Chunk of Money or Equity
- Thread starter molly1a
- Start date
Yes, built a house and land package for 335k and 6 months post completion its worth 80k-100k more than that.
Why do you ask? Its not like you can ever replicate what someone else has done. That time has always passed. That train has always left the station. You can't bring it back. Get on another
Why do you ask? Its not like you can ever replicate what someone else has done. That time has always passed. That train has always left the station. You can't bring it back. Get on another
Hello Lorraine, you'll find many people on the Forums that have created equity through reno. Some have even managed to make a chink of money.
You need a plan, not ideas. The first plan you need is how you expect to make money out of property.
For me, the short answer is this: you make money by getting somebody to buy the property from you for more money than you spent. You can get people to pay more by:
1) holding and waiting for the market to move upwards;
2) renovating or developing so that the properties are worth more.
One of these strategies relies on something happening that is out of your control: the market moving upwards. Most investors come to the conclusion that reno and development is the fastest and least risky way to make money from property. The challenge is finding properties that are suitable for renovation or development *at a price that will allow you to make a decent profit*. Two things need to align: finding a suitable property, and buying it for a price that will allow you to make a profit.
A major part of the strategy for success is keeping your costs down. These costs are: buying the property; holding the property; the actual renovating or developing; selling the property.
Lastly, the strategy requires creating a property that gets the best price. This means knowing your market and creating a product that the market wants at the price they are prepared to pay. It's no good putting a $20,000 kitchen into a $200,000 house, nor is a $2,000 kitchen any good in a $2,000,000 dollar property.
You need a plan, not ideas. The first plan you need is how you expect to make money out of property.
For me, the short answer is this: you make money by getting somebody to buy the property from you for more money than you spent. You can get people to pay more by:
1) holding and waiting for the market to move upwards;
2) renovating or developing so that the properties are worth more.
One of these strategies relies on something happening that is out of your control: the market moving upwards. Most investors come to the conclusion that reno and development is the fastest and least risky way to make money from property. The challenge is finding properties that are suitable for renovation or development *at a price that will allow you to make a decent profit*. Two things need to align: finding a suitable property, and buying it for a price that will allow you to make a profit.
A major part of the strategy for success is keeping your costs down. These costs are: buying the property; holding the property; the actual renovating or developing; selling the property.
Lastly, the strategy requires creating a property that gets the best price. This means knowing your market and creating a product that the market wants at the price they are prepared to pay. It's no good putting a $20,000 kitchen into a $200,000 house, nor is a $2,000 kitchen any good in a $2,000,000 dollar property.
On multiple occasions have made a chunck of money on buying land, building a project house, finishing of myself whilst living in it and then selling cgt free. Timing and luck had a lot to do with it though.
Profits have been anywhere from 10% to 150% with holding times of between 2 - 6 years.
Profits have been anywhere from 10% to 150% with holding times of between 2 - 6 years.
Why do you ask? Its not like you can ever replicate what someone else has done. That time has always passed. That train has always left the station. You can't bring it back. Get on another
Trick is knowing what train to catch and you only realise after the journey is over.
It's hard
Thanks for the responses we have been a traditional buy and hold with positive cash flow. We now do not want to wait for the market to move to wait for equity
Obviously buying to Reno or subdivide is harder I feel it needs to be in the vicinity of where we live would you agree ( so some work could be done by us. Education has a lot to being able to spread your wing and grow to the next level otherwise expensive mistakes could be made
Eg can you buy house have never bought units for say 250k spend 10k revalue for 300k or should you go out and buy 320k spend say 20k revalue for 400k THESE ARE EXAMPLES ONLY
Thanks
Thanks for the responses we have been a traditional buy and hold with positive cash flow. We now do not want to wait for the market to move to wait for equity
Obviously buying to Reno or subdivide is harder I feel it needs to be in the vicinity of where we live would you agree ( so some work could be done by us. Education has a lot to being able to spread your wing and grow to the next level otherwise expensive mistakes could be made
Eg can you buy house have never bought units for say 250k spend 10k revalue for 300k or should you go out and buy 320k spend say 20k revalue for 400k THESE ARE EXAMPLES ONLY
Thanks
You have to go to where the properties are that provide the opportunity. Good deals are hard to find.
As for your numbers on the units: you are not taking into account the buying, holding and selling costs.
Buy $250k then reno $10k and sell $300k. $40k profit? No: you had about $10k buy costs (stamp duty and legal fees) and another $10k selling costs (agent commission) plus holding costs of $7,000 for the 6 months it will take to finish the project (about $1,000 a month for mortgage plus $1,000 annually for insurance, rates, and strata). That's $27k costs. Out of the $13k profit you need to subtract CGT which will depend on your income but assume 30% the money in your pocket for 6 months work is $9,000.
The CGT will be halved if you hold the property for more than 12 months but you will be spending $6k holding the property to save $2k in tax.
In short these small reno jobs are a mugs game. Everybody chases them so you never get a bargain and the money isn't there. Gotta go for something where you can add more value like another bedroom or a deck or garage. This cannot be done with strata properties usually.
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