Golden Rule of Renovating

Hi Steve

well its two hours since you started this thread and no replies yet, mustn’t be many renovators reading this arvo, perhaps they are still hard at it.

Ok my Golden rule is simple – make a profit.
yes its a bit obvious but its easy to get carried away and overcapitalise, or on the other hand fail to do enough checks when you buy and discover the costs are way more than you initially thought.
Some other things i keep in my mind is what am i really trying to do, is it – improve a property that i’ll hold as a retal or fix up and sell? To me this is very important as if i’m keeping it as a rental i’ll probably keep the costs in check and not spend too much on the fitout eg Carpet etc, where as if i’m planning to sell it then its looks great to have some really nice feature and spend a little more even on simple things like the letter box.

My last comment before i let someone else have a go , is if it is a fix up and sell keep in mind the tax implications of owning and selling in 12 months time. Sometimes its better to rent it out “as is” for 12 months then do the reno and then sell. If you do the reno , then let for 12 months and then try to sell, the property is no longer in Mint condition.

regards westan

I live in New Zealand and for a fee find cash positive deals there, email me at [email protected] to join our database

Hi Steve,

While it’s fair to say that doing the reno yourself is replacing one job with another, it’s also a way for those getting starting to get a bit of capital behind them for future deposits (well, so long as they don’t overcapitalise and actually make money from doing the reno).

You gave up a lot in the begginning to get yourself on the road to success ie: you rented on a main road, lived off one wage etc. For others it might mean giving up their free time to renovate, “a bit of pain for future gain”.

For me, renovating one house meant I knew what to expect when asking tradesmen to renovate future houses. It’s easier to have the wool pulled over your eyes if you have no idea of what really needs to be done.

I’m glad you mentioned the pitfalls ie: it’s easy to overcapitalise, people do need to do their homework first and know the true cost of what they plan to do.

PK

Hi Steve,

As my partner and I are renovating properties, and hoping to get ahead by doing so, I found your article in the newsletter informative, and reinforced to us that we are on the right track. However, I do have to agree with Purplekiss, in that, we are doing a lot of the hardwork (well my boyfriend is anyway) in doing the renovations but this is the only way we can really afford to at the moment. Down the track it would be lovely to be able to afford to pay tradesmen, in the mean time my boyfriend is one, so by him spending sparetime renovating for us, we are hopefully one day going to be able to afford it to be his full time job, and eventually one day the renovations will be someoneelse’s job with us just giving direction. As we are just starting out though, I don’t really see any other way that we can afford to be doing the renos. So far he has done a great job and enabled us to make very good profits, funding our next real estate projects. I guess we all just have to take advantage of whatever your expertise are. [biggrin]
Thanks for all your great tips and advice, this forum and your books are great!

Lara

Lara Hansen

Hi all,

Firstly Steve; like the newsletters keep them coming, love the site – great ideas, great people[cowboy2] and I can’t wait to read the new book!!

While the renos would be easiler to do if there no tennants, my accountant says that its more tax effective if the work is done with them there.

What do you think?
Maybe reduce their rent for a time before you put it up when done. Or even, do as much as you can with them there eg; garden, deck, garage/shed, A/C
and do the kitchen, bath, paint etc later?[^]

We have just finished our first reno and have refinanced along the way to buy or first IP and now have the reno house (PPOR) under contract ….as explained in another thread.

We lived in this house for the reno and did everything walls in & out, doors, tiling, plumbing (Dad’s the pro), Electrics (mate next door), painting, plastering and I have to say before this house I didn’t have a handy bone anywhere. Now I can do everything[biggrin]….with in reason. Our next home we will use a little help from tradesmen.

It worked well (apart from the mess). I am on shift so I have 4 day weekends to get stuck in. The kids are young so I can keep an eye on them so my wife can work part time when I’m at home.

And yes doing renos yourself is like another job, but it has to be worth it. I suppose the CG – costs = your wages / the time took. It was worth it for us.

Sorry I took so long.

[medieval]

Matt

We actually enjoy renovating. We have done it with nearly all of our properties. If you choose the property well, then a reno shouldn’t be anything more than cosmetic. We do all of the work ourselves, (apart from electrical) and love doing it. It takes us between 1-3 weeks to complete (after work and on weekends), and each time has enabled us to use the new found equity to buy our next one.

The trick is to concentrate on the WOW factor without the cost. We use wholesale kitchens, which look just as good, but cost about 1/2 the price. We use relatively cheap tiles, light fittings etc, but if chosen well, look just as “classy” as much more expensive ones, and work just the same. One thing we learnt not to scrimp on though, was paint. We used fairly cheap paint in our first reno, and had to re-paint after a very short period. We only use the good stuff now.

It is a great learning experience. We used our knowledge to renovate our PPOR. We spent $25,000 over 3 months, and after valuation we found we had added $140,000.

Yep, it can be hard work doing it yourself, but if you’re a handy person and enjoy doing it, the satisfaction you can get from seeing your completed work is immense.

Cheers,
Karen[biggrin]

Hi Ali G,

We hired a carpenter to work for cash at first. We had a major deadline and I got to pick his brain and learnt HEAPS.

My Dad is a plumber and this saved us $000’s and I got to learn from him. My mate nextdorr is the sparky and I don’t touch that and for tiling we picked the brain of a couple of tile guys, got the right tools and had a go!! I did have a “practise area” for the tiling – the outside laundry.

Hardware shops have heaps of handouts for different types of jobs – “how to do’s” and Bunnings Warehouse even run hour long courses on weekends.

Although I am considering doing an Owner Builders’ course at tafe for this next house. It is much much bigger than the last.

[medieval]

Matt

Hey Ali G,

Well, we didn’t read any books or anything. I figured by the time I’d finished reading a book we could have finished the house/unit anyway.

We just got in there and did it. My husband is not a tradesman, but he’ll give anything a go. The only thing he realises he’s not so good at is tiling floors, so he does try to avoid that (walls he quite likes). We’ve got a friend who dropped out of a carpentry tafe course, so he helps us fit the kitchens. He also helps fit floating floors when we use them. If we’re fitting carpet, we leave that to the carpet layers.

I choose all the designs and colours, and look after the painting and any other bits and pieces which need doing. My Dad also comes along to help. He’ll give anything a go.

We didn’t have any experience with any sort of renovating before we started doing this. We’ve made a few mistakes along the way, but nothing which couldn’t be fixed and we learnt our lesson for next time.

Cheers,
Karen[biggrin]

Hi Ali G,

It certainly wasn’t easy – I learnt from making mistakes!!

I will never plaster again (my wife plastered and she will never do it again)…too precise and I can always see the defects.

We waterproofed and tiled. Word of warning though..as of last month (not sure if its a council regulation or only QLD) if you do a reno you must either have a professional waterproof you shower etc or have it certified as being properly waterproofed!!!

This was a big surprise for us. Lucky we took photos. Take photos … heaps of them. If you have a buyer digging around for faults etc so they can get a better price – the photos will back up your claims.

Also it seems just by having the council involved and checking your work with reguard to council regulations, is not enough for some people. I have just been asked to provide an engineers report to certify one or 2 things.

Next time I plan to get an engineers report on the next house and get him to draw a plan of the structural mods for me to follow and check when complete.

Have Fun!!!

Matt

Hi just wanted to add some more information into this thread.
I’m currently involved in a Group that is being mentored on the subject of renovating for a profit.
As a group we are actually doing a joint venture renovation meaning researching, purchasing, renovating, and on selling a deal as part of the mentorship.
Basically what is being taught is that you lock in your profit buy buying real estate at a price that ensures a 15-20% profit on resale.
Goes a little something like this.
You need to research what renovated properties are actually selling for in your target area i.e. lets say 3 bedroom renovated houses are selling for 250k you would need to deduct all entry and exit fees, your profit margin & renovation costs, to arrive at an ideal purchase price to buy an un-renovated house to ensure a profit on resale.
I have been interested in doing a Reno for a while but lacked the knowledge to actually do one and make a profit.
I’m not sure yet if what we are being taught is actually feasible as we may need to buy an un-renovated deal at a heavily discounted rate off fair market value and this part of the process seems to me a little bit steep.
These are just a few of the examples of “Golden rules” we are being taught and this being a pilot project for the mentoring company time will tell if they are correct.
At this point in time we are currently researching sales prices of renovated deals to enable us to figure out an ideal purchase price, we hope to buy before the end of the year if you like I will let you know how it all pans out and my feelings of the company that is mentoring us.

Thanks to everyone that posted in this thread there is some great information.[cap][biggrin][buz2]

can anyone recommend any courses,programs or training that teaches hands-on basic skills of renovating? Also any contact details of places that provide these would be greatly appreciated.
Great post this topic.