Hi All,
This is my very first time on this forum and I only signed up today. There seems to be so much information on here which is great.
My husband and I have a big dream to become full time property renovators within five years or so. We bought our first home in 2008 and are now looking at buying our first IP. I have read magazines, books, websites, watched dvd's and considered attending a seminar or two but I find a lot of the information is very conflicting. Can anyone point us in the right direction of useful renovating for profit advice? Any help would be much appreicated.
As we don't have a lot of equity or buying power with our salaries, we were thinking of buying something is country Victoria (maybe the Latrobe Valley) at a lower price bracket and see how we go with our first renovation before trying something closer to Melbourne. Is this a wise idea? I assume that its better to get started within a smaller price bracket and in a regional area that wait a few years before we can afford something in Melbourne.
Once again, any help would be very greatly appreciated.
Miranda
Hi Miranda
If you intend on doing a lot of the reno work yourself, then you are going to have to be within a reasonable commute of the reno property. Otherwise you'll spend heaps of money on petrol, and you'll get very very tired.
When looking for a feasible property to renovate, you need to look at the cold hard numbers. If buy the time you pay for the acquisition of the property, the relevant stamp duty and legal fees, buy the materials and pay the relevant tradies for the reno work, pay for your petrol running around, pay for bank interest during the reno, pay the real estate agent's cut of the event sale price, and your legal team again, will there actually be a worthy profit? (Remember any profit you make will be subject to CGT – capital gains tax – unless you live in the property and declare it your PPOR – primary place of residence).
Look at what un-reno'd properties are selling for in the area, and what reno'd properties are selling for. Not the advertised "we hope we can sell for this amount" price, the ACTUAL sale price. This will help guide you with realistic expectations. It's also important to have a grasp on how long properties take to sell.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
We are planning on doing most of the work ourselves but we were going to take a month of work and stay down there to complete the job. We have family close by so we wouldnt have to stay in the property whilst its being renovated either.
I have had a look at prices for before and after in the areas we are looking at and I've spoken to a few agents to see what the actual selling prices have been. We arent sure if we are going to sell it straight away or lease it out and try and have a cash flow positive property. Is it correct that you only pay 50% CGT if you own the property for over a year but don't live in it?
The ;thing that you will also need to factor into the regional purchase is that your time on the market is likely to be much longer than a suburban property – that is another level of risk. Unlike houses in capital cities, properties can languish for months in regional areas adding enormously to the holding costs.
yes it is true that if you hold an investment property for over a year before selling, you get the 50% cgt discount
i'd be checking that the value you will add to this property far exceeds one month of salary. otherwise, it's probably a bit risky.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
I've just completed one reno and am in the middle of another one in regional vic. Both are buy and hold for the long term as I don't see any decent profits in selling at this entry point price. First house cost 97K and around 15-20K reno & interest – so owes us around 120K. Haven't revalued yet, but expect value around 150K, but as mentioned the average sell time in some places can be quite long – say at least 6 months, so we are renting it for $200 pw.
Personally, I don't like the LaTrobe valley due to what might be happening with the power industry soon – but then again, I guess all areas will have their little issues.
Thanks for all your advice everyone, I appreciate it.
Does anyone know of any regional areas that might worth looking at? I've looked at purchasing Terry Ryder's hot spot reports and so on but I'm not sure if that's the right avenue to look at.
So ultimately, we are looking at buying a property to renovate, add value, put tenants in it and then hopefully be able to use equity gains to go again.
JacM – we have a fair bit of annual leave that we can use to get the renovation done. I have read about how to calculate your profit from a renovation by adding your purchasing costs, holding costs and so on before determining your profit – do you know of anyone/company etc that maybe sells spreadsheets or something similar to help work it all out quicker before the purchase?
Thanks for your input tvproperty, sounds like you are doing exactly what we want to do. Do you mind me asking what areas you look at? Do you live regionally and are you close to your projects? Do you do a lot of the work yourself or do you project manage most of it?
Thats a good point you make Scott No Mates, I suppose if we aren't looking to sell until the long term it shouldnt matter too much should it?
mirandakennedy wrote:Thanks for your input tvproperty, sounds like you are doing exactly what we want to do. Do you mind me asking what areas you look at?Currently, I'm in Maryborough (Vic) but would also look at others like Ararat, Hamilton, Ballarat (& surrounds)
mirandakennedy wrote:Do you live regionally and are you close to your projects?No, I do not live regionally, I live near Westernport Bay. Our other properties have been on the edge of metro (Cranbourne) so were only 15mins away. This time I am living away from home and coming home weekends (3hr drive) for the son's footy…….and wife of course. lol
mirandakennedy wrote:Do you do a lot of the work yourself or do you project manage most of it?I've been doing most of the work myself and only have trades in to do certain things like gas, electricity, carpets, carport building etc. I've been doing all other stuff like plastering, painting, tiling, small plumbing, general carpentry stuff like building BIR's, new doors, conversions to sliding doors etc. This current house is getting a new kitchen that I have put together and installing. I'm also putting a complete new bathroom in this one and all new plaster.
Personally, after tackling these two, I'll be looking for something either in a little better condition (quick paint) or much closer to home as it's a tough gig to do this type of thing. We purchased both these houses on the same day, so it's been one hell of a long reno job as far as I'm concerned and am ready for a rest.
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