Renovating A Commercial Space

Make money as a landlord by turning a commercial unit into a residential space 

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This former office space is now a one-bedroom flat with a kitchen, laundry and open-plan living area. Image by: Arunas Klupsas 

Jan Newland’s two-storey blue-chip commercial space in the Sydney business hub of North Sydney was starting to feel a little too spacious.

After over a decade of running her communications company, Eden Media, Jan planned to scale back her work commitments, so she no longer required the entire space.
 
She devised a plan to turn her investment into two money-making enterprises, a residential unit yielding more than $25 000 a year and a tax-effective working office.

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Before the renovation, the office had plenty of open space ideal for a kitchen and open-plan living area 


The approval process

Although the space had not been previously used for accommodation,it was close to the city, transport and cafes, and offered secure off-street parking and intercom access.
 
It also had great bones with a coveted north-facing leafy aspect downstairs, a generous balcony and large windows. Upstairs featured a large terrace ideal for entertaining.
 
With a bit of a floorplan rejig and council approval, Jan planned to rework the original foyer into two separate entrances. The idea was to shift her workspace upstairs and renovate the downstairs area into a one-bedroom apartment.
 
‘I was a novice so I had a lot of hurdles to jump. The development application took me about 10 months to get through council,’ says Jan.
 
‘The biggest obstacle was getting approval for a mixed-use development, so I could convert my commercial suite to residential. Once I had jumped over that, I just had compliance issues to deal with.’
 
A neighbour with a similar property was renovating at the same time, so they shared their knowledge, doubled up on tradies and swapped tips on dealing with red tape.
 

The renovation plan

‘The downstairs area was gutted then I had new walls put in and the plumbing and electrics done.
 
‘The second toilet room was turned into a compact laundry and linen press area, and a tiny kitchenette was knocked out to make the bathroom bigger.
 
‘A brand new kitchen was then installed in the living area,’ Jan says.
 
The renovation began in August 2012 and was finished by mid October, taking just two and a half months. The only major hiccup was the privacy screening on the balcony, separating Jan’s unit from next door.
 
‘I ordered the screens back in September but they didn’t come until the start of December and they’re not finished. There were a few tears there but delays come with the territory and that’s really the worst problem I’ve had,’ Jan says.


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One of the office toilets was large enough to incorporate into a new full bathroom  

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A good use of floorspace resulted in a sleek, streamlined bathroom 


Compliance issues

Jan says the usual trade compliance certification and council bureaucracy didn’t faze her, as she was organised.
 
‘Going in as a novice I didn’t know at first you have to prove you’ve done it right by getting approval certificates from all the trades.
 
‘The man who puts up the wall has to give a certificate saying the wall is BCA (Building Code of Australia) compliant,’ says Jan.
 
‘The plumber who puts in the taps has to give a certificate to say they have the right flow rate, and on it goes.’
 
She now considers the whole certification process to have been a valuable learning curve.
 
‘Knowing all that’s involved, I’m happy to do it all again upstairs. I’ll just remember not to let any tradie leave until they give me a certificate!’
 

The return on investment

Jan’s modest budget of $60 000 plus appliances resulted in a total transformation of the property and created a modern unit commanding more than $500 a week in rent.
 
‘I naively thought I could’ve got away with paying less for the reno but am actually very happy with the final cost as I know my neighbour spent about 20% more,’ she says.
 
Although Jan has permission to strata the upstairs unit and turn that into a potential second source of income, she’s biding her time to see how the local real estate market moves.
 
‘There are a huge number of commercial leases available around here at the moment but it’s filling up instead with residential.
 
‘I’m guessing that’s because a lot of the former businesses that were here have gone to trendy inner-city places.’

Maximising the reno

Here are Jan’s top tips, learnt on the steep curve of her first reno.
 
CUT YOUR LOSSES ‘If you have a tradie who’s slow, doesn’t turn up or doesn’t do a good job, get rid of them fast. It’s your valuable time and money that’s being wasted,’ says Jan.
 
SHARE COSTS
If you’re able to share costs and tips with anyone else, then do so. ‘I was lucky a neighbour was renovating at the same time so we helped each other.’
 
MAKE SAVINGS Jan used existing downstairs plumbing when redoing the bathroom and converting the second toilet into a laundry. For the upstairs, she’ll use her neighbour’s existing sewage pipe connection to make installing a toilet cheaper.
 
FIND GOOD TENANTS ‘The sooner you can get the certification, approvals and renovation done the better, then you can start recouping costs by renting out the property,’ says Jan.

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