Aussies are becoming instant millionaires with the sale of older homes. Here’s how to set yourself up.
Aussies are becoming instant millionaires with the sale of older homes. Here’s how to set yourself up.

Overnight millionaires cash in on booming market

Families and downsizers are becoming overnight millionaires after offloading homes they've owned for decades for "life changing" profits.

Melbourne's piping hot market may be helping some vendors sell their pad for seven-figure sums, Wakelin Property Advisory director Jarrod McCabe said.

But he stressed such transactions were typically decades in the making, with sellers in some areas making profits of more than 400 per cent on the purchase price of their home.

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The vendors of a derelict home at 209 Brougham Street, Kew, scooped up $2.925m after selling it at auction. The home had been in the family since the 1950s.
The vendors of a derelict home at 209 Brougham Street, Kew, scooped up $2.925m after selling it at auction. The home had been in the family since the 1950s.

 

The house wasn’t much to look at on the inside or the outside.
The house wasn’t much to look at on the inside or the outside.

Sellers in blue-chip Boroondara and Bayside make the highest median profits of $709,750 and $705,000 respectively, according to property data firm CoreLogic.

Those in Manningham, Nillumbik and Whitehorse also pocketed more than half a million dollars on typical sales.

In Manningham, a downsizer who sold her old four-bedroom Templestowe home at 410 Porter Street this month walked away with almost $1m in profit, after five bidders pushed the home $180,000 above reserve to $1.405m.

The vendor of 410 Porter Street, Templestowe, made almost $1m in profit on their original purchase price when it sold under the hammer for $1.405m.
The vendor of 410 Porter Street, Templestowe, made almost $1m in profit on their original purchase price when it sold under the hammer for $1.405m.

Philip Webb agent Michael Webb said the unexpected result, driven by the hot market, represented a $945,000 gain on the woman's initial spend. She snapped up the home for $460,000 in 2002 and made only minor updates.

Similarly, a derelict Kew family home held by the same family since the 1950s at 209 Brougham Street smashed its reserve by $725,000 when it sold for $2.925m this month.

And a deceased estate at 19 Lisbon Street, Glen Waverley, paid out $2.741m to the former homeowner's relatives when it recently sold.

Philip Webb chief executive Anthony Webb said such sales were "life changing" for the vendors.

The dated home at 19 Lisbon Street Glen Waverley, sold for $2.741m.
The dated home at 19 Lisbon Street Glen Waverley, sold for $2.741m.

He said he'd seen families sell homes they'd bought decades ago for $90,000 in the Doncaster Hill and Ringwood precincts for $1.5m or more.

Box Hill, Box Hill North, Croydon and Mooroolbark were also experiencing massive value increases, he said.

Often the family had "compromised" on location by buying a cheaper home in the suburbs.

But he said population increases, rezoning for higher density development, the development of new infrastructure, and the introduction of big suburban shopping centres had made the areas more valuable as years went by.

"The change of zoning is where I've seen the biggest changes," Mr Webb said.

This Pakenham cattle farm sold to Lendlease to become the Averley estate.
This Pakenham cattle farm sold to Lendlease to become the Averley estate.

"Doncaster wasn't the suburb it is now, it was all orchards. People were buying there because that's where they could afford."

Mr McCabe said there were impressive gains on older homes in suburbs across Melbourne.

But he said dated worker cottages in sought-after areas like Brunswick and Carlton could make more than 400 per cent profit on their original purchase price.

Some people tried to predict the market and buy in up-and-coming areas to make big bucks by selling in a few years time when the market rose further, he said.

But this was a risky business and the best - and safest - capital growth gains were made over the long term.

A deceased estate at 248 Rae Street, Fitzroy North, sold $751,000 above reserve in October for $2.351m.
A deceased estate at 248 Rae Street, Fitzroy North, sold $751,000 above reserve in October for $2.351m.

"It's going to have accrued over an extended period of time, you're not going to have made a million dollars in the past six months," Mr McCabe said.

Buyer's advocate Miriam Sandkuhler of Property Mavens said it took "at least 15 years" in most cases to see a big appreciation in a property's value.

"It's time that allows for exponential growth … and you only start making that exponential growth after 10, 20, 30 years," Ms Sandkuhler said.

But she said it could happen more quickly if buyers hit a sweet spot: "If you want to be a millionaire sooner, buy the right property in the right location, with the right attributes at the right price, and do some renovations to facilitate that, while you hold onto it."

CoreLogic also found Melbourne houses held for 9.7 years typically had price gains, but 3.2 years generally equated to a loss.

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rebecca.dinuzzo@news.com.au

 

DOWNSIZING AFTER 20 YEARS

Patricia and Peter Blake at their 27 Eden Street, Cheltenham, home, which is going on the market after decades of ownership. Picture: Jake Nowakowski
Patricia and Peter Blake at their 27 Eden Street, Cheltenham, home, which is going on the market after decades of ownership. Picture: Jake Nowakowski

Two decades ago Patricia and Peter Blake bought their Cheltenham home to be closer to family and raise their two children.

Mrs Blake said they were drawn to the area because of its good access to shops, schools and public transport, but the original home at 27 Eden Street needed a lot of work.

They picked up the property for $230,000 in 2001 and listed it on the market recently with a price guide of $1.3m-$1.35m, representing a six-fold value increase.

Mrs Blake said they'd added value by building a fourth bedroom and a study through extensive renovations.

They also changed the configuration of the bathroom, which she said originally had to be accessed from outside the home - something the kids "wouldn't have a bar of" when they first moved in.

"My husband's parents and my parents were both in this Bayside area and both sets of parents were getting older, so we moved to be closer to them," Mrs Blake said.

"The house has probably doubled in size from what it was when we bought it. The whole back end has been knocked off and rebuilt."

Now the kids have grown up and moved out, Mrs Blake said she and her husband planned to downsize to another home in Hampton to be closer to the beach.

The couple's home has an auction scheduled for May 8.

 

 

Melbourne's most profitable markets by value

Another deceased estate at 5 Langley Street, Ringwood East, sold for $1.35m in April.
Another deceased estate at 5 Langley Street, Ringwood East, sold for $1.35m in April.

Boroondara: $709,750 median profit

Bayside: $705,000

Whitehorse: $548,300

Manningham: $542,500

Nillumbik: $521,800

 

Source: CoreLogic, December quarter

 

 

How to give yourself the best chance of making a profit

 

A buyer snapped up the deceased estate at 76 Alfrieda Street, St Albans, in December for $1.7m — $300,000 beyond reserve.
A buyer snapped up the deceased estate at 76 Alfrieda Street, St Albans, in December for $1.7m — $300,000 beyond reserve.

- Determine your investment goals and strategy. Are you looking for capital growth over the long term, hoping to increase your cash flow now by purchasing and leasing out a property, or a combination of the two?

- Determine your risk level. What level of risk can you cope with financially? Consider a risk appropriate strategy and also what factors could influence your ability to pay a mortgage in the future, like a potential loss of employment or change in living situation.

- Think about infrastructure and growth drivers. Keep an eye out for areas where infrastructure and multiple growth drivers exist. Note where schools, shops, medical facilities and public transport are being planned or built and if the population is growing.

- Buy land for value, not size. People think buying a big block of land is a great investment, but buying a large block far away from a town or city because it's cheap isn't the solution. Compromise on size and buy something smaller but closer to where there is more amenity and employment opportunities.

- Add value to a property. Make well considered cosmetic changes in line with your budget to increase a property's value. These can be small updates or large renovations. It may also be possible to add value by subdividing and developing, but these strategies come with high risk.

 

Source: Miriam Sandkuhler Property Mavens / Jarrod McCabe Wakelin Property Advisory

 

 

Originally published as Overnight millionaires cash in on booming market

But the block had development potential.
But the block had development potential.


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