Hi all. Sorry to take so long to answer the question "what are we up to now?".
A bit of a saga to tell you…. I will give you the short version.

It all started with that lovely 30 day, cash, unconditional offer we were so glad to receive back in Sep '07. The purchaser did not actually pay any deposit when signing the contract, saying that he would pay a 10% deposit within 2 days. This was the start of a string of excuses and apologies and promises that never resulted in any actual money being paid as a deposit. The settlement date arrived and we were promised and assured that the whole amount would be paid in cash on that date. Then some more apologies, excuses, "we couldn't get the money out of the bank. They are taking ages to release our money. Sorry……"
The buyers happily agreed to pay penalty interest of 14%p/a on the full purchase price, so we thought we might make a little more than first thought.
Settlement was re-booked, and re-booked over and over. After about another month we issued them a "notice of rescindment" which means that they had 14 days to pay up or the contract is void. However, we really wanted them to pay up because they still had not paid any deposit so we had nothing to pay our extra costs with. We wanted them to settle so we got the original price PLUS all the penalty interest – about $7,000 by that stage.
Then the story emerged that they had inherited the money, and not realised at the time of making the offer how long it would take to actually get the money in their hands. A plausible excuse perhaps, so when the buyer (now in direct contact with myself, not through agent or solicitor anymore) assured me that the money was now in his account, we gave him another chance to settle.
This time he told me 2 hours before settlement that everything was under control, and his father was on the way to the settlement officer with the bank cheques in hand. Yet still no money showed up.
This time he told me that there had been a major medical emergency in the family, which turned out to be him (the buyer) being diagnosed with terminal cancer, and not going to be around for long anyway. But he still wanted the house, so we tried again to settle a couple more times. I tried to meet him – and got stood up. And then finally (yes, I know I let it drag on too long) I said forget it, I will sell the house again.
Within 4 hours of making that decision we had another offer of $345k, 30 day unconditional. We accepted due to the short settlement, and the fact that it was almost Christmas and we didn't want to wait, and then after we had all signed the contract, the new buyer tried to re-negotiate an extra 2 weeks on the settlement.
We said no, but agreed to an extra 2 days. They asked for a letter stating we would give another 2 days, so we wrote it for them. Then on Christmas eve they pulled out of the contract on the last day of their cooling off period.
After Christmas they asked for their $1000 deposit back, and got quite upset when we kept the 0.2% ($690) stated in the contract as the penalty for cooling off.
We had a few more offers after Christmas, but all too low to consider.
So then in early Jan '08 we ordered more furniture, got the house pretty again, re-advertised, started an auction campaign (just to do something different and try not to let the house appear "stale") and basically started the sale process all over again.
It took about a week after furnishing the house for us to get another good offer -$350k on Fri 11 Jan. It was a 45 day offer, subject to valuation. We said we would think about it for the weekend.
Then the next day (Sat) buyer number 1 sent me a message asking if I would give him one more chance if he took a bank cheque for the full puchase price plus costs to my solicitor's office on the Monday morning. I told him if he was there by 11am then I would still sell to him. He didn't show (surprise).
The new buyer (number 3) meanwhile called the agent on the Monday morning and said they would make the offer unconditional. So at 12pm I got the agent to call them back and explain that we really wanted about $360k, so after a couple more hours of negotiating they raised the offer to $355k, 45 days, unconditional.
We agreed and got the papers signed that night. They paid a 10% deposit by bank cheque the next day. Their cooling off period has ended, and we are once again looking forward to settlement -this time on 25 Feb.

So there is the fairly short version of the saga of selling our first reno project. Moral of the story is that the house isn't sold till the money is in the bank.

Now, what are up to from here?
After looking hard for a couple of months, making several offers, and being beaten on price numerous times, we finally bought a home in Chadstone which is due to settle on Feb 15th. It is a 4 bed, 3 bathroom Weatherboard home on 1013m of land. Our intention is to get plans drawn and a permit approved for 4 new townhouses. We will then aim to sell the property with the Planning Permit (DA) and make a profit of about $80-$100k. Our other option is to appoint a builder to construct the dwellings for us, and sell them individually when complete. This would have an expected profit of over $400k, but this is not our preference as it would be a much longer project, it would expose us to more risk, and it would take more cash than we have. Also, we would rather have a quick profit in our bank as our company is still quite young.

So far we have appointed an architect who has made good progress on preparing the permit application, drawing plans etc. We are still finalizing the loan, and are trying to keep the architect and others moving as fast as possible.

Apart from that deal we are looking lookin looking for more, and have some exciting prospects currently under investigation.

Thanks Andy
Good stuff.
Good luck with the ceiling.
Jase

Hi
Thanks everyone for the encouragement. Much appreciated.
Sorry for taking a while to reply – been flat out crunching more deals.

Crashy, thank you for your input, and for asking me the hard but important questions. I have been considering your comments for the last couple of days, and here is what I've come up with:

At the time we made the decision to buy the house, we did have some of the attitude that it would not be a total disaster if we just broke even on our first deal. We did try hard to choose a deal that would be profitable, so our decision was a calcualted one, but our eagerness to get started certainly played a part.
I think that "experience vs profit" attitude was a mistake, and it could very easily have caused us to lose $30k. During the project I heard a speaker say "If you lose money on your first deal, the experience you get is how to lose money, not how to make money." That hit home for me, so I was glad the deal went ok.
Also, being in a rising market is helpful to cover over the mistakes, so a rising market is easier to learn in than a tight market. We knew the market was rising at the start, and thought that would help us not to lose.

The biggest lesson I learned only hit me today when I met with my old boss for a chat. He is a successful developer and explained to me how much money I really didn't make.
Here is what he said:
Our profit was about $41,500, but that included 860 hours of unpaid labor. Roughly 400 hours was mine personally.
To hire sub-contractor labor would be a minimum of $35/hour. So apart from me, we should have paid another $16,100 in labor costs. Profit is down to $25,400.
Next, by choosing to leave my job and do this deal, I missed out on earning wages for 12 weeks so far (because I haven't started the next project yet) which was about $1,175p/week before tax =$14,100. That means I just lost $14,100. So if I paid myself back that amount, the profit is down to $11,300. (If I paid myself $35/hour for 400hrs it is $14,000 – so about the same.)
I did actually pay myself $3,600 included in the reno cost, so I can put that much back: profit is now $14,900.
Next, the profit is split b/w me and business partner, so my half share is $7,450.
After I pay tax on that, it will be about $5,200.
To get that $5,200 I also worked many hours at night that I did not account for. If I accounted for all those hours, the actual profit would be very close to 0, or maybe less than 0.
So the question my boss asked me is this: "Do you think you got a big enough return to be worth the risk you took by leaving your job and putting $40k of your money on the line?"
My honest answer is no, that is not enough return to justify the risk.
So then he said "So what is the lesson you learned?"
Answer: Do things differently next time.
Specifically, here is what I will do differently from now on, (AND I hope others reading this will make good use of my learning experience when you make your own investing decisions):

1. Pay myself for every hour of work done.
2. Only do deals with a much greater expected profit than $15k.
3. Estimate and included in costs all labor associated with deal.
4. Don't work under a "false economy". Understand how things really are, the true cost of what you do.

There are many more smaller lessons out of these, but I will give my head a few days to chew on those.

So in summary, I think I have made the right decisions so far based on what I understood at the time. I am pleased with where we are now, and where we are heading.
I think I have had a great learning experience out of our first reno, and to have done it without making a big loss is partly luck, and partly good management. Though I can now see that it could very easily have been a painful lesson.
I think that I can now apply these lessons and start to do truly profitable deals, but it is more complicated than I first thought.

Renovating with 4 kids in the house is not something I wish to experience.
I also don't want to travel much over 1/2 hour to do a reno. At least not right now. Maybe when I am more experienced.

That's all I've got for now. Keep those probing questions coming. See how much we all are learning? Fun.
Thanks again crashy for your questions. I honestly did not take your comments as negative. I appreciate your help.

Hopefully those of you about to do your first deal can now do it better than we did, and be aware of some hidden risks.
Cheers
Jason

Hi millions
At the time of buying most homes were about 260-280k for the average ones. The one we bought was probly worth about 250k, so I think we got it about 8k under value. Now the cheapest ones are about 275k, and the average ones290-300k. So about 20k growth.
I think our final product would have been worth about 320-330k in the original market. We could have sold it about 10 times at 340k, and only 2 buyers offered 35k, so I think we got the top dollar for it. So that is about 20k growth also.
I have been starting to look at more expensive properties, but also looking at similar ones to ours. I guess whichever has the numbers stack up.

Cool off period is over. No more backing out. Onward to profit we go.

Thanks crashy.
It looks like everything will be fine. I think half the problem was a bit of family feuding on the part of the buyer. A brother and 2 sisters buying the house for their parents. Once the agent worked out who was really in charge, it helped to make things smoother.
So this time tomorrow we should be out of the woods, and ready for a big fat deposit early next week.
Cheers