my current situation is i am 24 year old carpenter with experience in renovations and motivated to work hard and make some money for myself. I am looking at buying, renovating and selling property as a full time job in the northside of brisbane. My parents are willing to fund it as long as i do a bit of research on it and crunch some numbers. I would be looking at buying a house at around $350k -$400k and putting about $50k into it as they all need kitchen/bathroom renos in this price range. Plus things like a deck, built in robes and a fresh coat of paint. Would be looking at having it done and sold in 4 months after settlement. Just wondering what anyones opinion would be on any of this?? feasible to make a good profit?CatalystParticipant@catalystJoin Date: 2008Post Count: 1,404
It is definitely worth pursuing.
But you really need to make sure you get your numbers right. Choose 2 suburbs (3 max) and REALLY know them like the back of your hand.
Many people come unstuck because they under estimate time and cost of reno's and over estimate sell price, AND forget to factor in buy, sell costs, holding costs, stamp duty etc.
I think $350-400K price bracket is a good start. It's difficult to make enough on lower priced properties. You can make huge money in the higher brackets but it takes more cash and you need to do structural reno's to make the big money.
You need to cut your reno time in half for any reno that's not structural. We do a complete reno (new kitchen, bathroom, paint, carpet, sometimes remove a wall) in 4 weeks. We do a fair bit ourselves so with tradies, if you coordinate properly it should be even quicker. At $350K each month means losing $2,000.
Sorry thought you meant 4 month reno. Including sales period is feasible.
In your suburb research you need to see a big price gap between unrenovated and renovated profit. Those are the good suburbs to choose. Research is the key to success.
Thanks for the feedback catalyst. Much appreciated.
Is anyone with information willing to give any feedback on some brisbane suburbs?jmsrachelParticipant@jmsrachelJoin Date: 2012Post Count: 711
I'm actually trying this approach in Melbourne. The biggest no brainer is you need to buy them cheap and below market value. Other wise you will be wasting your time.
I also try and do most of the work during settlement. Negotiate for 2 – 3 month settlement with early access via a license agreement.
Well 50k is what i was working off as my budget. It would include things like bi-folds, new fencing, polished floors, landscaping, and possible new car port. It adds up quickly. The things i need to work out is whether all these things will add the value that i need. I havent got one house in my sights yet. Its just on the general list of things to do at most the houses i have seen.xdrewParticipant@xdrewJoin Date: 2010Post Count: 479
The correct way to renovate is moving the category of the property you choose from, from its existing category .. to a category of greater value. And doing the most you can … and limiting your cost component.
I have turned away deals because the paper component meant too much to get a nice end result.
You are assuming here that by spending 50k (allocated budget) you are going to increase the value of the property by at least that amount.
And to change it by that much .. is usually a major effort and sometimes not worth the expense.
From my perspective as to your plans … you are allocating a chunk of cash to solving a problem .. and thats how you will solve the problem.
The turnaround time at this current point in the property clock is critical. Ask yourself the obvious question, when you come out of the renovations .. what sort of market are you expecting to sell into? I do this again and again .. and sometimes its my deciding factor in finalising a property. I often allocate the time to do the work (like i have now) when the market is slow .. to release into a better market.
Can you visualise in your 4 month turnaround .. a better market at the end of it? BE REALISTIC .. REALITY PAYS THE BILLS.
The other thing is .. dont be afraid to take on smaller more affordable projects to start with. I'm quite sure you approach this as a competent carpenter. And doing your own renovations .. you should be able to judge your own risk levels with some degree of knowhow. My concern would be the degree of flexibility a first project offers you. From having done this before .. the first couple of projects are tight on budget and dont allow much room for maneuver .. after that .. its a LOT easier.
Consult your local real estate agent for what best adds value to a property in the area. Its the type of invaluable real estate experience that sometimes takes months to find out by yourself. Dont just assume a new kitchen new bathroom and a paintjob will boost your credible property value. Get the facts .. do your research .. and get it more right .. first time.
Validate for yourself that the proposed changes to the property will increase its price and overall desirability.
And enjoy it !thecrestParticipant@thecrestJoin Date: 2004Post Count: 992
Local valuers are ideal to discuss these matters with too, after all, they're the ones who place the values on the items you're talking about. .Have a chat with a few for the purpose of pricing and doing before and after valuations, and they'll give you an idea of what those changes are worth.
Thanx for the input shahin,
I will look into it further. I still believe kitchen and bathroom have to replaced. Maybe deck/bi-fold is not needed, but i still feel if that if i did put these extra things in for $12g it would add $20-30 thousand. I know its not one thing that adds value to a house, but a combination of things.
I know its hard to give feedback as you dont know what houses i am looking at, my trade skills, plus a number of other things
. But i do appreciate the feedback.CatalystParticipant@catalystJoin Date: 2008Post Count: 1,404TheFinanceShop wrote:Other than the flooring – everything else seems to be overcapitalising to me.
I don't agree, but you do need to be very careful not to spend money on things that won't give you a return on your money.
I also agree $50K is a LOT of money. You'd need to get $100-150K increase in equity to make it viable. Do not GUESS an amount. It quickly gets away from you. You need to allocate money to different areas. In order to do that you need to KNOW the cost of things.
Buy things on Ebay. As soon as we see a property hubby gets on Ebay and starts buying. If you are going to do this regularly buy things for later. If things are really cheap we stockpile. For eg we bought 3 showers for $150 as they were demolishing the house. Find places where you can get quality ,materials at a good price. Eg vanities can cost $1000 but a $300 still looks good. Kitchen can vary by $15K.
Bifold doors, fence? Will they give you a better sell price? If not don't do it. Landscaping can make a big difference but you don't have to go overboard with big plants etc. Don't renovate because you think it will look nice. Find out who your target market is and cater to them. Find out what prospective buyers MUST have and what doesn't matter. This is critical.
We typically spend $15K on new kitchen, bathroom, paint, carpet. And we usually raise the equity by over $50K. This is on lower priced properties (which we keep as they are then CF+).
Starting our next one next week. Yeehah!!! We love it.
Bathroom and Kitchen are arguably the most important parts of a house so reno away. I was referring to the fence and bi-folds. Bi-folds are super expense. My wife wanted then so what I need was get $110 solid french doors (they needed handles and a paint) and it was a cost effective replacement that looked just as good. The deck is in the same boat. Every single buyer wants a functional and attractive bathroom and kitchen however not every single buyer will require a deck. Its a nice to have in my book. Decks are expensive even if you do it.ZanshibuiParticipant@zanshibuiJoin Date: 2012Post Count: 14
Skills as a chippie coupled with investing knowledge will make you a force to be reckoned with!
I think it will be key for you to learn how to do the figures on deals first. My dads a builder and there is no shortage of stories about guys who are great with the tools losing money because they didn't know how to work the figures other than costing the Reno and doing a gross $350+$50 with a sell of $450= $50 profit. Well it doesnt. You'll also have to work out how to pay your bills while doing the Reno. Sounds basic but if you're on the tools for your own Reno full time then how do you pay the bills if it takes around 4 months to get your money back? Or if you work the tools full time for someone else then what's the value of your holding costs while you do the Reno part time? Depending on the deal the profits could just be a higher risk way of you getting paid for your labour?
The skills required to work the tools are different than the skills required to be an investor…but knowing that, you can easily skill up.
Although the idea of making money from reno's is sound, the reality of profit can only be worked out on a deal by deal basis. There are guaranteed to be houses in your current formula of buy for $350k Reno $50k that would not achieve a sell price with profit after covering these expenses plus buying costs incl legals and loan costs, holding costs of repayments, insurance, rates, selling costs of commissions and legals, any loan completion fees and CGT.
But learn how to do the figures and you'll be in a great position to make a profit.