Hi All,
I have a dream! ha! I'm thinking of, within the next couple years moving into a position where I could buy / renovate then sell or rent out property full time. Does anyone else here do this? Is it possible / feasable to do? Just thinking about the figures, in order to maintain a certain lifestyle and afford to continue further investing you would have to make profits of $100K per year for example… Is that realistic? Say doing 5 renos a year, earning $20K profit on each??
I have 2 properties already, which are pretty much positive, I have just finished doing basic reno on one, which before the reno was appraised by and RE agent of being able to bring in $240 P/W in rent, after the reno I have been able to rent it out privately at $300 P/W. And the reno cost me under $2K.
But anyway, my point is that I enjoyed doing this and I would be interested in hearing from people that renovate full time or anyone who has something to share about the pros & cons of doing this, as well as things to look out for.
Look forward to hearing from you all!
Sebsez
My partner and I do it full time. Its no 9-5. we work 7 days and usually 10-12 hrs a day.
5 renos a year? improbable. 2 at best. taxman will be looking hard if you are doing 5. I only do my PPoR so its CGT free.
get foxtel & start watching the lifestyle channel.
Property #1:
paid $220k Aug 05.
reno cost – $40k
sold Dec 06 – $346k
profit – $72kProperty #2:
paid $257k Dec 06
reno cost – $26k
revalued – $410k
est profit – $112ktrends……..costs down, so is time. profit up
Im a tradesman, so that helps us a lot. we have no kids which also helps heaps. we took a 3 month holiday last year, try asking 2 bosses for that much time off
Most people cant be renovators. Its stressful, demanding, high risk, and not for quitters. Dont try it unless you have a trade behind you. Things always take 4x longer and cost 3x what you think.
Its not a long term occupation.pros & cons……….
Hey Crashy,
Thanks for your comments. At this stage it is something that I am fleshing out, finiding out what to expect etc, so what you have said is exactly the kind of stuff I want to hear.
What you are doing is exactly what I have been thinking about, is only doing my PPOR and hence no CGT. So I imagine that your projects are quite extensive renovations? Taking so much time and returning such high return. Not having a trade behind me I was thinking of starting small, short (1-3 month) and basic renovations and then as skills and knowlesge go up I can tackle bigger renos.
I will be doing my first proper reno while still working full time, which will take longer, but wont expose me to as much risk by giving the day job the boot.
So do you buy / reno / sell your properties then? And live off / reinvest your profit? When you started how did you set yourself up? Did you put aside $50K for instance to live off while you did your first reno? Where you working full time still?
12 hours per day is not an issue for me, I do that already, but behind a desk, I'm looking to get out from behind that desk, and do what most people want to do, is be their own boss. I think the biggest risk for the inexpirenced is to over capitalize on the renovation and spend too much and add little value…. But research & expirence will help diminish this risk.
I'm also working on a spreadsheet to calculate renovation costs, once done I plan on using this against one of my existing properties to calculate the cost of a test reno and then compare the property against similar, renovated properties on the market to get a ball park figure of the estimated value. I'll use this as a test plan of expected returns as part of my research.
How do you do your planning / budgeting? Do you do all your renovation calcs before you actually buy the property?
Cheers
Sebsez.
Hi Sebsez
I had spent 15 yrs on construction sites and watched other trades when I could. It helps but at the end of the day you need to learn every trade (and most of them have a 4 yr apprenticeship) by the end of the 1st reno. There is a lot of misconception about which trades are the easy or hard ones. Tiling looked easy but was probably the trickiest of all. Yes, I do extensive renos. You have to I think. You need to make enough profit to cover stamp duty, legals, agents fees, advertising…..and slippage on the sale. So for me, a quick paint, new carpet, yard tidy & even a new kitchen just aint enough. Any idiot can (and does) do that, so those renos are a dime a dozen…….plenty of competition on the buy side & also on the sell side…….which means you end up paying top dollar to buy it, and dont get much profit when you sell. But sometimes they can work, they are a quick deal, but I see these deals as higher risk. Theres just not enough margin to cover all those fees if something goes wrong……..like finding rot or termites.
I like to change layouts and add living space. I love knocking down walls and asking "why the hell did they put the bathroom there? lets move it here"
Ive been lucky so far in that Ive always bought cheap at the start of a boom, and only ever dealt with motivated sellers. If you have to chase a deal, theres a good chance you will overpay. Its possible I may have made nearly as much money just by sitting on these properties and not doing any reno work. Im fully aware that a large chunk of my profit is from capital growth and not value adding. But then again the market could also have gone down……
I guestimate all costs before submitting an offer, and triple it before telling the agent what Im going to spend on it and this helps the seller realise he needs to be reasonable. Im very good with keeping costs down. I shop around a lot, go to auctions, shop on ebay etc. I dont quite get the logic behind the serious budgeter…….I mean things cost what they cost, prices dont come down just cos you aint happy with them. I often get tradies in for a quote, then see how much I can do it for myself. I do keep a running total just so I know, but its a meaningless number.
My first reno was funded entirely by credit. I also had to revalue during the reno to get more cash. Reno #2 was much less stress, had $25k cash to start with, and dipped into credit about half way along. #3 should be a breeze, cash all the way.
People who fail at renos do so because of one or more of the following:
1. overpaying
2. overcapitalising
3. poor finish
4. getting tradesmen to do everything
5. taking too long
6. running out of money
7. not finishing everything
8. getting target market wrong
9. not getting building & pest inspection
10. not walking away from borderline deals
11. not selling at a loss if you need to
12. not putting in 100%and probably more others could add………
Hi, I have built my own home did most of the work myself and don't have a trade background it went well and I made lots of sweat equity out of the project.
I am just reading Cathy Jayne Pearce's book Real Estate Cash and she explains how to Invest in property and add value by renovating. The key seems to be in due dilligence. I plan to also work towards this type of life style. I guess it does help if you can do some of the work yourself. What it says in the book is make sure you get your strategy right.
I also have a friend who simply purchased land had a project home built, did the lanscaping and made a tidy increase in equity enough to start two more projects. He sold the first to do the next however intends to hold on to the next one just using the equity. I am not sure of the tax ramifications. He went into it knowing the numbers and as the second block was purchased at around the same price it was clear the profit was not in appreciation of the land.
The advice in this forum is very good.
I will have more questions than answers until I get some more experience
I dont do renovation g every time . It incurs lot of money and time . Investing in renovation is only periodic.
sebsez wrote:Hi All,I have a dream! ha! I'm thinking of, within the next couple years moving into a position where I could buy / renovate then sell or rent out property full time. Does anyone else here do this? Is it possible / feasable to do? Just thinking about the figures, in order to maintain a certain lifestyle and afford to continue further investing you would have to make profits of $100K per year for example… Is that realistic? Say doing 5 renos a year, earning $20K profit on each??
I have 2 properties already, which are pretty much positive, I have just finished doing basic reno on one, which before the reno was appraised by and RE agent of being able to bring in $240 P/W in rent, after the reno I have been able to rent it out privately at $300 P/W. And the reno cost me under $2K.
But anyway, my point is that I enjoyed doing this and I would be interested in hearing from people that renovate full time or anyone who has something to share about the pros & cons of doing this, as well as things to look out for.
Look forward to hearing from you all!
Sebsez
Hi Sebsez – your plan is mine.
I renovate after work & on weekends. However, my plan is not to on-sell but hang onto after I move out & rent it out. Australia, even after the 1996 to 2003 property boom, is still cheap on a WORLD scale. And the world is shrinking. Where would you rather live: London or any city in Australia? Exactly! Therefore, expect prices to continue to rise for many years to come.At the moment, I am 9 months into renovation, with plans to finish in 3. I bought out my ex for $325K & expect it to be valued at $450K when finished (I have been to alot of auctions in the area in the last couple of months & this is realistic). Please note that I only started getting serious with the renovations about 3 months ago, so realistically I have spent 6 months. I expect to spend about $25K, so its a $100K return. Admittedly Melbourne is going through a boom at the moment – Surrey Hills for example has gone up 45% in 6 months. I think this is stock market or mining resources linked though – people investing money they have made & buying property.
I disagree partly with Crashy by the way – alot of doing a tradie's work is in the mind. People are scared of making mistakes. Admittedly my old man, being a tradie himself, has given me pointers at times but most of my work I did myself. Hate to boast but I did a BETTER job than the original carpenter/builder of the back decking, including erecting a laserite cover/canopy.
The decking had to be replaced & it was only 13 years old!!I did the floating floor all myself & did it the better way by NOT using quad & taking off the skirts & architraves.
Again not putting tickets on myself, but talking with people in the industry – some have no idea about interior design. Simple thing – square door handles & square tap fittings. This looks absolutely shmick, but not many use them. Aluminium framed glass doors – people get locked into two-pac for a stunning kitchen. Etc, etc
Once I move into another property I will do the same. I don't find it hard cause I get bored REALLY easily & I appreciate the fruits of my work. Also I like the fact that I have proven to myself that you don't necessarily have to be qualified tradesman (by the way I don't do stuff that is illegal – e.g: electrical; although I could do wiring, installation low voltage lights, etc. if I so chose)
The plan is that as I expand the 'portfolio' I will employ more & more tradies to get the work done faster, to the point where I have two houses being renovated at once then 3 so on, etc, etc). During this time I might also start buying new properties off the plan, but it depends how the market is.
Also it may be worth selling property if the market is going to stagnate – if you aren't making money on certain properties sell them & buy others that will. Its no different to investing in shares (for a GREATER, not LONG TERM return). That said, property does not have the peaks & troughs of the share market.
Ozboy wrote:Hate to boast but I did a BETTER job than the original carpenter/builder of the back decking, including erecting a laserite cover/canopy.
(by the way I don't do stuff that is illegal – e.g: electrical; although I could do wiring, installation low voltage lights, etc. if I so chose)
Did you know only a licenced plumber is allowed to do roofing? eg lazerlight
BTW good tips on the handles and taps etc. Think I might use those
Jase and Flic wrote:Did you know only a licenced plumber is allowed to do roofing? eg lazerlight
I can't keep up!! This is only done by the plumbers association (or whatever they're called) lobbying the government to make it law, so they can get more work. They'll provide some illegitimate reason – "…someone fell down 25 years ago & broke their neck, so better leave it to us…"
Installing laserlite is like shelling peasOzboy wrote:I can't keep up!! This is only done by the plumbers association (or whatever they're called) lobbying the government to make it law, so they can get more work. They'll provide some illegitimate reason – "…someone fell down 25 years ago & broke their neck, so better leave it to us…"
Installing laserlite is like shelling peasCan't keep up?? I don't know what state you are in , but in Victoria you have had to be a registered plumber to do roofing for over 20 years.
Tools
hey Sebzes,
If that is your dream follow it. There is no reason why you couldn't make that sort of money out of renovation. Give it a go. Who knows where you will end upChris
I've got to say there are some really dodgy overpaid tradies out there. I found that it is faster and easier, to learn a lot of the tasks that tradies do, and practice on a small job to familiarise yourself with procedures, then do a better job because you can focus on the only job you are doing, whereas tradies often are scrambling to complete jobs to make money from the next one…they are paid by the job, remember.
As to making money from reno work full time…hmmm, has anyone heard of the building industry? Don't they basically charge a full time lucrative living by working in property repair, removal, and creation? Why can't you!!chump wrote:There is no reason why you couldn't make that sort of money out of renovation.thats not true, there are plenty of reasons:
1. stamp duty
2. agents commissions
3. advertising
4. unforeseen expenses (eg damp, termites)
5. buying is easy. selling is hard
6. cannot possibly do 5 reno’s a year. 3 at best.
7. full time job being project managerand it goes on. It is POSSIBLE to make good money, but not IDIOT-PROOF as chump implies.
Bagheera wrote:has anyone heard of the building industry? Don't they basically charge a full time lucrative living by working in property repair, removal, and creation? Why can't you!!well because, builders dont have to pay stamp duty, agents fees et al. There are entry and exit costs with a property and you first need to add enough value to cover these and the cost of the reno itself. Thats not as easy as you think.
There are far more dodgy D.I.Y reno’s out there than dodgy tradesmen. It is arrogant & foolish to suggest you can do a better job than someone who has 4 yrs min experience & studied & passed rigorous exams, simply cos you spent 5 mins talking to a Bunnings employee & gave it a go.
Tools wrote:Ozboy wrote:I can't keep up!! This is only done by the plumbers association (or whatever they're called) lobbying the government to make it law, so they can get more work. They'll provide some illegitimate reason – "…someone fell down 25 years ago & broke their neck, so better leave it to us…"
Installing laserlite is like shelling peasCan't keep up?? I don't know what state you are in , but in Victoria you have had to be a registered plumber to do roofing for over 20 years.
Tools
Laserlite would have to be 'roofing' in the most loose sense of the word…
Direct from the PIC website….
What is plumbing work?
In Victoria, anyone who undertakes plumbing work is required to be licensed or registered with the Plumbing Industry Commission. Plumbing work is generally defined under six types: water supply, gasfitting, sanitary, roofing, draining or mechanical services (heating, cooling and ventilation).
- Water supply is defined as the installation, alteration or repair of any pipes, fittings, appliances or other items that directly or indirectly involve the supply of potable (ie drinking) water.
- Gasfitting is defined as the installation, alteration or repair of any pipes, appliances, flues, fittings, apparatus control or other items involved in the supply or use of gas. This includes gasfitting work related to caravans or other recreational vehicles, but does not include filling or refilling a gas storage container.
- Sanitary is defined as the installation, alteration or repair of any drains, fittings, pipes, fixtures, appliances or other items involved in the collection, conveyance, disposal or treatment of sewage, trade waste or greywater.
- Roofing is defined as the installation, alteration or repair of any roof gutters, flashings, piping, sheeting, roof covering or other above ground items involved in the collection, coveyance, disposal, treatment or reuse of stormwater.
- Draining is defined as the installation, alteration or repair of any drains, pipes, fittings, appliances or other items involved in the collection, conveyance, disposal or reuse of stormwater or sewage that is underground.
- Mechanical services is defined as the installation, alteration or repair of any valves, regulators, registers, pipes, ducts, flues, tanks, heating and cooling lines or surfaces, boliers, burners, solid fuel heaters, coils or other items involved in heating, cooling or ventilating your building by mechanical means.
Always ensure you used a licensed plumber with a photo ID card
Know your limits would have to be the rule here, Crashy…I said "faster and easier, to learn a lot of the tasks that tradies do, and practice on a small job to familiarise yourself with procedures, then do a better job because you can focus on the only job you are doing." By paying attention to detail, learning the proper methods and focussing on a skillset that is beneficial to your target properties, you can actually do a better job for cheaper. I am not advocating that you do anything that is outside the realm of competant DIY, however some tasks I have found relatively easy to learn are, carpet laying, painting, garding/landscaping, fencing, shed building, basic internal carpentry, etc.
An apprenticship program covers everything that you need to conduct yourself as a proffessional trades person for life. I just need to know some of thier skills to make a profit in a carefully selected investment. I have used trades textbooks, worked as a labourer to learn some skills, watched training videos for certain tasks, and built up a good set of professional tools (and practiced how to use them), any repeatable task that one person can do so can another.
Use due dilligence as your guide, don't attempt tasks that you don't know how to do, and learn what you can do and you can't.As to profitability, your due diligence, and negotiating skills are what make most of your profit…also it is a poor person who is afraid of the taxman, my financial goal at the moment is to pay $120,000 PA in capital gains tax.
Why not buy the messiest old house in the street tidy it up and sell it for a profit, you only pay tax on profit.
WHY WOULD YOU EVEN GET INTO A MARGINAL DEAL THAT YOU CANNOT PROFIT FROM?!!
Make heaps of offers, sometimes they work, then you can profit.
Find problem sites that you can innovate, rather than renovate. I love 3br corner blocks with large backyards.
Always calculate bigger on costs, smaller on profits, then see if you can go well with the deal. Avoid paying fees if you can.(buy private).
Complete the reno as fast as possible, then rent it out until sold, with a set profit margin in mind.Hey Crashy, or should I say Cranky!
Were you having a bad day when you made your last two posts?
I didn't metion anything about IDIOT PROOF in my post but I did give a positive message regarding sebsez will to succeed as a Renovator. Sebsez would obviously be smart about their Due Diligence when it comes to evaluating their deals and decision on some of the reasons you mentioned. Give us both some credit. Sebsez was simply putting it out there for the support of others.
Your little sign off at the bottom mentions Positve and Sharing it seems all you are sharing is a bit Negative and Selfish.Chris
chump….
sebsez wasnt asking for emotional support. he wants the truth. he wants the facts:
"Is it possible / feasable to do?"
you are confused. he doesnt want mindless positive reinforcement:
"I would be interested in hearing from people that renovate full time or anyone who has something to share about the pros & cons of doing this, as well as things to look out for. "
notice the word CONS there? last I heard, CONS meant NEGATIVES. Also, Im quite sure "things to look out for" is looking for negatives. Its clear you have no experience and have responded anyway, despite the fact he clearly asked for responses from people WITH experience.
You said there was NO REASON he couldnt succeed. This implies it is not possible to fail or lose money. This is irresponsible and simply untrue. Perhaps you meant something else, but thats what you said.
You think you are "helping" by blindly encouraging someone to do something that is risky / demanding / stressful etc. Reward can be great, but risks are abundant.
You think Im selfish for taking the time to convey my experience & education about these risks & pressures.lets see who sebsez finds "helpful" eh?
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