Is this a good idea

[cedben]

Would like some comments on my idea, is it a good idea or otherwise.

Will be out of our business in a few months time and I am considering what to do next.

I have been thinking about buying a property and renovating it and then reselling it and basically doing this as my job for a while. My wife will provide me with some assistance but will also be utilising her long service leave.

To do this it means that we would have to live on the proceeds from our business sale and the sale of another property as well until the renovation was completed and the property resold. Would also have to use proceeds from sales for renovation and holding costs.

Maybe there is someone out there that would like to be my mentor through this process.

I have worked for myself for many years and am looking for all options to keep myself busy and keep earning money without having to go and work for someone else. We have become a little to used to doing what we want when we want without having to ask or tell others. We both work hard and long hours so it is not a case of being lazy just a lifestyle choice.

I have many years of work left in me yet and have plenty of skills and qualifications to get a job working for someone, just not my first choice.

Buying another business in town is an option but choices a limited.

Have plenty of skills to do the renovation as have renovated 1 investment property and 3 houses that we have lived. One is current PPOR one is another investment property and one is being sold.

Any comments good, bad or otherwise appreciated.

Thanks

 

[Angel]

What you describe is one of the things that my husband and I would like do when we retire from our day jobs. A problem I am already aware of is that banks wont lend to purchase another property if we don't actually earn a living from working or a business. Maybe renovate one of your existing properties if you don't buy something for cash.

I would like to read what the experts here have to say.

 

[Rixter]

Not sure what your equity levels are, however one way is to set up and top LOC/s prior to rat race exit and then use that for funding your purchases & CF to complete renovations.

You will effectively be in a position to make cash offers to buy which also will place you in a great position for buying well.

Then once reno is completed & sold put the profits back into the LOC.

Rinse and repeat for next purchase & reno's.

 

[Perp]

To do what you want to do legally, you will need a builder's licence.

 

[cedben]

Thanks for replies.

Our equity position will depend on what we do with the money from the sales in so far as what debt we pay down, what our tax position is, what goes into super. Also would depend on current valuations of property we still own. None have been valued for a while. Our PPOR in particular has had over $50k spent on it since we bought it 18 months ago. We should have well in excess of $400k in equity and depending on how some other purchases are valued could go over $600k.

Interested in why I would need a builders licence, its it because I would be deemed to be carrying on a business and how would this be determined.

I thought buying a property renovating it and then reselling would be something a lot of people do regularly and I doubt many of them would have building licences.

Thanks

 

[Perp]

Interested in why I would need a builders licence, its it because I would be deemed to be carrying on a business and how would this be determined.

Because you'd be acting as a builder: https://www.sa.gov.au/topics/business-industry-and-trade/licensing-and-regulation/licensing/construction/building-work-contractor-s-licence

SA's laws seem to be looser than many other states, actually; in QLD you can't even supervise these works on your own home, that you're not planning to sell!

But it looks like when you're doing it as a business, the maximum value of total works that you can supervise is works with a retail value (not what you pay) of $12,000. (That sure doesn't get you much these days.)

As to how they tell whether you're doing it as a business, they'd look at things like whether you had another home at the time, what your primary source of income was during the period, etc. Be aware when doing your sums that because you're "flipping" houses, you will also lose the 50% CGT discount.

I thought buying a property renovating it and then reselling would be something a lot of people do regularly and I doubt many of them would have building licences.

Yes, many people do it illegally. I've asked the several promoters of "renovate for a living" courses how it's done legally without a builder's licence, and they all shut up. They have builders' licences, but it's not good for business to tell their clients that they can't legally duplicate their promoter's renovating efforts. I think it's unethical.

 

[cedben]

Thanks Perp
There must be a lot of builders around if everyone is acting legally. Reading this forum alone there are many people renovating there on investment properties . Would love to here how others address this issue. This law does not greatly bother me as I can deal with it if I do this one the same as we have done one other one.

 

[Perp]

Thanks Perp
There must be a lot of builders around if everyone is acting legally. Reading this forum alone there are many people renovating there on investment properties . Would love to here how others address this issue. This law does not greatly bother me as I can deal with it if I do this one the same as we have done one other one.

Most of the time it works out fine. The big risks are less from the regulatory authorities finding out you're doing unlicenced building works, but things such as statutory warranties and certification issues. If you're on-selling soon after the work, your buyer may expect that their work is protected by any statutory warranties applicable - six years on building works in Queensland, not sure in SA. Further, buyers may ask for your certificate of occupancy demonstrating that the works have been done to the required standards etc., which I don't think you can get if you're doing unlicenced work. Some buyers' financiers may ask for certification, too, meaning you limit your pool of potential buyers.

 

[Ace in the Hole]

Have you done any preliminary figures detailing:
Entry costs
Holding costs
Construction costs
Selling costs
Tax payable

Then seeing how much you have to increase the value of the property to make good money to cover your income + profits from the project for the whole duration of time involved, with a multiple alowing for increased risks?

If all is reasonably easy to achieve, then next step is getting aroung the builders license issue.

 

[cedben]

Have not done any figures. Just wanting views on the idea at this stage.
One property that is in the thought process provides the opportunity to subdivide into 3 and possibly 4 blocks. Not 100 percent confident on the resale of the blocks in the short term. Selling 2 vacant blocks would likely cover a large portion of the purchase price.

Will need to give the building issue a bit more thought but will be looking at using a licensed builder to supervise my work and deal with the technical side if any is required. He would then provide any compliance certificates. We have done this with another renovation except for getting certificates. We do have his invoices to show proof of work done.

Realise this has a cost but also provides surety of quality of work and gets job done quicker.
Thanks