Is the reno bug going crazy?

[travelbug]

Just looking the last few weeks and I see on RE.com properties that look like they are staged for sale.
So being a sticky beak I look them up on RP,data to see if they have been bought to reno and sell.

What I am seeing is places that have been bought and sold a few months later. But the thing is there doesn't seem to be much profit in them.

I've seen a few where the sale price is under $50K more than the purchase. Now add stamp duty, holding costs and reno that's not worth it in my view. And that's assuming they get the asking price.
I think people are getting caught up in the "I can do that" idea and not doing their research.

Of course there are others that have a better margin.

I also looked at one purchased for $340K and for sale at $430K and it is the WORST reno I've seen in my life. Whole place painted (one coat) with flat white paint. Thin and painted straight over imperfections in the walls. Nice (but cheap) kitchen with granite benchtop but the cabinet sticks out beyond the bench (poor workmanship). Floating floor with paint spots all over it. Gaps in the skirtings and patches that look like they were put in by a 3 year old. Bathroom tiles put on side of bath and you can see the raw edge of the tile.
The agent said "you've got an eye for detail". haha.

I'll be watching to see how much it sells for. Not a bad profit though if it sells.

 

[buzzlightyear]

Unless you are a traddie, extremely handy or have access through say family, to cheap labour, then buy, reno and sell for the average Joe Bloe, in a flat or falling is marginal at best.

Even if you could do this, and make a small profit, you need to move to do this to a number of properties, ie volume to make it more worthwhile financially. Of course there are risks in doing this, let alone potential ATO implications

Interestingly, I have seen a number of unrenovated properties in some of the premium areas in Melbourne (ie Albert Park, South Melbourne, St Kilda West) These will be over $1m imo, but for a long term view, and to make your PPOR, there are some real great opportunities. Overlay the poor sentiment in the market, and these I believe are true diamonds in the rough

 

[vaughan]

Agree with Travelbug... and BLY. Quite a few in 2770 that were bought late 2010 and early 2011. I cannot see how they'll make enough money to have been worth their while.

Carly Crutchfield has done broke (from what I read) which confirms that the conditions needed to make reno-and-flick work aren't happening just now. Yes, it might change in the future, but probably not soon enough for those installing kitchens right now.

Interesting also (and others have noticed) the increase in posts along the lines of "I bought OTP 12-24 months ago and now cannot settle because the valuation is low".

 

[Jane - Hotspace]

I think you hit the nail on the head in your subject line travelbug - yep I think there is still a 'band wagon' that people jump on thinking they can make a profit from any old dunger of a property.

I love renovations - do them for a living in fact (consulting to property investors) and my biggest tip to anyone buying to reno and sell at the moment is to buy well, then renovate well. When renovating for profit, know your target market up front. Know your budget up front. Stick to your budget - regardless!!!! Before you start, you need to know there are buyers out there looking for what you are going to offer.

My view is that any reno should be treated like a business. A good business person finds out what their audience wants and then tapers their offering to that. Likewise, as a renovator you need to know who you're renovating for. Who are they? What do they do? How much do they earn (this will give you a clue as to how much they will be willing to spend on buying a property from you).

Then it's time to renovate only the things in the house that marry up with what your target buyers want. Yes you can get big bang for your buck. It's not about scrounging around to find the cheapest vanity or the cheapest plasterer or painter. Yes that may save you a few dollars here and there, but the trick is to distribute your budget effectively around the house so that you make targeted improvements. You'll have lots of renovating ideas, but you want to only make improvements that are value-adders in your buyers world.

Its not enough to buy the worst house on the street anymore. There is a science to renovating for a profit and people who are serious about making money need to spend at least several months researching before putting in any offers.

Check out the stats, talk to agents, research property prices THEN put in lots of low-ball offers until someone says yes!

 

[travelbug]

Goog points everyone.
I have done a few reno's and made nice equity gain. I haven't bought to reno sell yet but would like to when I go part time at work.

I just found another one. Nice reno. They bought for $393K 12 months ago and have put in a new kitchen and bathroom. It's for sale now for $417K. They'll be lucky to break even.

When I last went to auction there were people paying way to much for unrenovated properties. I don't think people think about all the costs. I guess if it's for buy reno hold it's not as crucial but I know I wouldn't be doing a reno for nothing, even though I do love reno's.

 

[vaughan]

When I last went to auction there were people paying way to much for unrenovated properties. I don't think people think about all the costs. I guess if it's for buy reno hold it's not as crucial but I know I wouldn't be doing a reno for nothing, even though I do love reno's.

There was a post on these forums some months ago from a bold soul who declared they're happy to over-pay for properties because they double in value every 7 years, so the more they pay up front, the bigger their profit will be!

The interesting part is that in the not-too-distant past, this strategy probably worked.

 

[Rob Williams]

I just found another one. Nice reno. They bought for $393K 12 months ago and have put in a new kitchen and bathroom. It's for sale now for $417K. They'll be lucky to break even.

The only way they could break even is if someone offered way more than their asking price.
Even before you factor in holding costs and the actual reno costs, they had stamp duty etc on the buy side and now agents commission etc on the sell side. The gap between their buy price and their sell price would have to be in the region of $50k - $75k to break even after 12 months, depending on what the reno actually cost.

 

[Luv2Travel]

You could just ask for a ridiculous price, that factors in all your costs and gives you a little bit extra for all your efforts, and have it sit there on RE.com forever. Like I can only assume the one we saw on the weekend in Elwood (which was apparently "renovated to perfection") was doing. Too bad the tenant now in there wasn't doing them any favours in the way it was presented.

 

[NewHomeOwner]

Interestingly, I have seen a number of unrenovated properties in some of the premium areas in Melbourne (ie Albert Park, South Melbourne, St Kilda West) These will be over $1m imo, but for a long term view, and to make your PPOR, there are some real great opportunities. Overlay the poor sentiment in the market, and these I believe are true diamonds in the rough

So true! We bought our PPOR recently. It is an unrenovated property (but was perfectly liveable and structurally sound; ghastly carpets, curtains and choice of colours) in an inner East suburb and was passed in at the auction. I think negotiations had stalled when we happened to see this on a RE website. One look and that was it. Fell in love with it. Offered just 15k more and it was ours and I thought it was a steal The property next door to ours was sold a few months earlier in an auction for 300k more than what we paid for ours. The other place was fully renovated on a smaller block (by 200 m2), smaller house, no garage.

We were lucky, had I been at the auction, am pretty sure my heart would have ruled over my head and I would have probably paid way more!

 

[Jtkumnick]

Unless you are a traddie, extremely handy or have access through say family, to cheap labour, then buy, reno and sell for the average Joe Bloe, in a flat or falling is marginal at best.

Even if you could do this, and make a small profit, you need to move to do this to a number of properties, ie volume to make it more worthwhile financially. Of course there are risks in doing this, let alone potential ATO implications

Interestingly, I have seen a number of unrenovated properties in some of the premium areas in Melbourne (ie Albert Park, South Melbourne, St Kilda West) These will be over $1m imo, but for a long term view, and to make your PPOR, there are some real great opportunities. Overlay the poor sentiment in the market, and these I believe are true diamonds in the rough

Agree completely. You cannot buy a house at retail prices, do whatever you want to it, pay retail prices for tradies work, and expect to make a profit (especially when you have to pay Stamp Duty, agent etc.)

Unfortunately these reno shows on TV make everyone think its an easy way to make tens of thousands.

Dont get me wrong, there is money to be made in renos but you need to know what you are doing, get the work done at trade prices, and most importantly- do the right work. Work out what you can sell the house for conservatively and then work backwards with your costings...

Spending $5k on a hand painted mural, probably isnt going to get you a return.....

 

[Jacque]

Buy-Reno-Sell ideally works best in a rising market and with several of the factors already discussed, for sure. But I can't emphasize enough the importance of BEING IN THE MARKET constantly to be able to identify and secure the best deals. A bargain is likely to have other buyers sniffing around and it's often he/she who acts fastest (and who is thus prepared) who is the most successful here. By all means, do your research, organise yourself and the appropriate trades but but most importantly BE THERE as timing is so vital.

I've done a few renos in my time though I'm more inclined to pay someone these days to paint and pull nails out of floorboards instead. I still, however, get a thrill of excitement, when I come across a true "renovators delight" and consider the possibilities. They can be hard work but ultimately very satisfying especially when done well.

 

[Rob Williams]

I've done a few renos in my time though I'm more inclined to pay someone these days to paint and pull nails out of floorboards instead. I still, however, get a thrill of excitement, when I come across a true "renovators delight" and consider the possibilities. They can be hard work but ultimately very satisfying especially when done well.

Likewise. I used to do much of the work myself. Over time, I started outsourcing more and more, leaving just a few jobs I enjoyed doing to keep my hand in. I found my bottom line did not vary at all, despite not putting in long hours doing tedious work.

 

[Melbournian]

Unless you are a traddie, extremely handy or have access through say family, to cheap labour, then buy, reno and sell for the average Joe Bloe, in a flat or falling is marginal at best.

Even if you could do this, and make a small profit, you need to move to do this to a number of properties, ie volume to make it more worthwhile financially. Of course there are risks in doing this, let alone potential ATO implications

Interestingly, I have seen a number of unrenovated properties in some of the premium areas in Melbourne (ie Albert Park, South Melbourne, St Kilda West) These will be over $1m imo, but for a long term view, and to make your PPOR, there are some real great opportunities. Overlay the poor sentiment in the market, and these I believe are true diamonds in the rough

i totally agree with you but even if you're a trade - it is risky.
my builder did a couple 2 in albert park and 1 in ascot vale.

Bought one for 700K in albert park, reno about 400K sold for like 1.5 mil so some profit there. But he bought another after that 900K reno around 500K and delays interest etc another 400K. in total ard 1.8 mil spend tried to sell on the market for 2.2 mil reduced to 2 mil and still got nothing. now it is rented out negatively geared

you win some you lose some. to buy reno sell in this market - you need specialist knowledge and also the ability to have both end to end knowledge from buying, financing, renovation and selling. you could be a gun renovator but have no network to sell or either you just bought it at a bad price.

 

[Melbournian]

Unfortunately these reno shows on TV make everyone think its an easy way to make tens of thousands.

agreed - those reno shows are crazy they spending heaps on renos.
but the shows itself make heaps from sponsorship etc so its profitable for the channel to do these shows.

 

[pennyk]

Unfortunately these reno shows on TV make everyone think its an easy way to make tens of thousands.
.....

I must watch different reno shows to you...... on the ones I watch things always go wrong, and it seems like its way too hard to ever attempt myself!!

I'm very aware that I/ we have minimal skills and will always need to pay someone to do work. I see people on Somersoft doing renos for under $10K, and our reno is going to be upward of $100K... that includes building work, painting, lighting, floors, etc

I sometimes wonder whether people are telling the truth about what they spend, or whether they have not calculated in all the costs... or I'm just paying way too much! But at least I know the job is done well, and its finished in a reasonable timeframe, which it wouldnt be if I were doing it myself!

 

[marg4000]

agreed - those reno shows are crazy they spending heaps on renos.
but the shows itself make heaps from sponsorship etc so its profitable for the channel to do these shows.

Comment on "The Block" last night that "there will be 100 tradies working on the exterior tomorrow" and the contestants would have to work around them!!
Marg

 

[Melbournian]

I must watch different reno shows to you...... on the ones I watch things always go wrong, and it seems like its way too hard to ever attempt myself!!

I'm very aware that I/ we have minimal skills and will always need to pay someone to do work. I see people on Somersoft doing renos for under $10K, and our reno is going to be upward of $100K... that includes building work, painting, lighting, floors, etc

I sometimes wonder whether people are telling the truth about what they spend, or whether they have not calculated in all the costs... or I'm just paying way too much! But at least I know the job is done well, and its finished in a reasonable timeframe, which it wouldnt be if I were doing it myself!

it really depends what you doing - small renos like 10K are plenty and 100K would be more structural. Some of the renos ppl talk about here is about getting instant equity and not for resale like putting in bunnings kitchen etc and just to get it ready for rental.

i pay ppl too and at most would only attempt the demolition myself.

 

[Jtkumnick]

I must watch different reno shows to you...... on the ones I watch things always go wrong, and it seems like its way too hard to ever attempt myself!!

I'm very aware that I/ we have minimal skills and will always need to pay someone to do work. I see people on Somersoft doing renos for under $10K, and our reno is going to be upward of $100K... that includes building work, painting, lighting, floors, etc

I sometimes wonder whether people are telling the truth about what they spend, or whether they have not calculated in all the costs... or I'm just paying way too much! But at least I know the job is done well, and its finished in a reasonable timeframe, which it wouldnt be if I were doing it myself!

Renovators are like gamblers, you only hear about the wins.......

 

[pieman]

Interestingly, I have seen a number of unrenovated properties in some of the premium areas in Melbourne (ie Albert Park, South Melbourne, St Kilda West) These will be over $1m imo, but for a long term view, and to make your PPOR, there are some real great opportunities. Overlay the poor sentiment in the market, and these I believe are true diamonds in the rough

I've been looking around there for an ordinary single fronter after I sell 1 of my dog apartments in St kilda that has been an under-performer over the last 10 years.
Still seem to need near 1m for a shitbox, albeit freestanding house.
15 years ago they were <200k and I looked at so many and for so long that I started to see resales of the same house.

 

[buzzlightyear]

I've been looking around there for an ordinary single fronter after I sell 1 of my dog apartments in St kilda that has been an under-performer over the last 10 years.
Still seem to need near 1m for a shitbox, albeit freestanding house.
15 years ago they were <200k and I looked at so many and for so long that I started to see resales of the same house.

You'll get a touch more than a s...box for $1m+.....like this one