Is it still possible to make money (a decent living) renovating houses?
I know people could make money out of renovating years ago and I've seen here that some have done that recently.
I also went to uni with a girl whose boyfriend worked for a guy in Newcastle who did this for a living (and has made a motza over the years) but is the margins too small now days to risk it. Are these the exceptions? I've read elsewhere on the internet where people think that its no longer possible to renovate for profit as all the TV shows have encouraged all and sundry to do this and "Renovators Delights" are being bought at prices close to or the same as it would have been renovated.
I'd love to do this myself as I have renovated 2 PPOR's myself and have a degree in Architecture (only the first one, didn't bother getting the second one required) but do not work in the industry.
Whats the thoughts on this.
Does it really rest on getting a real bargain in the first place or can you pay a fair price and still increase the value enough to make it worthwhile. Is the holding/selling/stamp duty costs prohibitive? Is it worth doing but only after holding for 12 months to halve the CGT?Does it require doing everything (that you can legally) yourself or is just project managing the work give similar results as it takes a tradesman alot less time to do.
Putting aside the current market as I'm not interested in a discussion with the D & G ers, I'd be interested in hearing others opinions and experiences.
Do the general public think it's no longer possible or worth it because they don't have the experience, vision or passion for it?
One of the reasons I did my degree was to get into this but for reasons I won't get into other than to say a husband, a small child and a mortgage that had to be paid has forced me to go back into the industry I left to go to uni. Sigh!!!
I think I have a talent to see an ugly duckling for what it can be and have the design training so I want to give it a go but don't want to go down a no win path or work for peanuts.
What do you think?
Hey Bespoke,
i'm with you i would like to know too.A few extra questions.
If you do renovate what seems to be the best bang for buck-
Kitchens and bathrooms? etcI recently built a bar for a client and they sold their home just 3 weeks ago.
I was informed that they recieved 10k more for their property than what they expected and the RE explained that the bar was a real selling point for the property.What other mods help the sale of a property?
Adrien Mamet
http://www.mametconstructions.com.auIn my opinion, there is always money to be made buying and selling property. The fundamentals don't change whatever the market conditions are. If you buy well, put the right money in the right places and sell well, there is a profit to be made.
If the place is a complete train wreck, it has to be priced accordingly. There can be very costly repairs to be done which do not add to the saleability or price, such as driveway, roof, stumps, fixing damp or removing asbestos
Another option is one where the hard and expensive work has been done but circumstances are such that a quick sale is needed. There are usually a few of these around. Unfinished renovations or ones which have been renoed inside but have not done the gardens or fences yet. The appearance and saleability of many houses is increased more by a $1200 picket fence, a good clean, a working bee in the gardens and professional photography than by a $12000 kitchen. Doing it as a primary source of income is a big risk until you have the capital to ride it through because you never know how long one will take to sell for a decent price. A lot of property sale prices are a direct result of the actions of the chosen agent and often has little to do with the condition of the property. It comes down to the fact that there are good agents to buy through and good agents to sell through.I like the strategy of doing a few to build experience and develop enough equity and cash flow to enable buying several more as stock for holding for 12 mths to reduce cgt. A good working relationship with tradies is essential too.
Hope this helpsHi Bespoke
As jeffj has mentioned there is always money to be made in buying and selling property "correctly".
To me it all comes back to the old word "research". Know you market and then you know when to jump.
Steve has mentioned a number of times in the past doing the sums on a project in five minutes (or something like that)
If you know the market well in the areas you are looking, five minutes will be enough to give you a good guide on a reno.
May be I,m making it sound alittle easy as I knock over a few renos each year, so your always learning.
example:
The current project I have is a large corner block in metro melbourne. Its actually 500 m from steves property investment office.
The project has been a reno and extension on the 100 yo house, subdivision and new townhouse next to it.
The project will be about 16 months in total as I work full time.
The investment is about $1.2 and the return is about 35 % based on the current market.
I suppose a single house reno without the option to develop will not pull a large return, but this doesnt mean
its not viable in your eyes.
You may feel a $50k return on a house reno is great, but i just prefer something alittle bigger.
To sum it up you have mentioned ( a decent Living) out of house renos.
Even with the projects I complete I still wouldnt throw my job away just yet.
You need a S*** load of equity to walk away from your day job. Both for general living and also finance from lenders.I hope this little bit helps
cheers
JasonShould I invest in a bubble that is about to blow… Considering it probably already has and the property market on average has taken a 8% dive in the previous year, which is just the scratch of the service… You will see certain properties sell at 50% discount or more in the years to come.
Obviously now is not the time to be even considering playing in this field, If you want to make money in 2009 buy gold or silver, Also after most of the carnage in the share markets and commodity markets has finished it would be a good time to invest in things that make the world go round… like oil and food…. and Medicine…. Look for innovation… That is where the profits will be.
But now is not the time to be investing in these things, We have not seen the start of this economic collapse yet, You would be better spending your energy's on saving cash and liquidish assets, Not trying to figure out how you can go into debt…
A dictionary can also be considered a wise investment
awwww, I make one word up and now the spelling police are after me for committing an act of language terrorism, Does you feels like a big boy now ?
Is your eccentric ego feeling better now that you pointed out my bad linguistic skills and therefore rendered my post frivolous ?
How about stepping up and debating me on relevant topics and adding to the forum instead of running around like a little school girl tallying grammar poo poo's
If not you can always leave and go to http://www.spellingwars.com
If I was tallying, I would have scored six errors actually.
Why do you come onto a property investment forum to carry on with such negativity?
Everyone has to live somewhere and businesses need a roof over their heads, no matter what the market conditions are. The combined knowledge of the members here is a great resource to discover ways to still make money even through these difficult times.hbbehrendorff,
did I not make myself clear when I wrote"Putting aside the current market as I'm not interested in a discussion with the D & G ers, I'd be interested in hearing others opinions and experiences"?
Maybe I should make myself even clearer again for those that don't get it:
I am not interested in your ramblings of 50% (or what ever) drops in the market. I want replies from knowledgeable investors about their experiences and thoughts NOT YOUR RAMBLINGS OF DOOM AND GLOOM ABOUT THE MARKET. IF I WANT YOUR OPINION OF THE CURRENT MARKET I CAN READ ALL YOUR NUMEROUS OTHER POSTS AND I AM WELL AWARE, AS IS EVERYONE ELSE ON THIS FORUM OF YOUR OPINIONS.
There is a forum elsewhere for the D & Gers.
If you cant answer my question about reno's, then please don't reply.
Geeze, how hard is it to keep on the topic after only 5 posts on this subject? (weary sigh, whilst shaking head)
bespoke
Hey Bespoke,
I bought a property in South Brisbane this time last year for $220k, have spent $15k renovating it over the past month (didnt have the money 12 months ago) and now have a valuation of $290k. Most of it was just elbow grease. The yard was a mess, full of weeds / long grass / unkept tress and the inside was really dirty / broken windows / old and it smelt. I cleaned it all up inside, replaced the glass, knocked down an ugly and illegal back porch, mowed the lawn, cut down the trees, pulled up the weeds, paid a painter $8k cash to paint inside and out, ripped out the old kitchen and bathroom and put in new factory seconds stuff, and put in new oyster lights throughout. That's it. If I had the money I would replace the fence to give more street appeal but unfortunately I forgot to water my money tree and it is wilting. I'm now looking for the next one.
Last one I did $130k one bedroom queenslander. spent $6500 making another bedroom in part of the verandah, new HWS, paint, 37 tubes of no more gaps(gotta love tongue and groove), kitchen, light fittings, curtains, electrician and plumber. Bank valuation came in at $165. Currently rented at $170 per week. Could sell it for $180k but no need to as it is paying for itself.
Thanks for the replies so far guys,
jeffj and perpetrator-
I suppose the renos that just have the existing house wouldn't be that much in it if you did sell straight away if you take into consideration Stamp duty, agents fees and CGT, what about……. 20- 30K for you perpetrator? and roughly……… 15 – 20 K for jeffj?????Still that's nothing to be sneezed at, especially if you took a couple of weeks off work to do it…a bit of pocket money
jssmith
I think that the days of any one buying any old house and making money just doing nothing are gone for a while and I have come to the conclusion that its best to search for a property that has at least 2 ways to improve the value as you pointed out in your example.I have actually bought late last year a house in Newcastle which is in a "urban core" precinct, on a corner block, mainly because we have to help out my in laws who are emigrating from the UK and they only have 50 K in which to put towards their housing needs. My FIL is an invalid pensioner and MIL is 60 so not alot of income will be coming in there. So we have to help out and we don't have enough room for them to stay with us right now.
So when I did some due diligence on this property the council told me the block is too small to subdivide into the house with a separate vacant block at the rear to sell
… BUT if we put a dwelling on the rear and keep the right amount of outdoor space and off street parking required per dwelling, we can apply to subdivide with the DA (cause its in a urban core precinct).Is that a councils logic or what!
So Ive made a quick calculation of what the front house would be worth with a smaller back yard, plus the the rear house and subtracted the costs involved and I think there is about 130 – 150 K of equity in it.
This has come as a bit of a shock to me as we only did this to help house the in laws and get a IP in the front house. There was no grand plan to start with.
So now I'm thinking I may start to research in my area (Newcastle) areas within the Urban core precincts and corner blocks to know a good opportunity when I see it as well as doing renos…………in my spare time after work! I agree that to do it full time would require alot of equity and I wouldn't be as attractive a borrower for the banks otherwise. Maybe slowly slowly in time eh?
I need to do alot more research and learn alot more I think.
We don't plan to sell these properties as they will be cash flow positive to the tune of about $100 per week + depreciation (in todays terms) when the in laws move into the granny flat we are going to build when we build our house (on 3/4 acre).
I guess I can use this as a case study for myself as we have to reno the front house to get decent tennants.
bespoke
It is difficult to use council and logic in the same sentence.
Up here the costs for subdividing a corner block can be as much as $125kHi bespoke
In my experience (and this is just my experience and opinion), unless you buy a property well under market value there just isn't a very good return on reno's on their own.
You are right, by the time you take into account purchase costs, holding costs, selling fees, possibly GST and definitely CGT most profit is gone. Yes, you may make $20,000 or so on a reno that takes a month of your time but when you factor in "non renovating work" such as organising finance, researching the market, the stress of having an offer accepted, the stress of wondering whether the property will sell, etc, you would really have to question whether it is worth the effort. It may be for you. It is not for me.
Having said that, still make a very healthy profit (enough so that my husband and I don't have to go to work) by buying, renovating and onselling properties. For us though, we only buy properties on blocks that are subdividable and the money is in the subdivision.
We are working on one at the moment that cost us $250,000 and with a $20,000 reno we will sell the house for $300,000. Now without the subdivision there would be perhaps $10,000 in it. But that $10,000 pays our subdivision costs so we get a vacant block next door, worth about $140,000, for nothing. That's where the profit is in it for us.
I am not a buyer and holder. But if you were, it may be worthwhile buying a rundown property, doing a reno on it to increase equity and then holding onto it. It still seems to me like a good way of building equity. But as for using renovating as a way of earning a living, in my experience, those days are over for the time being.
Once again I iterate (for the benefit of all the D&Gers), this is just my opinion.
Cheers
K
hey guys,
im new to the investment game. was reading the forum and got thinking about the idea to renovate my ip and sell for profit. i am currently living in it at the moment for the first home buyers grant. if i was to sell it and make a profit, that would pay off the bank and i could buy, renovate and sell again…..and so on. would there be a bank fee for paying off the loan, and if so does anyone know how much they sting?
any help would be good as this option has just opened my eyes to a new way of making money. im an electrician so not afraid to get my hands dirty with renovating,
thanks in advance for any help
Hello Roy22,
Your idea can be a very good way of moving up the property ladder. It, like anything does come with its share of risks. Consider that every time you do it you are risking all of the work you have done to date on previous renovations. Basically , just be very careful what you buy. The benefits are that you will pay a lower rate of stamp duty than an investor (in qld anyway) and will not pay capital gains tax when you sell. If you don't mind moving it can work very well, especially being a tradie and with, I would assume, industry contacts to get other trade work done efficiently.
Good luck with it all and feel free to email me if you need any advice on selling when the time comes.
Kind Regards,
Jefffor us (full time renovators for last 4 yrs), there are 3 important ingredients missing in this market:
1. rising prices
2. fast sales
3. premiums paid for renovated propertiesthats why we pulled out of the market 6 months ago and wont get back in for another 12-18 months.
I think in this market buying a property that needs major renovation as opposed to a property that any hack can touch up, is a better idea.
The property needs to be significantly lower in value to it's surrounding neighbours, where it will be virtually impossible to over capitalise.
My wife is currently renovating a 3br house purchased for $210K , houses either side of it are valued upwards of $450K.
The house was not livable, but structurally sound. Needs new bathroom, kitchen + appliances, carpet, paint, windows.
Reno Cost +50k. Almost complete, 3 month project, recent rent appraisal $420 p.w.
There is still an un-renovated Granny flat out the back to be done as well. Spend 20-25K on it and it will attract a rent of $140 pw.
There will be no need to sell an investment like this as it will cover it's own costs until the market does eventually turn.Hi bespoke. Renovations or additions for adding value to investment properties is an interesting topic. I have done my share of reno, mostly by myself. I am proud of what I did and I put to shame many carpenters and plasterers and electricians, Joiners and glaziers.
However when you ask for opinions, make sure you can distinguish between the investor who renovates using a builder or even an architect, paying for every change he makes, and the investor who happens to be a carpenter or handyman and lives in, whilst renovating with his own two hands and some occasional tradesman, and moves out once finished for selling and going to the next place.
I think that since you can no longer trust prices to go up for a while, making money renovating using the services of a builder will be not an easy task. Yet not impossible.
As an example, if you call a company to renovate a bathroom you will spend for a modest renovation $10,000. Yet you can do it by contracting a tiler and a plumber for approximately $6000. However you can also spend $12000 because you contracted that tradesman friend of mine who lives in Lakemba and you will need to do it all over again, therefore $6000 x 2 = 12000 …If the second time you get a tradesman who is from Cabramatta, then it will cost you $18,000 since $6000 x 3 = 18,000.
Renovating is like any other business. Ask me if one can make money importing technology from the US. I can tell you it is possible, I do! Yet it is also possible to lose a lot of money if you don't know what you are doing. Can you make money farming? What about owning a petrol station?
Renovating is not different and if you are experienced in all the building areas, you have an advantage.This has always been so, and scores of investors have squandered zillions of money on dodgy Reno and dodgy builders yet still made money only because the steady increase in value cancelled out all those mistakes not because they did not make them.
Today one factor of money making, the price increase is gone for now, so you are competing with the professional builder. You want to pay him to do his job and add your profit and sell at that price. Not sure how much there will be left unless you paid a pittance and then your profit comes from your good purchase ad not the renovation.
On the other hand you can do it yourself. So you turn into a builder. Do what you can yourself and contract typically the electrician and plumber.
Can be done even without a license sometimes. Just make sure you know at the end of the day how much you are paying yourself in wages. Add the hours and price them at your opportunity cost and see if you have purchased a job or a business.
If you discover that you can make money by contrcting tradesman to work for you, bingo! you are making money as a builder.
You can advertise and do reno for others and make money without pruchasing any property.
I know of a guy who needed furniture and spent thosands in machinery to set up a workshop and made all his furniture. He recons he saved money, I think he worked untold number of unpiad hours for the satisfaction of a job well done.
Emotions, pride, achievement in an unknown area, the thrill of the challenge all contribute to our responses.
At the end of the day, the investor who considers renovation must factor the cost in as if conducted by a third party. Only then the real picture will show if it is worth it or not.
The example above, of a reno that costed 210 to buy, 75 to renovate is missing the only number that makes it all count. The price of the sale. Since it is not for sale, we will never know and so it is not an example that can be used to decide if renovating is good business proposition or not.
Renovating can be very rewarding or the source of nightmares…yet so can selling insurance or mustering cattle for that matter.
Ouch, I feel bum pain and leg cramps just by thinking of a saddle.thanks guys. i think i will wait tiill the market is on the rise again before i decide anything. hopefully this will be soon
… BUT if we put a dwelling on the rear and keep the right amount of outdoor space and off street parking required per dwelling, we can apply to subdivide with the DA
(cause its in a urban core precinct).
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