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.
CheersI just put some more photo's up on the flickr site. Some bathroom shots, and a couple of the house on open day, with driveway painted and carport complete. Sorry it took me so long.
Cool off period is over. No more backing out. Onward to profit we go.
What a difference the changes you made to the bathroom make. Looks great.
Did you use the spray gun to paint the tiles? Do you know how painted tiles stand up to being given a good clean/scrub?
I always worry that if they start to peel it's a horrific job to get the paint off before repainting.
Has anyone had any experience with this?Well done
ElkaDear Jase & Flic:
Good on you for your success and thanks for providing the detailed look into your adventures. This is really useful stuff!
I am still working though the numeorus posts of the thread….so in case it hasn't already been answered – may I ask a rude question?
What do you calculate your renovation costs would have been had you not been so 'hands on'? Still trying to get my old head around the real impact of not being a clever DIY person.
Bronte x
Hi all
Ok, time for the low down on all the numbers.
Here they are, as accurate as I can get them for now. The selling and holding costs might vary slightly depending how it pans out at settlement.Item Budget Actual
Purchase Price $242,000 $242,000
Acquisition Cost $15,612.19 $15,495.23
Renovation Cost
-Structural $400.00 $357.93
-Inside $14,476.91 $15,675.43
-Outside $6,805.00 $7,413.77
-Front Garden $1,600.00 $1,573.00
-Back Garden $1,980.00 $3,230.29
Total Reno Cost $25,261.91 $28,250.42
Holding Costs $6,264.32 $5,560.79
Selling Costs
-Agent+Ads $11,748.00 $12,550.00
-Furniture $2,500.00 $2,374.34
-Other $1,500.00 $2,274.85
Total Cost $304,886.42 $308,505.63
Sale Price $310,000.00 $350,000.00
Profit $5,113.58 $41,494.37
The budgeted profit is very small, but our first set of numbers actually had about $15k of profit. Then after we made the decision to buy, we learned of a few more bank fees, and a couple of other things that brought the expected profit down to that $5k. Also, the $310k sale price was our worst case. We expected around 320k, and hoped for 330k.
The reno cost did go higher than originally thought, but this was due to our deliberate choices, not just by "accident". We saw that the market was going strong, and that by spending more in a couple of areas we could lift the whole house to a better level. Specifically, we spent more on the bathroom, and on the deck. We had planned to do very little to the bathroom, but ended up re-tiling floor and painting wall tiles. On the deck we were just going to put brush or bamboo screening up, but decided on the cement sheet and texture coating instead. We were also going to just render the front wall, but decided to go around to the front door. I think it was worth the extra cost on these items to get the final product that we did.
Also, the total hours that we did was 860. We originally thought about 400-500 hours.
So at 860 hours I get an average of $48.25 per hour. Most of the hours were donated by friendly family members who want to see us succeed, so we are very grateful to themBut if I had to, I could have probably hired workers for an average of $35 per hour, so I would still have done ok. In future I will be trying to do less, and outsource more.Also, if I hired skilled help, the hours would be less, but I'm not sure how much less. At a guess I would say maybe 600-700hours instead of the 860. So there it is. Bring on the questions. JasonHi Jason, the reno is excellent! Did the prices of unrenovated properties go up in the time that you held the property or stay the same? Would you go for a more expensive area next time??
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.Thanks Jason.
Nice work guys and congratulations on the outcome. Can I ask whether you've calculated your CGT liability? I couldn't see it listed with the expenses.
Cheers, F. [cowboy2]
1. If you had known the projected profit was only $5k would you have gone ahead?
2. if the market wasnt red hot, what price would you have achieved and what profit?
3. what would you have done differently?
4. what budget items were cheaper / more expensive than thought?
5. any plans to reward the helpers in some way?Hi
Foundation: No, haven't worked out tax yet. Meeting with Accountant next week to sort it all out.Crashy: 1. No, would not have proceeded on a 5k expected profit. The 15k that we expected was a minimum expectation, and also we were very keen to get started. We thought that being our first deal if we came out with any profit at all it would be a success. Looking back, that is probably not a good way to make the decision, but we took the risk and it worked.
2. If the market was not red hot, we would probably have got $325 – 330k. If the market had downturned we would probably have spent less on the reno (about $25k) and then sold for $310-320k, so I still think we would not have lost, but it would have been much less fun.
3.I am happy with most things that we did because it was our first deal, but for future deals I think I will change:
-the minimum expected profit to be higher, say 25-30k minimum.
-allow for much more paid labor ( and still have the desired minimum profit)
-consider adding bedrooms etc as a way of increasing value further (this would not have been feasable on this deal though)
4.Spent over budget on border tiles, rendering, painting outside, deck area, plants and mulch.
Spent under budget on kitchen appliances, carpet, floating floor, roof re-spray, paint driveway, rubbish removal.
5. Yes. Do you think a Toblerone will be sufficient?thanks for answers
I could pat you on the back as others have done, and you deserve it, but……..
you would obviously realise it could easily have gone the other way. generally those who say "I dont care if I make a profit or not on the first one" dont become successful in this game.
as long as you have learnt from your mistakes (and Ive yet to see you admit you made any except for missing entry costs) thats the main thing. Experience is defined as the sum of all your mistakes. Therefore, if you didnt make any, you didnt really gain any experience. at least thats what they say………
dont take this as negativity…………just realism
re #5……..lol
having been a helper previously to someone who at the end just said "thanks, seeya" its good to show appreciation, especially with a very quick 40k+ profit. I never saw that someone again I have always regretted helping them to make a fortune at my expense.
if it were me, I might throw a party or take everyone out for dinner……..some might even buy a few slabs or bottles of wine. I helped out my father-in-law a few years ago with an extension and this year he returned the favour for us. The brother-in-law also helped and I saw him eyeing up something I wasnt using so I just gave it to him.
any thoughts about doing renos in other states where stamp duty is lower or doing renos on your PPoR?
Dear Investors,
$15,726.00 is not a huge margin to work with. Renovations are almost always more expensive than you first think. Prices of materials and labour have become a lot more expense over the past few year due to a number of reasons. As you would already be aware there is a real danger in over capitalising as all your hard work will be for nothing. It is also important to find out what people will pay more for, what you consider add value may not be add value to someone else. Many people spend a lot of time renovating the inside of a property and forget that street appeal is one of the main reasons why we are attracted to a house in the first place.
Kind Regards,
Mark Leith
Property Advocate
Global Buyers Agent
http://www.buyersagent.com.auCrashy
"dont take this as negativity…………just realism"
It's not just realism. It's negativity. Jason and Flic have done a fantastic job and the results were better than they expected. They budgeted to make a profit (albeit small) and they made a very reasonable profit. It was their first reno. Their posting of their progress on this forum has been, I think, one of the most valuable posts I have read. Your comments that because they didn't make very many mistakes they didn't gain any experience (even though you have disguised is with the disclaimer "that's what they say" is inflammatory and uncalled for.
Of course it could have gone the other way. So could EVERY investment, whether it is in shares, property, even sitting in a bank. If there was no risk then everyone would be doing it. I think it is unneccessary to point that out.
Well done Jason and Flic on a job very well done and good luck with your future renos. I am doing a property investment course at the moment and just recently had a speaker who does renos for a living and she said that if she knew at the beginning what she knows now, her first few renos would have been even more profitable. I hope the same goes for you and that your work becomes even more profitable in the future.
Cheers
K
Well done Jase and Flic!
and well said K ….
I didnt say anything negative.
Everyone else has already flooded him with pats on the back. I doubt he did all this for that reason.
Its easy to become complacent after an early success. much harder to reproduce success time after time.
Well done Jase & Flic, I'm really happy for you that you got that great offer so early, but a bit disappointed as I was gearing up to go to the second open for inspection. Oh well. I'll really miss your posts, so hurry up and do the next one !
Sorry me again – forgot to ask – what is the name of the Furniture Hire Company you used?
I'd accept a toblerone for helping but it'd have to be one of those really big ones that you get at Christmas from your big brother (when he was eight – he doesn't get me anything now he's 43).
I think you did pretty well for your first outing. Okay, so you went ahead aiming for a small profit and you ended up making a fair bit more. The main thing is that you actually did something. So many people sit back, procrastinate and then fail to take action. Forget all the nonsense that Crashy comes up.
So, what are you going to do next now you have a little experience? I've down a few renos in my time and, if you have a minute, here is my advice. Don't buy another straightforward reno. By straightforward, I mean an undercapitalised house that just requires an update. Look for a property which needs a vanilla reno (as that obviously adds value) but which also has a "hidden" source of untapped value. I have found that vanilla renos yield about 10% to 20% in actual before tax profit. There are a number of reasons for this cap in profitability. The two main factors are that prices are almost always going to be comparitively high as everyone and their dog wants to buy nice little doer uppers and make a quick buck. You're competing not only with other investors but also with the general buying public. Secondly, you can only ever raise the value up to that of the best comparable house in the surrounding streets. Properties with "hidden" value tend to yield a lot more. So, what is a property with hidden value. Well, there isn't one type but the following are things to look for: a property (not necessarily a house) on land that can be developed, subdivided or strata titled; a large house that can be made into flats; a house that can be extended either outwards or upwards; or one where more rooms can be created by division of larger rooms or use of under utilised space; residential to commercial conversions and v.versa; flats back to house and v.v; unfinished projects; what I call "shell developments" – eg: old industrial buildings or agricultural or public sector or church buildings or old shops that can be converted to residential or commercial. There are quite a few more. The main thing is that such opportunities are not even seen by the general investing public (negative equity buyers and safe positive buyers). They're not seen by most agents either. Such properties are therefore often woefully undervalued. And even if they do get spotted most people crap themselves at the work involved. You do have to use your imagination and have a bit of flair but the risks are certainly worth the extra work.
The other thing I would suggest you start doing is measuring profitability as a percentage. You mention that you would be happy with $25k to $30k profit but off what? That's not a bad outcome if you've only outed $150k but that's a nightmare if you outed $500k! I normally look for a minimum of 20% return on outlay. This confuses real estate agents as when they ask me what price range I'm interested in, I always reply that the price doesn't matter so long as I can get a margin. The problem then is that they just can't get their head around a client who might buy a $115k outhouse or a $750k mansion (I live in Tassie were $750,000 still does get you a mansion) – but I will so long as I can see 20%+.
And my final comment is that I totally disagree with Crashy's comment that "Its easy to become complacent after an early success. much harder to reproduce success time after time.". Of course, the complacent will fail but you don't strike me as being complacent. And with experience, you gain knowledge so obviously things become easier. Your next outing will be even better than this one. So, the very best of luck to you.
Andy
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