All Topics / General Property / Golden Rule of Renovating

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  • Profile photo of Steve McKnightSteve McKnight
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    @stevemcknight
    Join Date: 2001
    Post Count: 1,750

    Hi,

    Use this thread to discuss the ‘Golden Rule of Renovating’ which I discuss in the September edition of Insider.

    Cheers,

    Steve McKnight

    **********
    Remember that success comes from doing things differently.
    **********

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of westanwestan
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    @westan
    Join Date: 2002
    Post Count: 1,950

    Hi Steve

    well its two hours since you started this thread and no replies yet, mustn’t be many renovators reading this arvo, perhaps they are still hard at it.

    Ok my Golden rule is simple – make a profit.
    yes its a bit obvious but its easy to get carried away and overcapitalise, or on the other hand fail to do enough checks when you buy and discover the costs are way more than you initially thought.
    Some other things i keep in my mind is what am i really trying to do, is it – improve a property that i’ll hold as a retal or fix up and sell? To me this is very important as if i’m keeping it as a rental i’ll probably keep the costs in check and not spend too much on the fitout eg Carpet etc, where as if i’m planning to sell it then its looks great to have some really nice feature and spend a little more even on simple things like the letter box.

    My last comment before i let someone else have a go , is if it is a fix up and sell keep in mind the tax implications of owning and selling in 12 months time. Sometimes its better to rent it out “as is” for 12 months then do the reno and then sell. If you do the reno , then let for 12 months and then try to sell, the property is no longer in Mint condition.

    regards westan

    I live in New Zealand and for a fee find cash positive deals there, email me at [email protected] to join our database

    Profile photo of hotshot723456hotshot723456
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    @hotshot723456
    Join Date: 2003
    Post Count: 1

    Hi Steve,
    I am currently renovating a block of 6 apartments. Bought as a started project (outside only) but the previous owner ran out of time, I have since taken over and my team are doing a great job on the first two. Having purchased these as a 60, 90 & 120 delayed settlement on each set of 2, has given us the required time to renovate internally and either put back on the market (potential to make $100K per 2 Units), or hold and rent out (with the potential to make $200K per 2 Units in equity). If we hold, this allows us the leverage each & every deal the same way and have multiple projects underway. Or we sell every 2 apartments and take the profit (which inturn we loose 30% straight to the gov- In saying that I’ve just answered my own question!
    Thanks for the opportunity as always.
    Regards,
    Helmut
    [email protected]

    Profile photo of PurpleKissPurpleKiss
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    @purplekiss
    Join Date: 2003
    Post Count: 580

    Hi Steve,

    While it’s fair to say that doing the reno yourself is replacing one job with another, it’s also a way for those getting starting to get a bit of capital behind them for future deposits (well, so long as they don’t overcapitalise and actually make money from doing the reno).

    You gave up a lot in the begginning to get yourself on the road to success ie: you rented on a main road, lived off one wage etc. For others it might mean giving up their free time to renovate, “a bit of pain for future gain”.

    For me, renovating one house meant I knew what to expect when asking tradesmen to renovate future houses. It’s easier to have the wool pulled over your eyes if you have no idea of what really needs to be done.

    I’m glad you mentioned the pitfalls ie: it’s easy to overcapitalise, people do need to do their homework first and know the true cost of what they plan to do.

    PK

    Profile photo of JoeCoolJoeCool
    Member
    @joecool
    Join Date: 2004
    Post Count: 9

    Hi Steve,

    I have just terminated a contract and I know from the bank that i cabn only borrow sround $220 000.
    I live in Brisbane and these days I can’t even get one project for this price that would come with many problems, more then its worth let alone do what you suggest and do many reno project simul.
    I wonder how people like myself could get into this investing game ?

    Cheers

    Profile photo of pumpkinpumpkin
    Member
    @pumpkin
    Join Date: 2004
    Post Count: 14

    Hi Steve,

    As my partner and I are renovating properties, and hoping to get ahead by doing so, I found your article in the newsletter informative, and reinforced to us that we are on the right track. However, I do have to agree with Purplekiss, in that, we are doing a lot of the hardwork (well my boyfriend is anyway) in doing the renovations but this is the only way we can really afford to at the moment. Down the track it would be lovely to be able to afford to pay tradesmen, in the mean time my boyfriend is one, so by him spending sparetime renovating for us, we are hopefully one day going to be able to afford it to be his full time job, and eventually one day the renovations will be someoneelse’s job with us just giving direction. As we are just starting out though, I don’t really see any other way that we can afford to be doing the renos. So far he has done a great job and enabled us to make very good profits, funding our next real estate projects. I guess we all just have to take advantage of whatever your expertise are. [biggrin]
    Thanks for all your great tips and advice, this forum and your books are great!

    Lara

    Lara Hansen

    Profile photo of MiniMogulMiniMogul
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    Pumpkin,

    re: boyfriends, don’t you just love a man who is handy. Not being sexist or anything and realising I could do a lot of it if I was into that kind of thing, but I have found that I am not!

    My perfect idea of ‘doing’ a reno is controlling and paying for it, but not necessarily labouring. OK I don’t mind ‘working’ on a renos as morale- and vibe-merchant and keeping spirits up, making everyone coffee, food and treats, dj-ing the ghetto blaster, rolling a bit of paint on a wall until I get bored with it, bogging the odd hole cause that’s kinda fun, being production runner, hiring two burly local yokels for $10 an hour cash to do my work and then some so I don’t feel guilty, and giving my partner a lovely massage at the end of the day! hehe

    I will insert one bogging tip that I made up myself so here it is! You have two mixtures, one the usual thickness with which you use a trowel, and one you make up (using the powder sort as it’s cheaper anyway) a bit thinner like about icing thickness. And with this mixture you use a brush. it’s brilliant for when you have sanded over old paintwork and it’s still a bit up and down, and you just paint a light coat of the thinned bog mixture over with a brush before you paint. Works a charm.

    So back to renos, I have this added criteria that each reno should only take two days of my life maximum, should coincide with seeing my folks (a tax-deductible trip home!-) and preferably not even require me to set foot on the property at all, cause let’s face it, I’m into leverage and renovating is not the best possible use of my time!

    OK my motto is ‘a stitch in time saves nine’.

    I figure if you sort out the problems NOW all at once, firstly they won’t get any worse and cost you more later, and secondly you use your time (and your tradespeople’s) most effectively, by doing all jobs at once. Also, you guarantee a lovely spick and span place attractive to tenants and competetive in the market, you hopefully can get more rent for the property to boot than prior to renovation, and then your property should just be able to chill along nicely putting money in your bank account, while your rental managers praise you and wish every landlord was like you, and thus prioritise your properties, waxing lyrical about their merits.
    Also settlement is a convenient time to renovate, if you leave the tenant in until whenever, when they leave might not suit you to go and sort it out. At least if you do it at the beginning you are in control of when it happens, and you have the weeks prior to settlement to organise everything to start on day one. (or sooner if you have access prior to settlement.)

    a heat lamp in the bathroom is a $300 investment that I think has a ‘perception’ much grander than the expense, especially in a property which is otherwise kinda (though spick and span) still a bit ‘un-luxurious’.

    Leaving the properties for a year before reno just was not an option for me or two of mine. This is because I doubt i would have got a tenant the way they were! I decided to buy three grovel-pits and reno them for the price of two ‘better’ places because I could see that at the time even ‘better’ properties that cost a lot more still had maintenance issues, and the cosmetically challenged one was a much better deal. That I could ‘create’ properties of the standard and price-range that I couldn’t have afforded to buy ready-done. So instant CG’s really.

    Also my intention was to buy and hold, so I think the reno you do should suit your intended purpose. I intended these properties to be able to last a good 10-15 years as rental income producers, so I did a lot of ‘invisible’ stuff that wouldn’t really improve the value of the property but would ensure the long serviceable life of the building. If I had been planning to flick in a year I might have left some of those things off the list.

    joy to the world

    Profile photo of MJTMJT
    Member
    @mjt
    Join Date: 2004
    Post Count: 80

    Hi all,

    Firstly Steve; like the newsletters keep them coming, love the site – great ideas, great people[cowboy2] and I can’t wait to read the new book!!

    While the renos would be easiler to do if there no tennants, my accountant says that its more tax effective if the work is done with them there.

    What do you think?
    Maybe reduce their rent for a time before you put it up when done. Or even, do as much as you can with them there eg; garden, deck, garage/shed, A/C
    and do the kitchen, bath, paint etc later?[^]

    We have just finished our first reno and have refinanced along the way to buy or first IP and now have the reno house (PPOR) under contract ….as explained in another thread.

    We lived in this house for the reno and did everything walls in & out, doors, tiling, plumbing (Dad’s the pro), Electrics (mate next door), painting, plastering and I have to say before this house I didn’t have a handy bone anywhere. Now I can do everything[biggrin]….with in reason. Our next home we will use a little help from tradesmen.

    It worked well (apart from the mess). I am on shift so I have 4 day weekends to get stuck in. The kids are young so I can keep an eye on them so my wife can work part time when I’m at home.

    And yes doing renos yourself is like another job, but it has to be worth it. I suppose the CG – costs = your wages / the time took. It was worth it for us.

    Sorry I took so long.

    [medieval]

    Matt

    Profile photo of SonjaSonja
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    @sonja
    Join Date: 2004
    Post Count: 338

    We are about to exchange contracts on a very sad old duplex. We are aware that reonvations can be hard work and time consuming but are lucky enough that my inlaws are licenced builders and my father is an electrician. They are willing not only to help us out but to teach us along the way.

    Of course the electrical work is something that we would always leave to a licenced tradesperson. My late grandfather (a carpenter) who I respect greatly always said that there were only two things that he truly feared – God and electricity because although you couldn’t see them, either had the ability to take you life in an instant.

    As well as the $$$ profit in this, we stand to gain education (hard to put a price on). This knowledge will be of value to us in the future regardless of whether we do the work ourselves or hire people to do it for us.

    Cheers
    Sonja

    Profile photo of ScullyScully
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    @scully
    Join Date: 2003
    Post Count: 48

    We actually enjoy renovating. We have done it with nearly all of our properties. If you choose the property well, then a reno shouldn’t be anything more than cosmetic. We do all of the work ourselves, (apart from electrical) and love doing it. It takes us between 1-3 weeks to complete (after work and on weekends), and each time has enabled us to use the new found equity to buy our next one.

    The trick is to concentrate on the WOW factor without the cost. We use wholesale kitchens, which look just as good, but cost about 1/2 the price. We use relatively cheap tiles, light fittings etc, but if chosen well, look just as “classy” as much more expensive ones, and work just the same. One thing we learnt not to scrimp on though, was paint. We used fairly cheap paint in our first reno, and had to re-paint after a very short period. We only use the good stuff now.

    It is a great learning experience. We used our knowledge to renovate our PPOR. We spent $25,000 over 3 months, and after valuation we found we had added $140,000.

    Yep, it can be hard work doing it yourself, but if you’re a handy person and enjoy doing it, the satisfaction you can get from seeing your completed work is immense.

    Cheers,
    Karen[biggrin]

    Profile photo of Ali GAli G
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    @ali_g
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    WOW! I would LOVE to know where to start when it comes to renovations!! So just a quick question for all of you neo-DIY investors: how did you learn how to do everything? My Mum is the handiest person in my family and I don’t think she can teach me “the works” so who can? Are there any good step-by-step books, videos or other fountains of DIY knowledge out there? Jamie Durie doesn’t do it for me… [biggrin] I am sure much of it comes just by getting your hands dirty and learning from experience but how did all of you start off? I am both intrigued and inspired! [biggrin]

    Cheers,

    Ali G

    Profile photo of MJTMJT
    Member
    @mjt
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    Hi Ali G,

    We hired a carpenter to work for cash at first. We had a major deadline and I got to pick his brain and learnt HEAPS.

    My Dad is a plumber and this saved us $000’s and I got to learn from him. My mate nextdorr is the sparky and I don’t touch that and for tiling we picked the brain of a couple of tile guys, got the right tools and had a go!! I did have a “practise area” for the tiling – the outside laundry.

    Hardware shops have heaps of handouts for different types of jobs – “how to do’s” and Bunnings Warehouse even run hour long courses on weekends.

    Although I am considering doing an Owner Builders’ course at tafe for this next house. It is much much bigger than the last.

    [medieval]

    Matt

    Profile photo of Ali GAli G
    Participant
    @ali_g
    Join Date: 2004
    Post Count: 99

    Great stuff Matt! You make it sound so easy!! [biggrin]

    I had considered the TAFE course because (to me) it sounds like fun, but perhaps a couple of weekend workshops are a better place to start.

    Thanks for the ideas!

    Cheers,

    Ali G

    Profile photo of ScullyScully
    Member
    @scully
    Join Date: 2003
    Post Count: 48

    Hey Ali G,

    Well, we didn’t read any books or anything. I figured by the time I’d finished reading a book we could have finished the house/unit anyway.

    We just got in there and did it. My husband is not a tradesman, but he’ll give anything a go. The only thing he realises he’s not so good at is tiling floors, so he does try to avoid that (walls he quite likes). We’ve got a friend who dropped out of a carpentry tafe course, so he helps us fit the kitchens. He also helps fit floating floors when we use them. If we’re fitting carpet, we leave that to the carpet layers.

    I choose all the designs and colours, and look after the painting and any other bits and pieces which need doing. My Dad also comes along to help. He’ll give anything a go.

    We didn’t have any experience with any sort of renovating before we started doing this. We’ve made a few mistakes along the way, but nothing which couldn’t be fixed and we learnt our lesson for next time.

    Cheers,
    Karen[biggrin]

    Profile photo of alwayscuriousalwayscurious
    Participant
    @alwayscurious
    Join Date: 2004
    Post Count: 80
    Originally posted by JoeCool:

    Hi Steve,

    I have just terminated a contract and I know from the bank that i cabn only borrow sround $220 000.
    I live in Brisbane and these days I can’t even get one project for this price that would come with many problems, more then its worth let alone do what you suggest and do many reno project simul.
    I wonder how people like myself could get into this investing game ?

    Cheers

    Joe Cool – keep trying. I am seeing opportunities on the northside of brisbane – houses for as low as 220K – 250K (Asking price, not sale price!)

    So keep looking – there’s probably units out there that are cheaper than that too.

    Cheers
    alwayscurious

    Profile photo of MJTMJT
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    @mjt
    Join Date: 2004
    Post Count: 80

    Hi Ali G,

    It certainly wasn’t easy – I learnt from making mistakes!!

    I will never plaster again (my wife plastered and she will never do it again)…too precise and I can always see the defects.

    We waterproofed and tiled. Word of warning though..as of last month (not sure if its a council regulation or only QLD) if you do a reno you must either have a professional waterproof you shower etc or have it certified as being properly waterproofed!!!

    This was a big surprise for us. Lucky we took photos. Take photos … heaps of them. If you have a buyer digging around for faults etc so they can get a better price – the photos will back up your claims.

    Also it seems just by having the council involved and checking your work with reguard to council regulations, is not enough for some people. I have just been asked to provide an engineers report to certify one or 2 things.

    Next time I plan to get an engineers report on the next house and get him to draw a plan of the structural mods for me to follow and check when complete.

    Have Fun!!!

    Matt

    Profile photo of Henry_2Henry_2
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    @henry_2
    Join Date: 2002
    Post Count: 13

    Hi,

    Also, feed and water your crew,even the paid employees. This will have a dramatic impact on the mood at the job and productivity. (no beer till tools down, don’t want any missing fingers.)
    .
    Henry.

    Profile photo of Native_MetaLNative_MetaL
    Member
    @native_metal
    Join Date: 2003
    Post Count: 47

    Hi just wanted to add some more information into this thread.
    I’m currently involved in a Group that is being mentored on the subject of renovating for a profit.
    As a group we are actually doing a joint venture renovation meaning researching, purchasing, renovating, and on selling a deal as part of the mentorship.
    Basically what is being taught is that you lock in your profit buy buying real estate at a price that ensures a 15-20% profit on resale.
    Goes a little something like this.
    You need to research what renovated properties are actually selling for in your target area i.e. lets say 3 bedroom renovated houses are selling for 250k you would need to deduct all entry and exit fees, your profit margin & renovation costs, to arrive at an ideal purchase price to buy an un-renovated house to ensure a profit on resale.
    I have been interested in doing a Reno for a while but lacked the knowledge to actually do one and make a profit.
    I’m not sure yet if what we are being taught is actually feasible as we may need to buy an un-renovated deal at a heavily discounted rate off fair market value and this part of the process seems to me a little bit steep.
    These are just a few of the examples of “Golden rules” we are being taught and this being a pilot project for the mentoring company time will tell if they are correct.
    At this point in time we are currently researching sales prices of renovated deals to enable us to figure out an ideal purchase price, we hope to buy before the end of the year if you like I will let you know how it all pans out and my feelings of the company that is mentoring us.

    Thanks to everyone that posted in this thread there is some great information.[cap][biggrin][buz2]

    Profile photo of qwertyqwerty
    Participant
    @qwerty
    Join Date: 2004
    Post Count: 117

    Excellent information there Henry!

    Thanx mate[biggrin]

    Profile photo of Misty1Misty1
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    @misty1
    Join Date: 2004
    Post Count: 348

    can anyone recommend any courses,programs or training that teaches hands-on basic skills of renovating? Also any contact details of places that provide these would be greatly appreciated.
    Great post this topic.

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