If you’re wondering if you can take advantage of the government’s HomeBuilder renovation grant to improve your investment property, the simple answer is no.
But it could be used to get you into your first home or boost your property portfolio if you are smart and ‘agile’ enough.
There are so many grants sloshing around at the moment, it’s worth taking a look at how you might legitimately qualify for some or all of them – especially if you are desperate to get into a home of your own.
Investment properties are specifically excluded from the government program intended to rescue the building industry from Covid-19 collapse.
That said, there are ways of accessing the grant of $25,000 towards a massive renovation or new-build purchase.
And there are ways to turn turning your principle place of residence into an investment, following a massive renovation.
Why massive? To qualify for the grant you will have to do work costing between $150,000 and $750,000, on a property worth less than $1.5 million, as it stands, before a tile has been chiselled or a load-bearing wall removed.
Most experts say you shouldn’t spend more than 10 per cent of the total value of your home on a renovation, so spending the minimum $150k on your $1.5 mil flat makes perfect sense.
Take the $25k grant into account and you could spend $175k and still be in the renovation gurus’ comfort zone.
Spending more, up to the maximum $750,000 on a $1.5mil flat sounds like a massive gamble, but if you own the crappiest old flat in a fabby block in a great area, it might make some sort of sense.
But getting back to the basic reno, we enter the economic minefield of how you spend the minimum $150k. If you have two bathrooms and a kitchen, you might normally expect to spend $30-40k on each. Not nearly enough!
So we’re talking removing walls, high class timber flooring, balcony tiling and new windows (if you can get strata committee approval).
Still not there? Maybe an all-printed glass bathroom with gold-plated tapware and a kitchen bench recreated from the tiled floor of a Second Century Italian villa.
Or you might have a third bathroom and, before you scoff, there are more than 30 three-bathroom apartments for sale for under $1.5 million in Sydney right now.
So it’s doable – provided you are single and have a taxable income of less than $125,000 or are a couple with joint income of under $200K a year.
The question of how much disposable income anyone under the earnings caps could put towards a $150k renovation is debatable. The question of what a single person is doing in a three-bathroom flat is also a cause for serious head-scratching.
So forget the renovation … what about an off-the-plan apartment? There are literally hundreds available in all our cities and beyond, and if you qualify you can get that $25k grant towards buying them.
However, there are tight time limits; construction can’t have already started but must begin within three months of signing the contract (and that’s before December 31).
The HomeBuilder program is managed by individual states but there’s a comprehensive Treasury FAQ available online
And bear in mind, if you are a first-time owner, or your property is a new-build, you could also add more than $50k in grants and stamp duty relief, depending on where you live.
You can find state by state grants details on the Finder.com.au home loans comparison website.
Now, to be fair, all of these grants and concessions are for principal residences and definitely not for investments.
However, the residential requirements are so slight that they’re almost irrelevant. The “expectation” on the HomeBuilder grant is six months’ residence. The rule in most states on their first-owner and new-build allowances is a year in situ.
In short, you’d have to live in it for at least six months and probably a year if you want to get the maximum bucks for your bang.
OK, would you want to be looking for tenants for your main home right now when rents are falling and availability is rising? But don’t forget negative gearing will help (if you still have a job).
Perhaps not, but interest rates are low and mum and dad will help with the deposit, especially those not-empty nesters whose young adult kids have come home to roost.
And, a year or two from now, when you are looking for tenants for your lovingly renovated or newly built apartment, coronavirus could just be a nostalgic memory of quiet streets and half-empty trains, and that residential pad you bought or renovated could be the smartest investment you ever made.
And the toughest decision you have to make might be moving back to where you are now or staying where you are. And who knows what incentives there will be to make the home you’re about to move back to as good as the one you moved into.
A version of this column first appeared in the Australian Financial Review.