Renovating full time?

you are not looking at the big picture. there are countless renovation shows on TV all proclaiming with equal ignorance that renovating is easy, quick, hassle free, cheap and highly profitable.
There is already a surplus of unjustified positivity through these programs. rarely though does anyone dispute these views and offer a realistic alternative. This is why we have thousands of people throughout the country in deep trouble after taking on a reno they could neither manage nor afford. Many a marraige has ended in divorce because of the stress created and financial loss suffered. Many people have become ill while living in a home covered in toxic chemicals and carcinogens, not to mention utter filth and inconvenience.

all I have done is expose the little known truth. if you are smart, you will realise Im doing a GOOD thing.

I have already covered a lot of those questions in other threads recently.

For us, the golden rule is "you dont make money when you sell, you make money when you buy"

You have to buy below market value. If you pay market value, its very difficult to make a profit considering sell costs. If you are not buying at least $20k below value, find another deal. You must deal with motivated vendors. This includes distressed sellers, deceased estates, stale listings, half-finished reno's and houses that have failed building inspections.

You have to buy the house nobody else wants to touch. When we walk into a house, we get excited when we see rot, termite damage, dated kitchens & bathrooms, bad layouts, leaks and tennant damage. All of these things represent an opportunity. The more obvious these things are, the quicker buyers will run out the door. Its a simple supply & demand situation. If the house is tidy, everyone wants it and it fetches over market value. When nobody can see past the repair costs, nobody makes an offer and the price drops. People believe repairs cost more than they really do.

We go to realestate.com.au, search an area, sort by date listed, then go to the back page. Why? we want the smelly stale listings. We dont EVER look at houses that have just come onto the market. Why? because thats what everyone else is doing. We dont want to compete against them. Secondly, the vendor is unlikely to accept a low-ball offer if its a new listing. He still has his head in the clouds because the agent lied about how much he could get. Low-ball offers are only accepted after a month or more on the market, and few if any viewings.

I recently viewed a house and had no interest in it. It was reasonably priced and it hadnt been on the market very long. The agent called a few days later to see what I thought. I said I thought it was overpriced and wouldnt be interested until the 300k mark (house listed @ 339k). To my surprise she said they might take it and asked me to put the offer on paper. The offer was accepted after much negotiation on the sellers part (325? no,300. 320? no,300. 315? no, 300. and so on) until 300 was accepted. 2 weeks later the agent got an offer of 325k. I was forced to go unconditional, and of course did so happily.

Later found out the vendor was dying and couldnt spend the money anyway.

Ive found it useful to make a "first and final offer" and be prepared to walk away when the offer is rejected. My 2nd house, I dealt with the same agent earlier in the day, told him it was first and final and walked away when it was rejected. This put me in a great position later that day when I gave him another offer for a different property. He knew I meant what I said and would walk. He convinced the seller this was it.

We stay away from structural problems. If footings are gone, its difficult / costly / time consuming to repair. We are in it for a quick buck. In & out quick is the name of the game. Termite damage is easily repaired, and frightening to most buyers. Rot / leaks are the same. Asbestos is unavoidable, our main rule is to avoid houses with super-6 roofs. they are harder to sell. I prefer tile roofs, they are easily painted and can look new. Iron roofs can also be done, but its more work if there is surface rust and the result is less spectacular. With an asbestos roof its grey & old, and not much you can do. Serious paint decay is a bugger to repair. you can sand weatherboards for weeks. I allow $15k for a repaint.

Whatever house you buy, it MUST sell quickly. It must be presented well, be generic, neutral colors. Houses on busy roads are hard to sell. Houses next to hoarder neighbours are hard to sell. You must appeal to the largest market possible. Art deco houses are hard to sell. Ugly houses are hard to sell, even if beautiful on the inside. If street appeal isnt there, people make up their minds in the first 30 seconds.

For us, updating isnt enough. We want to add living space. Usually this means adding a bedroom and/or bathroom. We often turn a 3 bed 1 bath into a 4 bed 2 bath. Sometimes its simply a matter of changing the layout. Old houses often have large laundries which are not used much. On my first property, I created space by switching the position of the kitchen and dining. A lot of space in the kitchen was wasted due to the back door and walk through access for it. The dining required walk through access anyway so the two were combined. Knocking out walls is not that hard. Even structural walls can be taken out with the right know-how. The layout was appropriate when the house was built but life has changed. The kitchen is now the most occupied room and other rooms should be designed around it.

Bathrooms are often easily increased by knocking out the wall between the toilet and bathroom. This also allows you to steal some space from the hallway, and even more space if you demolish the hall cupboard that usually is on the same wall.

I think I have an advantage over other renovators because Im a tradesman (so Im good with my hands, plus I own heaps of tools), and Ive spent 15 years on building sites watching other trades do their thing. Im also very thrifty and spend $1 where other people would spend $4. I buy stuff on ebay, from St Vinnies, Ikea discount bin (my favorite for kitchens) and auctions. NEVER PAY RETAIL. EVER.

You make money by improving the house for less than people believe it should cost. If you plan on spending $12k on a kitchen the buyer wont give you an extra $12k for the house. he might give you $7k though. Spend $12k and youve lost $5k. However, do the same kitchen for $1500, and youve made a profit of $5500. Same goes for bathrooms. I did a bathroom people thought costed $15k. Cost me $2k.

thats how you create value……..

Unless you are willing to do 90% of what I just listed, it might be difficult to be profitable. Plus, you must be willing to live in filth and suffer inconvenience for long periods. If you are afraid of debt, pass on renos. If you are afraid of hard work, give it a miss.

Hello,

I am a full time renovator and I'm not a tradie – and this is my first meeting of "Renovators Who Are Not Tradies Anonymous".  Maybe Crashy could be my mentor.  Christ, I'm dying for a drink… maybe I'm at the wrong meeting?

Anyway, I think, before Crashy and Chumpy decided to lay into each other in the pub carpark which is http://www.propertyinvesting.com, that the initial question was "is it possible to make a decent living doing renos full time?"  The answer is absolutely.  I'm living proof.  And you don't have to be a tradesman (you do need to be able to know when to employ them though – as well as other professionals). 

It ain't easy, you have to be prepared to work probably harder that you do now, take some hopefully informed risks, make a fair few mistakes, learn as you go and be very self disciplined… oh, and be able to pick yourself up (as you now have no colleagues or manager to make you all better again when you find out you've just really cocked up!)  Apart from that its a breeze.  Far better than working for someone else.  Buy an ipod though as it will be your sole companion for much of the time!

By the way, although I don't agree with everything said by Crashy, his last post does highlight many of the common mistakes made by the foolhardy.  You do make the lions share of your profit when you buy.  Learn to love the dead, defaulters, drug addicted, incontinent pet lovers and smelly property owners of this world.  For they shall pay your way.  Also, be friends with agents as they sometimes will throw you a bone (not very often it has to be said).  But also remember, always work to a minmum of 25% actual profit before tax (and that means factoring in all your costs – like what those nasty real estate agents will charge you when they sell your property etc…).  Don't overcapitalise.  If you spend $100, expect it to add at least another $100 to the end price.  Work like a dog.  And work quickly as nothing eats profit like interest charged (and it goes amazingly unnoticed at times).  Do a good job, and employ people when you need time, skills or knowledge.  Do not be scared of negotiating or hectoring those who fail to provide you with a good level of service.  Never pay until 100% satisfied.  And always get a discount.  Don't try and achieve this by rolling over PPORs as the tax man is an evil force to be reckoned with.  Oh, I could go on for ages but to be honest, the only way you'll learn whether its right for you is to give it a go.

Oh, and don't expect to be doing 5 houses a year (without a large amount of cash and a great deal of subcontracting).  You'll be dead from overwork or bankrupt through bad management by the end of the third month.  To do 3+ a year, you move up the ladder from jobbing renovator to full on project manager/property developer.  But you need some experience first.

By the way, I hear the car park behind the Thieving Hounds in Lewisham is always a good place for a pitched battle if you two ever decide to meet up.  We could sell tickets and take bets?  My money is on Crashy as he's a tradie – particularly if he's a bricky.

Very best regards from the peace loving,

Andy

Principle Place of Residence..ie your home

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