Hello Renovators (especially experienced ones),
You buy a run down house, spend $10-$50k+ improving it and then sell for a profit right?
You do what you can around the place and hire plumbers, electricians, plasterers, painters, carpenters etc for the rest….
Then you repeat the process with another house.The concept is easy enough, but how do you do it legally??? I'm in Victoria but other States would have similar laws:
I read the following in a Building Commission handbook:
"An owner-builder is defined as a person who constructs or RENOVATES a domestic building on his or her own land, who is not in the business of building". It goes on to say:– you must obtain a Certificate of Consent in order to obtain a building permit to carry out domestic building work valued over $12,000.
– You can only do one owner-builder project every 3 years.
– You must have insurances and provide subsequent purchaser with 6.5yrs warranty insurance.
– And of course there are penalites for not complying with these laws.So, experienced renovators…..how do you structure yourself for the business of renovating?
Presumably you don't go down the owner-builder path.
Do you get building permits? My understanding is you need one if altering structural walls or doing anything more serious than simple cosmetics. eg. assume the project requires changing a single garage to double, altering room layouts by modifying both structural and non-structural walls, painting, plastering, polishing floorboards, new kitchen/bathroom.Do you use a licensed builder instead? Wouldn't they eat up your profit and not be keen on you hiring/managing tradies whilst still doing bits yourself.
Thanks in advance for any advice.
I'm keen on renovating but want to do it right.
Jodydepends on who you know etc.. id put it through a builder and organise everything myself. as a rough guide any builder will hit u for 15% on EVERYTHING as their wage. if u can just use their license and organise everything possibly pay cash u can save alot more than 15% making it actually worth your while.
alternatively take it in turns, you go owner builder, then your spouse does.. not sure about those insurances. maybe they apply if u have to make the house a building site? pretty sure for any domestic ( non construction) work most tradey's dont apply for insurance. most work under the builders unless they are a company, then they have to legally get insurances. most abn holders dont ever bother, just acn holders..
owner builder is someone who does STRUCTURAL work. This means altering existing structural walls or adding new ones via an extension. Things like gyprocking / tiling etc are not structural work. would have to be a big job to get $12k in structural work. Of course, if the bill is $11,999, you're in the clear!
Thanks for your comments dollarman and crashy. I've spent the morning speaking with the council building services dept and many building surveyors. Both are permitted by law to issue building permits. The council was very down-the-line and said "As soon as you pickup a hammer or glue something a permit is required". The building surveyors were more practical and said you only need a building permit if altering the structure. I think the answer is to minimise structural reno work, and if needed, keep it less than $12,000 (in Vic). If the value exceeds $12k, find a friendly builder as dollarman alludes to.
crashy wrote:owner builder is someone who does STRUCTURAL work. This means altering existing structural walls or adding new ones via an extension. Things like gyprocking / tiling etc are not structural work. would have to be a big job to get $12k in structural work. Of course, if the bill is $11,999, you're in the clear!Sorry, but I'm pretty sure that you're incorrect. It doesn't matter what you're doing – painting, plastering, tiling, etc. It's all included in the $12k limit. Furthermore, you must calculate the cost as if you were paying a fully qualified trade to do it. This means that just because you can plaster and paint a room for $250 in materials doesn't mean that you only add $250 to the predicted total – you are supposed to calculate it at $2,000 because that's how much you would pay a plasterer, painter and possibly electrician to do the job.
If you want to be fully legal, once you start doing more than just a single room or a bathroom, kitchen, etc. You technically need a permit as an owner builder (once every 3 years) or employ the services of a qualified builder. For a little more info, have a look at this thread: http://www.somersoft.com/forums/showthread.php?p=340253
To answer the original question, unless you are paying licensed contractors/builders to do you reno work or unless you are doing less than 1 every 3 years, there is no legal way of doing reno work and making money. The people that are doing it now are doing it illegally.
In NSW works below $12k don't require home warranty insurance – for piece of mind building, contractor risk, public liability and contractors/accident insurance etc should be bought for piece of mind.
If doing the work yourself, then progressive reno you may escape not having to get an owner builders licence ie you don't need one if you are going to patch and paint a few rooms, replace carpets, doors or fix up a few taps.
Check that the work you are going to undertake doesn't require a DA (council application).
Most tradies HAVE insurances – dodgy ones don't (as they don't meet the low standards set by dept of fair trading).
Cash is great, gets the job done cheap (today) but when you come to sell YOU are the one who has to pay the CGT on all of that extra profit generated by the 'cheap' work. Some saving huh? You might save gst on the labour but the tradie is paying gst on his purchase and you will be wearing that as well (he can't buy without paying it).
If margins are so tight that you have to take big risks, are the risks worth it?
It's not possible to continually do this yourself legally, Jody, you're quite right. Yes, lots of people do it, but they're taking an enormous legal risk and I'm sure there'll be a case sometime soon that highlights the perils.
Dollarman, you certainly can't take turns with your spouse here in QLD, unless you have no shared property ownership or anything. It's pretty much impractical as far as I can ascertain. If you own a PPR jointly, nobody who's part-owner can get another owner-builder licence within SIX years of any other part-owner getting one (last time I checked it was 6 years in QLD).
And crashy, srobins is correct – there's no distinction between structural and non-structural work. In fact, let's say you pay a pergola company $10K to put up a pergola, but decide to do some jobs like painting the timber and paving underneath it yourself to save some money. Or even pay a separate painter or paver to do the work. Guess what – if all works add up to a RETAIL VALUE of more than $12K, you just became an owner-builder and are barred from doing any other owner-building work for the prescribed time period. Yes, it's incredibly restrictive, but that's the way it is.
Scott No Mates, with regard to what you're saying about progressive renovation – yes, I think everybody does it. Given that it's recommended that you spend 2.5% of the value of your home each year on maintenance and improvements to retain its value, who could avoid spending $12K within 3 years? But the advice I received from the BSA (Building Services Authority) here in QLD is that if you pay more than one tradesman for work on your home, and it adds up to more than $12K, even if over a period of time – guess what, they consider you a builder. I have no idea how this can possibly work in practise. eg We got our carpets replaced for $13K a couple of years back. My reading of what they were saying is that if we now get any tradies to do work on our home, we should have a builder involved as we've done more than $12K of work…. yeah, right!
I think the pragmatic position is that if you're employing a series of professionals to do "unrelated work" (eg carpets in one room, new light fittings in another, etc) on your own home over a period of time, nobody's going to care and that's not the situation the legislation is intended to cover.
But if you attempt to get around the laws requiring management by a builder, by doing, say, a whole kitchen or bathroom using one contractor to do the tiling, another to do cabinets, another to do electrical etc, well, you can't do that without a building licence if the total value of the new kitchen/bathroom is more than $12K. And this is exactly what many professional renovators are attempting to do, many of them I suspect with no idea of the potential perils.
Find a friendly builder who's willing to do it for a reasonable mark-up and work with you, then it's covered by the builder's insurance and they're answerable for all works. Builders are just one more in a long line up of people – including finance brokers, solicitors, accountants, hydraulic consultants, town planning consultants etc – who can save you far more than they cost you, because they have specialist expertise. They also have great contacts and can save you far more than they cost you by referring you to reliable tradesman who do good work at a reasonable price, and actually turn up!
Good luck!
Trakka, you're right regarding the intent of the legislation it is to ensure that building works are carried out by licensed trades (Dept of Fair Trade/VCat etc). The use of unlicensed trades is risky – most tradies regardless of company status/sole trader/partnership have blanket insurance policies not taken out on a job by job basis (notification of risk required) – if they don't have insurance YOU aren't protected if something goes awry.
Some types of work can only be undertaken by licensed trades regardless of value – eg plumbing, electrical, air con, asbestos removal (in some circumstances), scaffold erection over certain heights. Other works above some nominal threshold do require licensed tradies. So in your instance, you may not need to engage a builder for $13k of carpet BUT the carpet company/layer would have a licence for their trade category.
I generally stick with the rule that if it doesn't require a planning permit ie nothing structural then I don't need to have a owner/builder's licence. That is not to say that I won't require the tradies to have the appropriate licences & insurances even if I don't need a permit.
Does anyone know if I do a reno in Vic that required a qual builder can I then do one in NSW and then in QLD. That is, is the legislation only state based and doesn't cross borders? Or if I do one in Vic, I can't then do one in Vic or NSW for 3 years and QLD for 6?
Thanks,
JLIf you are using a licensed builder you can do as many as you like in whatever timeframe. In NSW, at least, you will be required to have an owner builders licence requiring you to sit a course – about $500. Not sure if it is the same in other states.
Hi Scott No Mates;
Please correct me if I am wrong. Lets say I am planinig to add extra bedroom to my unit, so as long as I dont go over 12K I can do it as an owner- builder and I dont need council permission for the work?
Where can I find more info about the rules of applying and beeing owner-builder?
Daniko – 'building work' is a defined term which includes erection of walls (load-bearing or not). If you are planning on erecting a wall to create the bedroom, then you will need planning approval. An owner-builder is still required to achieve a certain level of competence before being licensed to carry out building work (the $12k limit applies to licensed builders not requiring home warranty insurance).
For licensing requirements contact the dept of fair trading/vcat.
If you intend to do work in your unit, you will probably need consent from your body corporate as well as council.
wow. you can only renovate every 3 years?? but what if in the 2nd year you want to renovate again?? would that be illegal??
Yes if the work was unlicensed, however there is nothing stopping your partner and yourself taking turns at being the licence holder.
Hmmmm, this is very interesting, and disturbing.
So what you are basically saying is that if I buy a property, rennovate it myself for say $10000, but if I'd emplyoed someone to do the reno for me it would have cost $15000, I am doing the work illegally?
Surely there are 1000's of people who are doing this. It's not hard to spend $11000 (the limit here in Qld) on a property – put in a new kitchen and a couple of bathrooms and that's your limit well and truely blown. How on earth is this policed? Who knows what I am doing in my house? How can they prove that the new looking kitchen wasn't there when I built the property?
I am looking into buying a house as a reno project. I'm budgeting around $20000 for the reno, but in light of this I'm having second thoughts.
If I did say $10999 in work and a builder did the rest, would this be legal?
Would be very interested to hear more abobut this. I guess people won't post if they are doing "illegal" renos………
Rudi
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