Renovating for a living

Hi Kate,

From my own experience, I left my high paying job and jumped into the property game straight away as I had caught the property bug 12 years ago. What I had failed to realise at the time was my borrowing capacity became non-existent and I had to use joint-venture partners to finance the deals which in effect meant that I was halving my profitability and
had a funding source with money that had varying personalities and risk tolerant levels.  If I had my time over again, it would not be the course of action I would have chosen mainly because I had to do twice as much work and had to manage the money people. 

A once wise mentor said to me that he did not use joint-venture partners/money partners because I was giving half of my profitability away which meant taking twice as long to get somewhere. He said initially it would be slow going because I would be doing one or two properties at the time; however, because I would have been getting 100% of the profitability that I can reinvest back into my business then in time the snowball effect will mean faster growth than anybody who's used joint-venture partners to fund their business/investment ventures. I wouldn't have the management headaches.  We do use private money lenders that we do pay a fixed return to; however, they act more like private bank than a joint-venture partner.

If had my time over again, I would have treated my property investing venture in the manner …. Some of my thoughts:

1.      Treat it as a business/hobby until it got to a point where I could leave my full-time job knowing that I had the team in place. A few runs on the board could have been done first so I could start making money straight away to replace my income from a full-time job of day one of stepping out. By doing this you are more focused on building something rather than merely surviving.  Having a job with a regular income is also a great safety net for your family. It can also fund any
contingency plans if need be, you can put food on the table every week and you can enjoy life long way … as based on personal experience. Your family does not suffer as a result of you being a fanatical property renovator.

2.      Accept that your profitability is not high due to the fact that you need to project manage the renovation process out to a third party like a builder. In looking at it you are just replacing the cost of a joint-venture partner with a builder who does project management on your renovation.

3.      You also have to realise that you do have to invest a considerable amount of time outside business work hours in order to source suitable properties, oversee the renovation project in the morning, in the evening, and over the weekend. When I first started, I did the before work, during lunchtime, during the evening after work and on the weekend. You need to make sure that you don't burn yourself out. But you do have the income to have a holiday or a weekend away on a very regular basis to recuperate.

4.      Live on the proviso that you make money when you buy … So we concentrate most of our efforts on buying extremely well as that definitely helps cover the learning experiences along the way. I have normally found in the past 12 years that learning experiences are invaluable that you normally have to pull out the cheque-book to pay for it.

All the best in your future endeavours  and I hope that this sheds some light on the topic for you. If you want to check out some of the renovations that we have done please have a look at http://www.bostonwest.com.au and if you know anything more please shoot us an e-mail.

Kind regards,

Sherry and Jason

I think the big guns actually have cash to buy. Buying, getting loans etc then backing out of them a few weeks/months later gets messy.
If you have equity set up a LOC and use that to buy. I know that's a lot of cash.

Why not start small? Buy something. Take time off work to do the reno. Sell and build up cash that way.

We do our renos around work. Tough going for 5 weeks but then it's done. We don't do structural (well other than move/remove a few internal walls), just kitchen, bathroom, paint etc.

I to would like to go into this one day however I can’t don’t want to cut back on my lifestyle. I often read stories about people who renovate for a living and live off something like 40K a year…….. Thats no realistic for most.

kateej03 wrote:

Thanks for everyones comments
We have decided to do what we did with our first house. Buy/renovate/hold and then use the equity to buy more and sell after a year or two. Hopefully it works out!

Why are you selling if you have pulled the equity out to buy the next one. That means when you sell you'll get no money. Always selling costs money. Stamp duty, legals, CGT. In order to build a property portfolio you need to buy and hold property.

I only sell if I have to or if a property is under performing or I think it has reached it's potential and the money can be used more effectively elsewhere.