how to make $110k 12mths without quitting my day job
- Thread starter Erica
- Start date
Thanks for all the words of encouragement peeps.
The reno is soooo close to being finished now I can almost taste it, and the place is looking schmiko, has come up even better than I imagined, will be sure to post the 'after' pics soon.
Time line to get tenants in is now early January, just waiting on the painting to be finished and floors to be polished up last.
So how do my initial cost to profit estimates look now? Terrible
$445,000 Purchace price
$8,000 MLI
$25,000 stamp duty/purchasing costs
$60,000 renovation WTF!?! yep, final figures are in, all tradies bills tallied up and has come to exactly double my best effort at costing it up at the outset.
$33,000 subdivision (an extra $3k for the professional drawings which I wasn't expecting to need, as my last subdivision got approval with just a $400 concept plan)
$15,000 holding costs (slightly up as vacant longer and have drawn down my line of credit more to finish reno)
$586,000 TOTAL OUTLAY
$390,000 renovated house minimum resale value estimate
$270,000 vacant land minimum resale estimate
$660,000 COMBINED END VALUES
$74,000 ESTIMATED CAPITAL GAIN 12% before agent fees and taxes taken out, and assuming the market doesn't move up or down in the next 12mths. (Remember that nice round figure of 20% I so confidently boasted about at the start).
So peeps, you can see just how quickly things change, my first post was only 3mths ago, what is the moral of todays storey: Make sure you have a big line of credit available if you plan to undertake reno/subdivide/developments and/or large cash safety net.
Anyway, it is all a bit arbitrary really, I 'aint countin' my chickens before they hatch, gotta get em sold first, plently can change in a yr.
Erica
Thanks for sharing your numbers. A profit is a profit it still puts money in your pocket. I reckon the experience and knowledge gained through this journey will be invaluable. So well done for giving it a go.
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Property was under settlement when I started this thread, I only got the keys on 3rd Oct, so been renovating for past 2 mths, reno will be finished in another 4-6weeks and I'm confident I will get a tenant in by mid Jan.
I am expecting to have the subdivision complete and new title issued in time to settle a contract of sale on the land at about 1mths from initial purchase. (An uncomplicated subdivision could be completed in only 6 mths, but as I have touched on in earlier threads, this one will take longer because I'll have to wait on SA water to construct a new sewer main extension along the side street, to supply the new allotment we are creating).
I plan to have the existing house sold approx 18mths from initial purchase (this is 3mths for renovation, a 12mths tenancy while subdivision is all finalised, then a 3mth marketing campaign while it is vacant).
This is all just wishful thinking at this early stage....
Certainly your lesson from this is that the maxim for renovations has come true 'double your budget and times the time by 3' or whatever it is.
I am worried that a $60k renovation is overkill for the area but I'm not that up on SA suburbs. I thought initially you were doing a cosmetic reno which for I would expect to cost $30k at most. Something to make it look good and get a good value.
Doing a reno to schedule needs good tradie contacts and good quotes before you purchase so that you have a budget which is doable.
The council Town Planning Scheme setbacks over the normal also could have been a complete dealbreaker. Next project you must do better due diligence to know these things.
I hope things improve for you.
I am worried that a $60k renovation is overkill for the area but I'm not that up on SA suburbs. I thought initially you were doing a cosmetic reno which for I would expect to cost $30k at most. Something to make it look good and get a good value.
Doing a reno to schedule needs good tradie contacts and good quotes before you purchase so that you have a budget which is doable.
The council Town Planning Scheme setbacks over the normal also could have been a complete dealbreaker. Next project you must do better due diligence to know these things.
I hope things improve for you.
Actually this one did need some structural work too and a hell of a lot of cosmetic. I thought it would be 30k at the most thought, and I'm not a complete newb, I've renovated my family home myself, my sisters townhouse, built a house then finished it off myself.
It totally sucks that I've had to outlay double, I really did try my best to cost it up correctly before buying. I don't think I have overcapatalised for the area, the pictures will give you a better idea when they go up. I didn't go overboard with fancy things like granite benchtops or anything like that, the extra $30k was labour cost blow outs, so doubly sucky because they can't be seen and don't add any value.
It is just amazing how these costs added up. Had I known before purchasing that the reno would be that much, there is no way I would have gone ahead and bought it, the cost/profit margin wouldn't have been acceptable. Next time I'll be only buying something that can be tenanted as is.
It completely baffles me how anyone could turn a profit by renovating alone, unless they do EVERYTING themselves, but then all you are really doing is replacing a desk job with a labouring job. So renovating for profit is a tough game (unless you live in it, do it all yourself, sell it as your PPOR, and don't pay any capital gains tax). This reconfirms for me, the profit lies in the subdivision of the land.
the renovation breakdown
Everyone is probabally going to be bored to tears by this but anyhow I'll do a run down of some of the things that have been done:
-knocked out the wall between kitchen and study, I figured making it an open plan dining kitchen would be better resale value
-replaced 2 ceilings that were unsalvageable (bathroom and sunroom had sagged off joists and covered with mould)
-brand new bathroom (it originally had lino on the walls so no warterproofing, and the water damage coming through to the lounge wall was extensive, so I had a professional in to tile/ and plaster to fix up the walls that were damaged when i ripped off lino wallpaper)
-the front concrete portico had concrete deterioration and was falling down, this was a safety hazard so professional builder contracted to remove it entirely
-paid my landscaper to repoint the brickwork on the west wall, I thought this would seriously deter onselling as it is evidence on long term water damage, (roof water not plumbed to stormwater system correctly)
-Fencing front yard and new boundary as the plan shows, required removing a small concrete fence- didn't realise I was going to be up for $3000 of bobcat hire/driver/dumping fees, budgeted only $1000 fort that oops
-New driveway and council curb cross over as per the plans
-New fans in most rooms, all the last ones were broken/loose/not working, not a good idea to put in a airconditioner, the whole house is only on 25amps
-Hard wired smoke alarm -legal requirement, and a Clipsal safety switch- my idea, unfortunately to do this an extra $4k cost was incurred to upgrade most of the wiring, the old cotton cable just kept breaking each time the electrician tried to connect anything up.
-pinting whole house inside and out, one room inside was hot pink, one room turquoise green, other rooms had water damage, paint was flaking off all the ceilings, the old timber leadlight windows haven't seen any paint for well over 20yrs so were flaking and looking crap inside and out, but under all that in actually good condition, so they have come up looking great now.
- I had to do some rendering aswell, the old render had fallen off the back wall and looked crap, plus some idiot had gone past and smashed all the window sill tiles off, so they needed rendering too.
-Stormwater needed running to the street as was just going onto perimeter paths and running down west wall.
-new doors and handles throughout except one, they had just broken sliding plastic doors
-I retiled the toilet and laundry, I figured my less than perfect job would still be an improvement over bare concrete floors
-I put in a upgraded kitchen/ laundry and splashbacks, this was a 5yr old kitchen including stainless steel appliances I bought off someone on gumtree, had enough cabinets to doo vanity, laundry and kitchen all matching
-all miscellaneous fittings for the house cheap, bought at Evans and Clark auction house
-Got the bath tub reglazed
-I put in $1000 worth of plants and trees and bark chips for front garden beds, lawns are looking a bit bare after the bobcat had to do so much workl, but I always pay for my tenants water so will tell them to go nuts with the hose, and should look much better by this time next yr
Everyone is probabally going to be bored to tears by this but anyhow I'll do a run down of some of the things that have been done:
-knocked out the wall between kitchen and study, I figured making it an open plan dining kitchen would be better resale value
-replaced 2 ceilings that were unsalvageable (bathroom and sunroom had sagged off joists and covered with mould)
-brand new bathroom (it originally had lino on the walls so no warterproofing, and the water damage coming through to the lounge wall was extensive, so I had a professional in to tile/ and plaster to fix up the walls that were damaged when i ripped off lino wallpaper)
-the front concrete portico had concrete deterioration and was falling down, this was a safety hazard so professional builder contracted to remove it entirely
-paid my landscaper to repoint the brickwork on the west wall, I thought this would seriously deter onselling as it is evidence on long term water damage, (roof water not plumbed to stormwater system correctly)
-Fencing front yard and new boundary as the plan shows, required removing a small concrete fence- didn't realise I was going to be up for $3000 of bobcat hire/driver/dumping fees, budgeted only $1000 fort that oops
-New driveway and council curb cross over as per the plans
-New fans in most rooms, all the last ones were broken/loose/not working, not a good idea to put in a airconditioner, the whole house is only on 25amps
-Hard wired smoke alarm -legal requirement, and a Clipsal safety switch- my idea, unfortunately to do this an extra $4k cost was incurred to upgrade most of the wiring, the old cotton cable just kept breaking each time the electrician tried to connect anything up.
-pinting whole house inside and out, one room inside was hot pink, one room turquoise green, other rooms had water damage, paint was flaking off all the ceilings, the old timber leadlight windows haven't seen any paint for well over 20yrs so were flaking and looking crap inside and out, but under all that in actually good condition, so they have come up looking great now.
- I had to do some rendering aswell, the old render had fallen off the back wall and looked crap, plus some idiot had gone past and smashed all the window sill tiles off, so they needed rendering too.
-Stormwater needed running to the street as was just going onto perimeter paths and running down west wall.
-new doors and handles throughout except one, they had just broken sliding plastic doors
-I retiled the toilet and laundry, I figured my less than perfect job would still be an improvement over bare concrete floors
-I put in a upgraded kitchen/ laundry and splashbacks, this was a 5yr old kitchen including stainless steel appliances I bought off someone on gumtree, had enough cabinets to doo vanity, laundry and kitchen all matching
-all miscellaneous fittings for the house cheap, bought at Evans and Clark auction house
-Got the bath tub reglazed
-I put in $1000 worth of plants and trees and bark chips for front garden beds, lawns are looking a bit bare after the bobcat had to do so much workl, but I always pay for my tenants water so will tell them to go nuts with the hose, and should look much better by this time next yr
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final plans
Final plans done, will post pricing schedule when available, this will be sent off to be privately certified, I just went with what the designer came up with, didn't really spend long on the designs. Again, I'm not going to build it, just sell as a H&L package, which whoever buys, will probably just change the plans to suit themselves anyway, so the purpose was only to get the subdivision pushed through council and to to show potential buyers the minimum setbacks and maximum floor plan that can be built on the block (for single story anyway)
View attachment architechtural plans.pdf
Final plans done, will post pricing schedule when available, this will be sent off to be privately certified, I just went with what the designer came up with, didn't really spend long on the designs. Again, I'm not going to build it, just sell as a H&L package, which whoever buys, will probably just change the plans to suit themselves anyway, so the purpose was only to get the subdivision pushed through council and to to show potential buyers the minimum setbacks and maximum floor plan that can be built on the block (for single story anyway)
View attachment architechtural plans.pdf
Congratulations, well done - even if not the profit you were hoping for.
The best thing about this kind of project is the experience you gain which you can apply to future projects. Have done a few renos, they always cost double what you think, there's always hidden (and expensive) surprises and the list of things to do always triples! Sounds all good though.
Are you going to hold or sell? Plympton's a great area with lots of future CG potential. Made offers on a couple of places there myself.
The best thing about this kind of project is the experience you gain which you can apply to future projects. Have done a few renos, they always cost double what you think, there's always hidden (and expensive) surprises and the list of things to do always triples! Sounds all good though.
Are you going to hold or sell? Plympton's a great area with lots of future CG potential. Made offers on a couple of places there myself.
Erica
On one hand it is disappointing you didn't manage to hit your target. However, $75,000 profit in 4months isn't too bad either. I guess that's why we aim for 20% - because things go wrong.
In addition assuming you borrowed at 90% of purchase price, and paid the rest with cash it is a return of about 50% on your money - or a +100%pa gain.
Plus you learned a lot.
Onwards and upwards. I look forward to the next installment.
Blacky
On one hand it is disappointing you didn't manage to hit your target. However, $75,000 profit in 4months isn't too bad either. I guess that's why we aim for 20% - because things go wrong.
In addition assuming you borrowed at 90% of purchase price, and paid the rest with cash it is a return of about 50% on your money - or a +100%pa gain.
Plus you learned a lot.
Onwards and upwards. I look forward to the next installment.
Blacky
