First home buyer: how couples made money on their first home

A young couple who bought a house that was sold for demolition has now made money from it.

Steve Mucha and his partner Ivette first entered the real estate market four years ago when a unique opportunity came upon them after three months of unsuccessful searching.

“We knew we wanted to buy a house, but we weren’t sure if we were going to buy an investment property or a house first,” explains Steve. “Then we saw our future property popping up around the corner from where we were renting in central Perth.”

While prices in their area were generally too high for the couple’s budget, this property was sold for demolition, making it a relative bargain at $493,000. Today — thanks to renting out some of the property on Airbnb for $80 to $94 a night — that bargain has helped pay for their second home.

“It had a panoramic view of the city, but it certainly attracted more developers than regular buyers. So we thought we would take on the project and combine investment and living space in one,” he said.

Steve works as an architect, which gives him a bit of an edge when it comes to renovating, so the couple were open to the idea — but certainly weren’t planning on a project as big as the one they were taking on.

“It really fell into our hands, and we had to deal with it,” he said. “Because we took out an additional $150,000 loan from the same lender for the renovation, our total mortgage was $593,700.”

“The layout was really packed. It was built in the 50s, so small kitchen, small living room, small bedrooms. We really had to change the whole thing – it took about four to five months.”

The couple created a plan to turn a three-bedroom, one-bathroom home into a home that also included a separate home under the same roof that they could rent out as an investment.

“We added another bathroom to the master bedroom,” Steve explained. “Blocked the doorway so you couldn’t get to it from the house, and turned the outside window into a door. We’ve also added a small Ikea kitchenette and a small built-in bathrobe, desk and bed made from shipping pallets.

“The renovation cost us a total of $170,000,” said Steve.

“It’s small and super efficient. We had permission to run it as an Airbnb or rent it out to a third party. We are now 90 percent occupied, and the days off are really just so we can clean it up in between. There is really a lot of demand for it.”

Combining investing with living is something Steve thinks more people should benefit from now.

“In Perth, there’s something called the granny-flat scheme, which basically means you can add an outbuilding or an additional small home if your house is a certain size,” explains Steve. “Then you can rent out to third parties.”

“It’s something I think more people should take advantage of, especially if they’re tight on mortgage payments.”

Best of all, the couple found out that the bank would lend them the money for renovations so they wouldn’t have to make a down payment.

Lucky thing, as the property disqualified them from receiving aid through the First Homebuyers Scheme.

“It took us about two to three years to save a 10 percent down payment on our salaries (we have a total of about $240,000 now), plus a little more for renovations,” he said. “It was really good for us.”

To save the down payment and mortgage payments, all while paying the rent and living expenses, we had to cut back on the lifestyle for the couple.

“We’ve really minimized our costs for things like entertainment,” says Steve. “We didn’t really cut back on food because we’re both very healthy and didn’t want to sacrifice that. But our car – it was a matter of tossing if it would work every time.”

However, it was a sacrifice that they consider well worth it, especially now that they have their second property thanks to the money they have made from Airbnb. In fact, Steve is so happy with the result that he’s since started a business and shares how they’ve done it.

Though he admits other homebuyers may want to consider their own capabilities before embarking on such major renovations.

“I probably wouldn’t recommend it to someone who wasn’t in the business — there are a lot of decisions to be made and not having the experience can be very stressful,” he said.

“However, if it is a cosmetic refurbishment, as we are now doing on our second property, I would recommend it. Really simple changes, such as floors, paint and fixtures, can add a lot of value.

“It was also a bit emotional up and down, but we managed to get through. We made it work.”

Originally published as How Couples Actually Made Money From Their First Home

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