Part 3 of a 5-Part Series with Professional Renovator, Caroline Vass
This is our third interview with Caroline Vass, a professional renovator who lives in Geelong. Having been trained by Steve, Caroline has been investing in real estate for about five years. While she loves the profit potential of subdivision and development deals, her greatest passion is renovating homes.
She’s so committed to the strategy that she’s even started a business helping other investors renovate their properties – either to update them or prepare them for resale.
To quote Caroline, “I love it when I finish a renovation, and friends and family are amazed at the transformation and ask me how it was achieved in such a short period, and within such a tight budget.”
Be sure to check out our last two discussions with Caroline. In Part 1 , we talked about “Finding a Profitable Renovation Deal,” and in Part 2, we covered “Buying a Renovation Deal that You Won’t Regret.”
This week, I’ve asked Caroline to share with us in detail how she turns a property from old and ugly, to looking new and beautiful without blowing her budget.
As I’ve talked to other renovators, the recurring warning I hear is, “Do not overcapitalize.” With Caroline’s help, you can avoid some of the more common renovation pitfalls.
Q. Caroline, Obviously We’re Investors, And We Renovate To Make Money. As You Shared Last Week, Your Profit Margin Hinges On Your Ability To Stay Within Your Renovation Budget. What Would You Say Are The Top Three Or Four Most Important Things To Keep In Mind To Avoid Spending Too Much?
1. Use Your Settlement Period As Effectively As Possible
I always negotiate for as long of a settlement period as possible, to allow me to prepare for the renovation before I own the property.
During this time I’ll obtain development approvals and building permits, schedule my tradesmen, purchase all of my materials, and finalise my renovation plan right down to colour selection.
This way, even if I can’t get early access, I’m not wasting a single day, once I take possession. Every day that I own that property, I’m paying interest, which decreases my profit. If I’m paying interest for my planning time, it means I’ve been slack.
2. Make Sure You Stick To Your Original Plan And Budget
During the renovation phase, it is very easy to blow your budget. To avoid this, I keep to my project plan and costing very closely. For instance, if I’ve budgeted $10 for a door handle, even if decide I like the $30 one better, I must be disciplined.
Those $20 preferences add up, and will kill my profit. The only time I ever consider making a change is if I’m certain it will add more in perceived value than actual cost, and therefore increase my profit.
Last week I mentioned the Geelong renovation from last year. On this deal, I originally budgeted to replace the carpet in the front dwelling. Once I took possession, it was clear that the carpet didn’t need to be replaced.
It just needed a steam clean. This savings ended up offsetting some unforeseen issues, because it turned out I needed to repaint the whole of the outside of the house.
3. Get Your Selling Agent Involved
I find involving my agent in my renovation-planning phase helps me to gain clarity on the details that are crucial, and those that could lead to over-capitalizing for that area. On this renovation, my agent and I both agreed that installing stone bench tops in this property would have been a waste of money, as these properties would be listed under $300,000. That market does not care about stone bench tops.
I also find that when my agent is with me from the beginning of the renovation, they know what the property looked like before. After the renovation is completed, they are better able to sell the property to potential clients.
4. Choose Your Tradies Well
When I first started, I had no option but to get multiple quotes and then compare price against quality. Over time, I began to build a rapport with my trades people.
Once they could see I would be repeating the process over and over again on future deals, they became very available and flexible and were giving me great quotes.
Quality versus value for money is always a balancing act. I’ve found that cheapest is not necessarily the best, particularly when it comes to higher-cost items like landscaping and driveways. I’ll take punctuality, responsiveness and a willingness to offer valuable advice over saving a little money any day.
Q. Profitable Renovations Hinge On Our Ability To Add More In Perceived Value Than Actual Cost. On What Parts Of The Home Do You Focus Your Attention In Order To Achieve The Greatest Impact?
It is important to understand the psychology and motivation of a potential buyer. I have learned to appeal to both the male and the female needs. I also create functionality and the impression of longevity in both the use of the spaces and the neutrality and style of finishes.
I focus on four key high impact areas to add maximum perceived value:
1. Street Appeal
Street appeal is crucial for me, as the majority of buyers decide if they like the place the moment they step onto the property. This is easy to achieve, whatever your budget. I generally go for a clean, tidy, modern-looking front yard consistent with the character of the dwelling.
Some basic landscaping goes a long way. In this renovation, the front yard had pebbles all over it. Once I replaced them with grass, the change in street appeal was amazing. We also changed the roof colour and trims from dark green to dark grey. Generally I find an old brick veneer home will benefit greatly from a rendered façade and updated colors for window frames and guttering. A nice, freshly glossed front door without fly screens or security screens is a must.
2.Walls And Floors
The next most important aspect of the home for adding perceived value is the walls and floors. A great neutral colour scheme that will appeal to the majority of buyers is crucial. These improvements can be made very quickly. If your budget is tight, you can do the painting prep work and undercoats yourself, then let the professionals finish of the cutting in and top coats.
I’ve also used some great low-cost flooring alternatives, such as laminate boards that look like timber. I’ve developed a relationship with my local supplier for tiles and flooring products, which means he gives me a great discount, as he knows I will bring him repeat business.
The kitchen is extremely important. Depending on my budget, I might do a cosmetic refresh by using tile paint and changing door handles, or I might replace the kitchen entirely.
In the front property of this renovation, we replaced the kitchen, as the existing was not functional. In the back house, we simply refreshed the kitchen, as it was already in great condition. We painted the tiles, resurfaced the bench and updated the range hood and cupboard handles. These minor changes created a more functional and modern space, providing the feeling that it was an enjoyable area to spend a great deal of time.
Bathrooms are another area that provide a lot of bang for your buck. In this renovation, I changed the tap ware and vanity handles, and painted the walls – all at a minimal cost.
Knowing your target market really helps. In the bathroom of the front unit, the vanity was extremely small. I knew that if I wanted to appeal to the female market, I needed to replace this.
I’ve done a number of renovations where simply replacing tap ware and shower screens, and re-grouting has made the bathroom look modern and new, adding heaps of perceived value for not a great outlay.
Q. What Do You Do When You Have A Home That Needs Structural Work? Where Do you Draw The Line On How Much To Spend In These Unseen Areas Of The Home?
If you buy a property, and then realize afterward that you need to undertake major structural repairs, then you’ve dropped the ball on your due diligence. As we’ve already made clear, the whole aim of a quick flip is to add more in perceived value than actual cost.
Structural work, such as re-stumping is something a potential buyer is not going to see. I therefore would have negotiated a lower purchase price to compensate for this added cost. What you invest in structural work should depend on the area. If you’re renovating a heritage Victorian house in a high-end suburb, the cost you spend on re-stumping will pay off. If you’re in a lower-end suburb, you’ll need to do your estimating carefully, as your renovation budget will be a lot tighter.
In this renovation we removed a non-load bearing wall to create a large open space living area and thus created more perceived value. Whenever I consider any structural work, I evaluate the cost and the benefit. In some circumstances, creating an additional room or bathroom can give you a huge profit.
Q. Do You Do Any Of The Renovation Work Yourself, Or Do You Outsource All Of It To Tradesmen?
Time is money, and I would rather be searching and preparing for my next deal than flinging a paintbrush around for days on end. If I’m doing the work, it takes a great deal longer and I’m not managing other areas of the project as well.
We’ve learned that doing it yourself can also be costly. On our first deal, my husband painted the house and in the process injured his arm. It took six months of physiotherapy for him to recover.
You must know your strengths, and then do what you are good at and passionate about. For me, that’s renovation planning, project management and property styling. On this project I did the majority of the cleaning, but I now outsource this, since my time is better spend on what I’m good at.
Q. How Many Different Tradies Do You Typically Hire In A Home Renovation Project?
We use specialist tradies. You will need a plumber, electrician, carpenter, render, plasterer and painter on nearly all renovations. Where external work is involved, you may need a landscaper, concreter and roof plumber for guttering and flashing.
Using specialist tradesmen rather than one person who does everything is usually less expensive and you’ll likely get the work done faster. You can negotiate the best price on multiple components, but handymen generally work for an hourly rate.
When the total goes beyond the estimated cost, they generally stop work and there isn’t much you can do about it.
Also, when using a single handy man, if they get sick or injured, you will face delays. I will use handymen from time to time to complete the tasks specialized trades don’t like, or those that would be very costly, such as installation of blinds and door handles.
Q. What Have You Learned About Effective Project Management In A Renovation? What Is Your Most Effective Role While The Actual Work Is Being Done?
While the work is being done, my role as project manager is to coordinate the timing of trades, ensure work is being done to the required quality and specifications, and make the life of my tradies easier.
I always provide them with access to refreshments, such as clean bottled water and snacks. I make sure I know what my tradies like, whether it’s a morning coffee, or cake during morning or afternoon break.
I also invest time building a relationship with all my tradies, which means they communicate well with me. I make an effort to let them know that I value their input. In return, I find that I am alerted to issues very quickly, which is a huge bonus when project managing.
Q. You Mentioned The Importance Of Asking Your Tradies How You Can Best Save Money. Can You Elaborate On This? What Are Some Helpful Hints That You’ve Picked Up From Them Along The Way?
I’m always careful to only tell them what outcome I wish to achieve, not to dictate to them exactly what I want them to do. They have a great deal more practical experience, so they will often have ideas to save costs.
On this Geelong project, I learned a few really helpful lessons. I had them put some big kitchen drawers next to my dishwasher, thinking it would be a great asset to the kitchen.
The only problem was that it meant my plumber had to spend more time fitting the dishwasher. I saved money sourcing a second-hand dishwasher, but spent it again for the additional labour costs installing it.
Another one to be aware of is buying the cheapest fittings. On this property, I sourced some really inexpensive door handles. The only problem was the installation took double the time. In hind sight, I would have been better to stick with a middle of the range brand, which is easier to install.
Q. Are There Any Other Final Tips You Could Offer The PropertyInvesting.com Community About The Actual Renovation Process?
The most important tip is to thoroughly plan every detail. A project plan, also known as a Gantt chart, is a great tool to map out the sequence of, and relationship between tasks.
It also lets you do a resource analysis to determine if you have double-booked your tradies. More time spent planning before anyone even picks up a hammer will save you time and holding costs on the other end of the renovation.
Don’t be afraid to ask other people for advice. I now spend a great deal of time building relationships with experienced investors and renovators, so when I’m doing a renovation I have a wealth of experience to call upon.
My final tip is to ask your tradies at the end of the project for feedback, and where they think you could improve next time. It’s amazing what pearls of wisdom you will get from being open to others opinions. I know it makes me a better renovator every time I ask.
Q. One Final Question. Any Update Yet On The Current Deal You Have On Offer?
Unfortunately we had to utilize the due diligence clause and pull out of the contract. We identified some major unknown cost factors that would reduce the profit margin and make our return on investment unattractive. It was a tough decision to make.
In these moments, I remember a question Steve McKnight taught me to ask: “What pain would be worse?” The pain of pulling out now with a small likelihood of a profit was not nearly as bad as the pain of making a loss after fifteen months of work.
In Part 4 of this five part series, we’ll discuss, “The Secret to Selling Your Renovated Property Fast.”
What stands out to you about Caroline’s renovation process? Take a moment to leave a comment and share any revelations you’ve had.
You can learn more about Caroline and request some free training videos at her website: http://www.smartchoicepropertydevelopment.com.au