Cosmetic renovation for quick profit, is it possible?

Hi Investors and renovators. I am wondering is it possible to do some cosmetic renovation e.g. painting, new carpet, minor work in kitchen and bathroom, new light fitting, door handles, land scaping etc and add value to make profit? If I buy a 300K unit and spent, after buying cost it will be 315-320, if I spent 15K for renovation, it will be 330-335K, If I add up 10% profit (30K) it will be 360-365K. So that 300K unit after the above cosmetic renovation, I donot think we can sell at 360K. I think it is possible only in rising market.
But renovation eperts are always claiming they make huge profit by cosmetic renovation. I am confused how can we add so much value by cosmetic renovation. If you have any idea I would appreciate your help. Thank you so much.[
 
I find it almost impossible to make money by buying, reno'ing and selling.

Yes, you spend 10-15% of the purchase price on the reno to make the property worth 20-30% more. But factor in holding costs, stamp duty & legals on the purchase and selling commissions and CGT on the sale - and I do not see any 'profit' left at all.
 
Possible to do, but you need to live in the property to reduce CGT, plus watch the ATO you need to INTEND for it to be your home and not just for a quick profit.
 
I have always been successful in adding value by simple cosmetic renovations.
However you are so right, in this market I believe it could be a squeeze to turn it into actual profit.

In past days,no problems,In future days,probably no problems either.

However I believe there is an exception to this, if the property is undermarket when you purchase it. ;)
 
I think $15k on a cosmetic reno is way too much! Parents almost re built an entire house for $18k, although i guess this depends how much of this you do yourselves.

Although i think you can make a profit out of cosmetic renos, i think this would mainly apply for houses rather than units and you should also be looking to buy under market to make an actual profit or it'll just get eaten up.

Also be looking to add or remove walls, you'd be surprised how many people would prefer an open kitchen looking over a large lounge room than a small lounge room with separate kitchen, etc.
 
Yes, it is possible. As warned by others in this thread and noted by yourself already, some can do this better than others and I see just as many make a loss, as make a profit.

A little creativity does go a long way, though. Things like converting a formal dining room into a 4th bedroom, for example, can bring a property into the next price bracket for the area. Of course, buying well to begin with can make a difference and knowing your market - both for properties with potential, and those in the bracket that you are looking to reach - will make all the difference.

Nathan has also pointed out in one or two of his threads, I think, the benefits of keeping your renovation costs down and so spending wisely is an important part of the process.

Your own tax circumstances may have a bearing on the overall bottom line, but this is probably the least of your concerns at this point.

Good luck with it, mate. Keep us all posted when you do find the right deal, hey?
 
It is possible, however most people dont make $$ in renovating and a lot dont make money in property full stop. However like anything you must have a system, a plan, and of course take action.

Goodluck.

Nath.
 
It's definately possible, though it takes some thought and planning. Also it's far easier to buy reno and hold, then refinance. Here are some thoughts while trying not to overlap what others have said.

1 start by identifying what houses your market pays a premium for.
2 next identify what housing your market isn't interested in.
3 aim to turn point 2 into point 1
4 some areas you get a discount for unreno'd houses, some you dont, look to get a big discount, then alter the house.
5 get an understanding of fixing problems that others would see as too big, and buy houses with problems, then solve them.
6 get a talent for identifying quick profitable changes, especially ones which increase the rent, if the rent is $50 more than before your valuer cant justify a low valuation, for example...
... turn extra space into 4th bedroom.
... cheaply renew kitchen/bathrooms
... paint
... add outdoor entertaining (below permit level)
... add outdoor shade/car shade (below permit level)
... add/repair fences (tenants with pets often pay more)
 
I think $15k on a cosmetic reno is way too much! Parents almost re built an entire house for $18k, although i guess this depends how much of this you do yourselves.

Although i think you can make a profit out of cosmetic renos, i think this would mainly apply for houses rather than units and you should also be looking to buy under market to make an actual profit or it'll just get eaten up.

Also be looking to add or remove walls, you'd be surprised how many people would prefer an open kitchen looking over a large lounge room than a small lounge room with separate kitchen, etc.

With all due respect, are you joking? 18kfor a rebuild..Are you sure you're not talking about 1972 instead of 2010.......A 200sqm(very conservative slab), would cost close to 18k...and thats' just the start. I'm not sure how you convert that to a full house. ???

Suraj, I know you've asked for advice, but be very careful of the responses here. 15k is a very reasonable amount to spend on renos.

Focus on aethetic issues in a unit if your budget is 15k. Replace the kitchen handles, clean flooring, nice entry door, open up spaces if structurally possible, bathroom pc items if the tiles are ok. Theres a lot you can do for 15k
 
Hi Investors and renovators. I am wondering is it possible to do some cosmetic renovation e.g. painting, new carpet, minor work in kitchen and bathroom, new light fitting, door handles, land scaping etc and add value to make profit? If I buy a 300K unit and spent, after buying cost it will be 315-320, if I spent 15K for renovation, it will be 330-335K, If I add up 10% profit (30K) it will be 360-365K. So that 300K unit after the above cosmetic renovation, I donot think we can sell at 360K. I think it is possible only in rising market.
But renovation eperts are always claiming they make huge profit by cosmetic renovation. I am confused how can we add so much value by cosmetic renovation. If you have any idea I would appreciate your help. Thank you so much.[

Short answer- it depends :)

In my experience, the profit is in the buying.
Know local prices of both unfinished and finished product.
Take into account all costs when crunching the numbers and you'll be surprised at how quickly your "profit" is eroded.
Hang onto the IP for a year to halve your cap gains bill.
Don't skimp falsely on finishes that buyers are going to see right through. Match the reno to the buyer and demographic for that particular area. Watch your reno costs and get 2-3 quotes per job
Obtain prior access (even if only for quotes) to minimise your holding costs
More profit in structural rather than cosmetic - think extra rooms (or conversions eg LUG to bed and add carport) decks/pergolas, building under house, adding freestanding studio/LUG etc but these require council approval
Good luck!
 
It is possible, however most people dont make $$ in renovating and a lot dont make money in property full stop. However like anything you must have a system, a plan, and of course take action.

Goodluck.

Nath.

Reminds me of my boss who said to me how he thinks "Property isn't an Investment" because apparently it doesn't make money. :rolleyes:

Being the 'apprentice' I just rolled my eyes and shut up lol.

For a quick reno to work out profitable, you have to really do what Nathan and many others do. That is buy undervalue, do alot of work yourself or know someone who can do good work cheap and make sure you know how much you stand to make from it and know your market.

15k is a very reasonable amount. Just know where to look to find bargains on kitchens, bathroom gear and etc.
 
I am just starting to get back on the threads, as I have just finished a cosmetic reno. (over the last 3.5 weeks). I will try and put up my reno on the forum soon, but have to catch up on a lot of other things first.

Why not do up option to purchase without obligation, and sell option after you do reno without having to pay for purchase costs (as you didn't technically own the property).

You could draw up long settlement in order to do reno, and then sell option.

I am just starting to look into this for myself, as if you are looking at buying, reno ing and flipping, by not paying for purchase costs adds a little more profit to the end of the deal.

F
 
I think it is possible only in rising market.
in this market I believe it could be a squeeze to turn it into actual profit.
I agree. And if it's a rising market, why bother doing the reno at all; why not just ride the market and save yourself the effort of renovating? It seems that the primary purpose of the renovation is to fill up the time needed for the market to move.
Pa1nter said:
However I believe there is an exception to this, if the property is undermarket when you purchase it.
For a quick reno to work out profitable, you have to really do what Nathan and many others do. That is buy undervalue
In which case your profit is not from value added by the renovation, but by the difference between purchase and market price of unrenovated product.
AndrewT said:
do alot of work yourself
In which case you're not making a profit via the value added by renovating; you're taking a job as a labourer. :)
AndrewT said:
or know someone who can do good work cheap
In which case you're profiting by on-selling cheap labour at retail price. Isn't that what people criticise Nike for doing in sweatshops?
Hang onto the IP for a year to halve your cap gains bill.
Only if you can convince the ATO that you're not in the business of renovating properties. If you always intended to on-sell for a profit, then any profit is taxable as income rather than capital gain. If you do more than one per year, or do several in a row, or make a significant portion of your income via renovations, then the ATO could deem you to be in the renovation business, in which case you pay full tax on profits.

And, of course, the "elephant in the room" that no flippers have ever answered satisfactorily for me is how they get around this dilemma: if you have a builder, it's even harder to squeeze a profit out of the project. If you don't use a builder (or have an owner-builder's licence, which is only good for one reno every several years anyway) your renovations are illegal.

If the answer is, as I suspect, that people are happy to do things that are illegal and hope a blind eye is turned or that they won't get caught, then why do something with profits as low as renovating - why not just sell crack? :confused: :p

I do think it's possible to make a profit from a renovation, but the profit has to be there even when using a qualified builder, and buying and selling at market price in a level market, otherwise it's not the renovation that's made you a profit. :)

It's not as simple as picking any unrenovated property, renovating, and then hoping you'll get back more than you've put in, as many seem to think. Unfortunately, early in the noughties the market was consistently rising and this strategy worked because of the rising market, encouraging heaps of people to think it was as easy as outlined. :eek:
 
It seems that the primary purpose of the renovation is to fill up the time needed for the market to move.

Exactly, no need to wait for market to move to resell or refi

In which case your profit is not from value added by the renovation, but by the difference between purchase and market price of unrenovated product.

No its from the combination, if Nathan tried to sell one of his burnt out properties without fixing the problems in many cases he wouldn't find a buyer. The big money is from fixing a problem other people cant or wont fix

And, of course, the "elephant in the room" that no flippers have ever answered satisfactorily for me is how they get around this dilemma: if you have a builder, it's even harder to squeeze a profit out of the project. If you don't use a builder (or have an owner-builder's licence, which is only good for one reno every several years anyway) your renovations are illegal.

This is only an issue if you need a building permit with a value over $5k, then you need a builder or owner builder status, otherwise you can repair and install anything you like.

I do think it's possible to make a profit from a renovation, but the profit has to be there even when using a qualified builder, and buying and selling at market price in a level market, otherwise it's not the renovation that's made you a profit. :)

I dont think the simple arithmetic of 1+1=2 applies here. If you pull apart a deal that includes a reno and you say well the final value was 200k, the reno cost 20k, the house was bought for 150k, that doesn't mean the house could've been resold unrenovated for 180k. Its the combination that adds value, which is why i agree with you when you say it's not as easy as it looks, you have to be able to see in multiple dimensions

It's not as simple as picking any unrenovated property, renovating, and then hoping you'll get back more than you've put in, as many seem to think. Unfortunately, early in the noughties the market was consistently rising and this strategy worked because of the rising market, encouraging heaps of people to think it was as easy as outlined. :eek:

Totally agree ozperp!

Here's some free text so the message will post :)
 
With all due respect, are you joking? 18kfor a rebuild..Are you sure you're not talking about 1972 instead of 2010.......A 200sqm(very conservative slab), would cost close to 18k...and thats' just the start. I'm not sure how you convert that to a full house. ???

200sqm? That's huge! The commission places I know of are nearer 100 sqm.

And they're often on stumps, not slabs.

Sort of like these: http://www.somersoft.com/forums/showthread.php?t=20019

Just rereading this, the amount quoted appears to exclude blood, sweat & tears
 
Hi Suraj,

$15,000 I would want a whole new interior of the unit.

I am talking, new kitchen, bathroom, flooring and paint, light fittings, and window coverings.

I did one for $12k recently, and that included structual work.

How much work did I do? None! Well actually I filled a skip one day for something to do. That was using othere peoples labour.

Goodluck.
 
I was quoting a paint job a last year and the customer told me she was quoted nearly 20K just for a bathroom reno and was going to accept the quote :eek:,

I happened to have a few weeks free and decided to use her 20K to see how much work I could do to her house while still making money.

1:It had just been re stumped so needed plaster joints through out.(I was the plasterer)
2:It had cladding on the outside so pulled that off and nice repaint on the timber weatherboards.
3:Gernied and painted the roof so it looked new.
4:painted all inside with feutre walls where needed
5:Rebuilt bathroom with new spa ($700),shower rose,vanity,taps/spanish tiles to ceiling,waterproofing/drain
6:laundry with new tub,taps,remove cupboard/waterproof/drain
7:New toilet with full waterproof / drain and tiles
8:Front and back verandahs,new posts,timber decks,custom made balastrading,new steps and gates.
9:New tiles in kitchen to match
10:Electrical included new fans in house as well as new powerpoints/lights in bath/laundry/toilet as well as wiring spa.
She still had around 3K left after I finished :D
 
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