The Long Game
A “meth-house” type dwelling has been renovated by an investor who is committed to buy-and-hold. Joanna Mathers writes.
1 April 2021
Investor Darryl Reid has no illusions about the five-bedroom 1950’s bungalow that he purchased for $509,000 in Rotorua last November. He calls it a “meth house”:
“It tested negative, but it was as rough as one,” he shares.
The Ōwhata house and sleepout were bought sight unseen on the recommendation of a local iFindProperty expert in the district. He thought that it was going to be a wreck and when he eventually saw it, he wasn’t wrong. “It was disgusting. Although an owner-occupier lived in it, they had done no maintenance for years. It was dirty and grimy; the shower was gross. I knew it would need to be gutted and started again.”
But the site was 1,110m2, the house 120m2, and it had potential for subdivision.
“Buying places like this and renovating them is one of the only ways to make money in this market.”
It was also structurally sound (as so many of the 1950s houses are) and required no major work.
Reid is based in Coromandel and has a couple of renos under his belt. This one was a challenge: the interiors were such a mess that they needed to be completely stripped back and started again. He was happy to do most of the work but brought in the experts when he needed.
“Fortunately, the iFindProperty person knew of a good builder, who brought his tradies, we worked well together as a little team.”
The work started soon after settlement, with Reid demolishing much of the interiors. The kitchen and bathroom were particularly problematic: aged vinyl and original wooden cabinetry graced the kitchen; the bathroom resplendent in pink.
“It looked like something out of Trainspotting,” he laughs.
Working Thursday till Saturday on the project, Reid soon filled a giant skip with remnants of the original house. He also worked on the sleepout, which was attached to the garage and featured a kitchenette.
One of the more amusing features of the home was a toilet door, which inexplicably opened inwards:
“They did things differently in the 1950s,” he laughs.
In its place he installed a sliding door which allowed for better usability of the toilet.
There was also a “phone room”with a hole in the wall that connected to a bedroom. The hole was patched up and this vestige of another time removed forever.
The flooring in the house was worn old carpet, which Reid removed, revealing mataī floors underneath. He thought about maintaining the wooden floors and polishing them up, but eventually decided the= best option was to bring back carpet to warm the home for the cold Rotorua winters.
He chose a durable dark carpet, perfect for larger rental homes, where there are likely to be children. The walls were painted a neutral white: this job, says Reid, was the single longest and largest component of the renovation.
“It took a long time for the painters to complete this, because there was also a lot of wooden joinery to paint,” he says. “I spent around $17,000 on this part of the renovation.”
The sleepout was fully lined, carpeted and painted, with an extractor fan installed. Although this can’t be legally rented out separately, he says it added value when it comes to rent as it allows for a number of living configurations for large families.
One half of the space remained as agarage, the other half a clean and dry separate bedroom.
The home was also brought up to Healthy Homes standards, with high-quality insulation and a heat pump installed.
The build only took three months all up, but Reid had hoped for a speedier process. But with down time over Christmas and a few delays along the way for various supplies, the build was complete in mid-February.
Reid has always conceptualised the property as a buy-and-hold. It has subdivision potential for the future, but he decided once he’d finished the reno to pop it up for rent straight away.
He estimates that he had around 30 enquiries within the first 24 hours the property was listed.
“There were lots of tyre kickers,” he says.
But he managed to whittle it down to five decent applicants. The property has now been rented to a grandma and her three mokopuna, who are delighted to have a clean, dry home to call their own.
The price estimate for the renovated property is now in the mid $600,000s an increase in value of close to $150,000. The renovation ended up costing Reid around $70,000, and he has chosen a 20-year mortgage, paying off both principal and interest.
“I am cashflow positive for this, which is great,” he says.
He is currently getting $690 a week for the property, which he is delighted with.
“I was estimating between $500 and $590, so it’s worked out really well.”
And he’s enjoyed the project so much that he is currently looking around for a new “meth house” type property that he can renovate and add value to all over again.