On today’s episode,
Bernadette is going to talk about renovating apartments. There is an added level of complication, mainly because you don’t own the walls in the apartment. The line of ownership ends at the paint line.
Listen to Episode 52: Renovating Apartments
Podcast: Download (Duration: 17:20 — 17.07 MB)
- Why do apartment renovations?
- The cookie-cutter approach works
- Important to do your due diligence
- Can you put it on short term rental?
- Important to think about are your ceilings
- Installing a floating floor
- Is plumbing problematic?
- Bathroom renovation
- How to choose your trades and builders
- Be aware of the approvals that you will need for the renovation
- Security against damage to the building
01:28 - Apartment renovations
03:01 - Getting owner's corporation approval
05:18 - Installing a floating floor
08:20 - The belt and braces approach
10:12 - A heritage conservation area
12:09 - Check the dimensions of the lift
14:07 - Protect common areas
15:11 - Rubbish removal
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"And while I'm not a lover of the cookie-cutter approach, this is one situation where you can get that rinse and repeat process. So you get a formula that works and then you can just keep turning it over."
Well, hello, it's Bernadette Janson. And today, I'm here to talk about apartments, renovating apartments. I quite like renovating apartments, but I have to let you know that there is an added level of complication, mainly because you don't own the walls in the apartment. The line of ownership ends at the paint line.
If you want to do anything other than painting, pretty much, then you need approval from the owner's corporation to do that. Now it adds time to the process and it basically means you have less control over what you can do with the property. And so you have to ask why would you bother? And I guess the main reason we do, particularly in Sydney and Melbourne, is because it's an opportunity to do a full profit renovation at a lower price point.
In our area now to renovate a house, you're well into the $1 to $2M mark, yet you can still do a decent apartment project for under a million dollars. We have done a couple of years ago, we did an apartment project for our charity and that was $475K. So it was quite a low price for Sydney. Generally, I like to target around the $800-$900K, not because that's the point where you're sitting around the $100 profit.
The other thing I like about apartment renovations is the actual renovations, less work. There's no external work. And while I'm not a lover of the cookie-cutter approach, this is one situation where you can get that rinse and repeat process. So you get a formula that works and then you can just keep turning it over.
I'll be having one of its students coming in shortly to tell you about their projects where that's exactly what they're doing and making fabulous profits each year.
Of course, if you need to get approval, that can take some time and you need to manage the holding costs while that's happening. If the property is already tenanted, then you would leave the tenant in the property until you are ready to start the work. But if it's not, you might want to look at short term rental and many apartment buildings will not allow short term rentals. That becomes part of your due diligence process. And if you're allowed to, then as soon as the property settles, you wack some furniture in it. Get it listed and get that income coming in. So we haven't got money pouring out the door while we're waiting for the owner's cooperation to make up their mind.
If you're not allowed to put it on short term rental, you're usually allowed to rent for a minimum of 3 months. I've done that in some scenarios and you can still find someone to pay you some income to live there. So all is not lost.
Now, as far as getting approval through your owner's corporation that can be a bit of an education process. So you will be required to put forward your renovation plan. Some owner's corporations require everything. They want drawings. They want the names and the details of the trades your using the quotes and the trade licenses and certificates of currency for their insurance. I have been required to put all that in on a few occasions in order to get approval.
Generally the strata managers and the owner’s corporations don't have an idea of what's required. Usually, that means that you need to educate them. I had one property where the approval just was not happening and I hadn't been to the meeting, so I decided to go to the meeting and find out what was going on. And basically they couldn't read drawings. They were looking at our drawings and we're looking at the existing walls and thinking that they were part of our renovation. I was able to clarify that, no, that we weren't making any structural changes and then managed to get the renovation approved so we could get going.
When you are planning your reno, there are a few things that you need to think about. In an apartment, often the ceilings are a suspended floor slabbed. So they're the floor of the apartment above and they're your ceiling. This means that all your lighting is embedded in the ceiling. And so if you want to move or install new lighting, it becomes a bit of an issue. Electricians don't like to chase that slab because they're worried about heating services. Often the only way to change the lighting layout is to actually put a new gyprock ceiling in and pack it out. So you've got some ceiling space for you're lighting and your wiring, which is quite an expensive process. I have been able to get the electrician to move a light, a small distance and, you know, one side to the other and chase the concrete. They don't love doing it. And to be honest with you, I don't blame them.
The other thing is, if you want to install a floating floor, you have to give some thought to the noise reduction or the soundproofing. A lot of owner's corporations have specified their requirements. Some will specify the type of acoustic underlay that you use. Some will require that you provide the technical specifications of the underlay you're going to use for them to approve. And some will require that after you've installed the floor that you get it sound tested. And if it doesn't meet their requirements, it has to be removed, which is a very expensive process. The sound testing itself cost about $2K. So, you know, if you are planning to do a renovation in a property that you're going to be buying, it's a good idea to have a look and see what policies they have or by-laws they have around renovating.
The other limitation in terms of your reno planning is that moving the plumbing can be problematic. So it's not like in a house where you just pull up a floor and run the plumbing along under the floor or, you know, chase the floor. Here you cannot go across the floor. And I guess we become quite creative in how we solve these problems. I've never been in a position where I've not been able to move the plumbing to where I wanted it. But of course, our solutions have been quite creative at times.
A bathroom renovation is considered a major renovation in an apartment because of the waterproofing issue. When you first buy the property that has existing tiling in the bathrooms and the existing waterproof membrane, the responsibility for the waterproofing will be with the owner's corporation. However, if you submit a plan and a request to change the tiling in the bathroom, then in most cases the owner's corporation will take the opportunity to hand the responsibility for that over to the owner of the property, in this case, you. Now that will require that you have a bottle prepared and registered at your expense, but that's not the biggest issue. The biggest issue is that who and not just for you. Whoever owns that property then has a responsibility to make good if that waterproofing ever failed.
So, you know, if it leaks into the floor below, then you get to pay for the repairs, which can be quite costly. Something that we have adopted now is when we're doing apartments, we actually double waterproof regardless of whether we're selling or not. Because I really don't want to sell a property to an owner and to have them have to deal with that. So we always double waterproof. We have the waterproofing membrane under the floor scrape or the topping in the wet areas and then we do a second one over the top just to make sure, you know, it's the belt and braces approach.
Most buildings have designated hours of work and that's generally 7-5 Monday to Friday. So that means unlike in a house when you can probably hammer away until midnight and Saturdays and Sundays as well, your working hours are limited. Even when you comply with those working hours. You can also have issues with neighbours and the noise. One of the other challenges with apartments is the neighbours are in very close proximity and their life is totally disrupted while your reno is going on. I know in one reno we had a tenant in the apartment below doing night shift and seriously he was like a bear with a sore head. And unfortunately, there wasn't a lot we could do about it. Although we did our best to keep the noise to a minimum. But building relationships with your neighbours communicating clearly, maybe one of the things that we like to do is treat them to the first inspection of the property when it's finished and have some drinks and a thank you because they're the ones that get disrupted most by your reno.
When you're planning, you want to check the dimensions of the lift that you can fit both materials like a sheet of gyprock, which is 2.4 metres long or a Caesarstone. If not, it either has to be carried up the stairs or in some cases, particularly with beams and so on. They have to be craned in over the balcony. This will add substantial costs. So you really need to be prepared for it. If possible, it's a good idea to do a dilapidation report on your neighbour's property prior to starting so that you have a baseline to work from.
Checking the neighbours side of the walls that you're going to be working on so that if any damage does occur, then you're able to prove the condition of them before you start.
It's also a good idea to assess the condition of the walls and the fixtures on the neighbours' side. I've had situations where their tiles were quite drummy and we were removing tiles on our side. So we made the decision not to remove that walls, tiles and just tiled straight over them because it was fairly certain that if we started hammering away, trying to pull tiles off, the tiles would fall off their walls and we'd have a real mess. Fortunately, they were sound on our side because that's always something you need to check if you're planning to go over tiles, but better to do that than the alternative. Often those walls are single skin brick, so there's not a lot between them. I have had trades go through the neighbor's wall on several occasions. They've had gone through with a drill or it baffles me how creative they can be in the strange things they do. But that's happened.
Before you get started with your reno. It's likely that you'll be asked to pay a security deposit. This can be a couple of thousand dollars and this is a security against damage to the building in the common areas.
When you've got trades stomping through with their dirty boots down the carpeted hallways and moving materials in the site in and out, there is a potential for quite an amount of damage. Certainly take all the measures you can to protect the common areas. I like to use the sticky drop shape, which is just like clear contact and you could stick it down on the carpeted areas and leave it there until the job's finished. So you keep the carpet from getting damaged. Often we'll have to give the walls a paint job certainly in the hallways outside the property after the project's finished. In order to get our couple of thousand back from the owner's corporation.
The other thing is to watch the lift, damage to the lift can be a very expensive exercise. A lot of lifts have curtains. You will have seen them when you're buildings that are under construction, which are great because you can just get them installed and the walls are protected. But if not, you really do need to micromanage your trades to make sure that those lift walls are not damaged.
And lastly, rubbish removal. This, too, has its complications. Often you will not be able to put a skip anywhere. There may not be space for a skip or even if you can, you'll find that it gets filled up with everyone else's rubbish and not yours. So what I do is I actually stockpile a rubbish in an area somewhere, set an area aside for the rubbish and periodically have that cleared out. Our rubbish guy actually comes up with solo bins, fills them up, cleans up the room and then takes it away.
Okay. I think that's all I have to share with you today. I hope that this has enlightened you on the dos and don'ts of renovating apartments. If you're interested in learning more about it, there's another podcast called "Your Strata Property" by Amanda Farmer, which is a great source of information for strata properties, units, and apartments. And I know that she's covered renos in several episodes as well. OK, well, that's me for today. And we'll see you next week.