pascoe_82 wrote:

I Reno full time and as a basic rule I have a minimum nett profit of 10% of the purchase price. I use the 10% minimum as a basis to work off when doing initial numbers on a property but in most cases my profit is 20% or more.
Eg if I purchased a property for 200k I would expect a minimum nett profit of 20k before I even considered putting an offer in. In the early days I was happy to take a 20k profit and was doing most of the work myself. I have now become a bit more savvy and years of physically doing renovating take there toll mentally and physically. I would now only make an offer if I could expect to safely make at least 40k profit off a 200k purchase. I am averaging about 8 renos a year depending on the market and my appetite.
Obviously the rule of 10% doesn’t apply for cheaper properties as I have purchased property for 120k and definitely wouldn’t waste my time if I was profiting 12k.
I like to pick and choose which properties I keep for the portfolio depending on a few things, cashflow from the individual Proprty, future growth potential, my own serviceability, etc…
Hope this answers a few of the questions.

Thanks Pascoe,

Yes it does, I think 20% is a good number. Good to know it can be done. Now I’m off to find a $10 million property :) seriously though, it encourages me to try it a few times.

Terryw wrote:

No need to cross collateralise – because you can do the same thing without.

Thanks Terry even better to know

Thanks for the artcile and further explanation Corey.

Thanks Corey and Terry for explaining the LMI I never knew there was a discount and this is a game changer for me, I’ve got an existing loan where I can probably access another $60,000 that I was afraid to use due to LMI. I didn’t realise there was a discount. Now I’m excited to use it.

I never intended for anyone to perceive that I would do this endlessly, it was just a tool. In the great words of Basher

https://m.youtube.com/watch?v=G8Kvkg3h-rg

Like you say, it would slow the decrease in borrowing capacity, since I was talking about LMI I thought it obvious there would be a limit. Is it still $3,000,000 for LMI do you know?

I’m still wondering about profit margins, Steves book gives examples of around 100% ROI but this seems even more elusive as not many people are giving real figures. I’m not saying it’s not true and some things make perfect sense, don’t build a pool and do use paint, I used to in fact be the pool man and it’s a definite expense. It’d be good to hear from those who’ve done renos.

Now @jltarra you asked plenty of questions actually, for the benefit of all I’ll answer but normally forum etiquette would be to at least attempt to help answer the questions the first poster (me) asked.

I’m not actually necessarily diy, I was asking about Reno.

How do I service it? I take some cash out of my Scrooge mcduck vault.

In seriousness, I earn great money so it doesn’t make sense for me to diy myself, that’s why I’m interested in margins, to see if it’s affordable to pay someone else, even if I pay them what I earn per hour, they’re better at the Reno job than me and there would be many benefits to paying them. How would I service it? I earn great money and my one investment property is basically cashflow neutral. I also save 70% of my income.

There has rarely been a time where rent has so closely paid the mortgage so easily. We are lucky to be at this part of the economic cycle. Yes, I intend to hold big loans and lots of property. Have you read Steves second book? There is a strategy along these lines.

@terryw I was thinking I’d need to see an expert like you re using LOC if I went that way because the next house would end up being cross collateralised I would have thought. I’m not sure how to keep them separate unless you use second mortgage which I’ve heard can be hard to do in this kind of scenario (using the equity from one property). Any info you can share would be great, but it’s probably something I feel I need an expert’s help in anyway.

Thanks for the quality answers that were given so quickly.

@jltarra I’m actually not going to answer your question, just like you haven’t answered mine.

Thanks Terry can always count on you.

Yes the latter is what I meant. Good to know.

Thanks guys. Thankfully it’s only $20,000. I’ll just park it until the next loan for an investment property. Separate the loans through a broker and it should be ok, I think. Does that sound right?