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It’s A Kind Of Magic

It’s A Kind Of Magic

Michael Burge has waved his successful wand across yet another renovation in his BRRRR journey. Joanna Mathers takes a look.

By: Joanna Mathers

2 July 2023

If you’ve been a long-time reader of New Zealand Property Investor magazine, the name Michael Burge may ring a bell. The former personal trainer was featured in the June 2020 issue of this magazine after he single-handedly built a portfolio of 17 houses that he’s worked his BRRRR (buy, renovate, rent, refinance, repeat) magic on.

His insights are now being shared with others through his property mentoring course (he’s in the property coaching feature on page 28).

His most recent reno project, completed in March, has been his most successful. With a budget of $60,000 he’s managed to add six-figures’ worth of value. And he’s providing the people of Rotorua with two new dwellings for the social housing pool as a bonus.

The kitchen began with missing cupboard doors and filthy multicoloured walls (below) and was transformed to a bright, modern space (above).

No-One Biting

The home-and-income Burge bought in the Rotorua suburb of Fordlands initially popped up on Trade Me. The three-bedroom 1950s home, with a second one-bedroom unit out back, was on the market for $519,000 … but no-one was biting.

“The unit wasn’t on any of the Trade Me posts,” says Burge. The reason became clear when he decided to visit.

Although tenanted it was pretty much uninhabitable. The bathroom and toilet were black with mould and the kitchen was a horror show, with missing cupboard doors and filthy multicoloured walls. In the living area mismatched carpet pieces were fraying at the edges.

It was unsurprising that no-one wanted the property for $500,000-plus. But through negotiation, Burge was able to get the seller down to a very reasonable (by today’s standards) $452,000.

“Both the houses were tenanted. But they were vacant by January this year.”

The mouldy toilet and bathroom were removed, replaced and repainted.

Rental Potential

As Burge explains the main home was tidy, and only needed a simple cosmetic renovation to get it up to scratch. “We painted the interiors and brought it up to Healthy Homes standards – that’s all that was needed.”

The one-beddy wasn’t such a simple fix. Nothing in the home was retained, such was the state of disrepair. The kitchen and bathrooms had to be completely removed and replaced; walls and floors repainted and re-carpeted.

Burge also added an extra interior wall to convert the house from one to two bedrooms – upping the rental potential instantly. The new-look home was basic but clean and tidy, ready for new tenants to move in and enjoy.

As the child of a single parent, Burge is keen to give back and always rents his houses to social housing providers. This has the additional advantage of exemption from the interest deductibility changes, which means the yields are often much healthier.

The smaller house is rented to a social housing provider for $460 a week, and the larger three-bedroom home is bringing in $550 a week. With a weekly rental return of over $1,010, he’s looking at a rental yield of an impressive 10 per cent.

“I haven’t had the houses revalued, because I am not able to buy any more properties at the moment,” he says. “But I think that the property would now be worth around $750,000.”

Property Journey

Burge says he began his property journey in Fordlands. He has been purchasing elsewhere since those early days, and this represents his first Rotorua purchase since Covid. It’s been a very successful reprise: the passive income from the property is (approximately) $250 a week before tax.

“I actually didn’t realise what a great deal this place was until it had gone unconditional. It’s probably been the best cash flow and value add of any of the homes I’ve renovated so far.”

The BRRRR strategy has taken Burge from zero to 17 properties in five years. And his latest success is a reminder that there are still great deals and money to be made from property … and that you can never judge a book by its cover. The property may have scared many buyers off, but Burge was able to see through the mould and dirt, and release the property’s hidden potential. ν

The Numbers

Purchase price: $452,000

Renovation costs: $60,000

Current rental: $1,010 per week

Yield incl. reno: 10.57 per cent

Value add: approx $200,000

Home And Income

Builderscrack sees a broad variety of jobs come through related to building additional revenue streams from properties. From simple home offices through to Airbnb rentals; beautician, hairdresser and massage spaces and more.

Renovating a space to rent out on Airbnb is simple and popular. Typically the renovation involves creating a self-contained bedroom and ensuite. Adding an external entrance helps to segment off the short-term area from the remainder of the home to retain privacy.

Working spaces for beauticians, hairdressers and massage therapists often have specific requirements depending on the services being offered. Home hair salons have to meet various council requirements, for example. We see garage spaces being converted to studios for various creative enterprises including crafts, photography, woodworking and 3D printing to name a few.

The biggest investments are in the form of second dwellings, typically under 60m2 but fully self-contained. This in essence creates an entire additional dwelling on the property that can be rented out. Costs vary greatly, but around $5,000 per sqm is a rough all inclusive estimate.

If you’re looking to create an additional income stream from your property, builderscrack.co.nz has the trade professionals you need to turn your vision into reality.