sanding. Additionally, two garden sheds needed to be stripped and rebuilt, and there was so much rubbish on the property it took two days to clear it.

Once the homes were renovated Raj decided to rent the properties to a social housing provider, Salvation Army. He says this has ended up being beneficial, and he has been happy to help people in need.

“I know what it is like to not have much money,” he says. “So, it has been great to give something back to others.”

The two units now generate $430 each, and the property is cash-flow positive. The homes are now valued at $390,000 each, with the renovation costing $75,000 for both units.

New Life

Once the duplexes were renovated, it was time to undertake the property’s subdivision and development.

As Raj explains the council in the area had recently changed the planning rules to mean certain parts of the city could be developed more intensively. Marfell had also been undergoing a redevelopment: formerly a notorious gang area, a KiwiBuild development had breathed new life into the suburb.

The rules for this area allowed for medium density housing, and there was enough space to develop two three-bedroom houses in the large backyard section.

“I was talking to experts at every step of the way,” he says. “It’s so important to get expert advice when you are undertaking a development like this.”

The subdivision process itself cost $40,000, with both houses costing $540,000 to complete (they are still in the process of being built). They are three-bedroom “build and hold” properties (Raj is interested in positive cash flow and a long-term portfolio, rather than short-term capital gains). The renovation and build project has yielded extremely impressive results: the property is now valued at $1.8 million, with four titles, and has added some great stock to the area’s housing pool.


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