New Property Concept

[Shaneelastic]

Its actually 93% to be precise.
Do you actually think we would waste time on a concept this big, without first doing research?

Most Australians, 93% of them, arent in a financial position for borrow between $20,000 to $400,000 to do major renovations.
Apartment vendors, even struggle to borrow $20,000
They struggle to meet their current mortgage, as it is.
We are a wealthy nation, but not THAT wealthy

Only 7% can borrow large amounts on top of their mortgage. Thats the elite percent, which is a bracket we arent interested in anyway, as they dont need us.

Cheers

care to quote your source

 

[Peter 14.7]

Agree with many posters re the cynical factor re the high risk and experience of the main man. BUt moving on from that:

Does he realise:

un-renovated properties go for more pro-rata in most desirable suburbs then the renovated ones? I.e. inner city terraces needing work get 80% of the value of completed ones as they are cheaper to get so more buyers, as you price a property up, there are less potential buyers;

a rule of property is leave something in the deal for the next person, full renovated mean no value to add, a lot DINKS are happy to put in weeks and weeks of hard slow ALA the block, most even enjoy that

90% of owners want their own ideas and speaking as ex building designer, some of what the owners want can be very err, individual, a new kitchen can be pulled out the first week of settlement because it is the wrong colour, of white!

what about council Approval for development and building approvals, in the city take months, if not years, this assumes vendors want to sell and take their time about it, my experience is most vendors sell for very quick reason like divorce, new kid, new job, death, etc...thats why agents call constantly to catch that moment.

what stops a vendor doing this: own bomb worth $500k, you spend $100k making it liveable, valuation says it now worth $700k, agents list for sale $600k and vendor accepts first offer , from surprise, surprise, their brother. Insdider deal?

I could easily think of more...

As a professional project manager in the industry the average PM gets $130k a year. Why would they work for less than that for you?

Renovations are fraught with unknown costs, your $100k reno can easily blow out to $150k (watch grand designs!!!) the value added is $100k. You lose because purchasers does not value replumbing and rewiring only new spa and kitchen. Could easily happen.

Regards Peter 14.7

 

[Reno Funders]

Hi Reno Funders

Whilst I am all for thinking big, to consider yourself in the same realm as Gates and Zuckerberg and think your activities will be even bigger, is a little naïve and childish to say the least.

As MTR has indicated the comparison is chalk and cheese. You cannot even begin to compare what you propose with the scale of replicating something such as software or (anti) social media where the work is done once and the sales/use and viral marketing continue whether the founder is awake or asleep or drinking out of a coconut under a tropical palm tree.

Whilst your posts to date have been polite and you are welcoming feedback and critical thoughts and questions, the fact that you lack experience (by your admission) is concerning.

As you are seeking to use other people's money to fund your learning curve, I have some questions.

Who will superintend the project management?

What contingencies will you build in to the renovation costs?

How are your feasibilities structured?

What types of insurance(s) will you have in place?

You claim to only take a cut above a certain level of profit, however don't outline what happens to the investor who through transaction costs experiences slippage beyond the nominal gain that may be made thereby negating any profit, or indeed manifesting a loss. What guarantee do your prospective clients have that they will not make a loss by utilising your services and tradies?

The economies of scale you suggest, in the absence of experience in pulling off a successful renovation or the threat you claim to pose to existing renovation/investment companies is waving yellow flags.

To this end, if you want to be taken seriously and with a more trusting light that you actually know what you are doing, you need to answer the questions above and advise of what happens when the exits don't go to plan. Expect he best however plan for the worst..........................

Look forward to hearing your replies.

Thanks for post. Awesome post. Appreciate your time in writing it.

Re Zuckerberg. who would want to be him.
Banking industry, is the biggest industry on the planet.
And the property industry is the biggest industry to the banks. FACT.
Interconnect the 2, and result is??
Revolutionary concept, involved in creating massive property technological changes, moving with the times, suiting vendor profit capacity/potential in property industry= bank industry= $

To answer your great questions

Who will superintend the project management? Professionals with property savvy management skills, highly skilled in dealing with renovation implementation and the concept of "renovate to profit".

What contingencies will you build in to the renovation costs? A small yet elite team of assessors will apply all relevant costing measurements, risk management, quality fitting expenditure, technological advances in design, will also be greatly considered in many properties, by utilising a team of extremely creative innovative designers, including those keen on science/design/engineering, to maximise property potential, appeal, if right area is suited.
That could include areas such as Rye, Victoria. Completely changing vendors home into a state of the art property purchase.

How are your feasibilities structured? Once again, with elite savvy team, with proven track record, who assess each property in its own unique light and region.

What types of insurance(s) will you have in place? All relevant insurance measures will be met to protect us, the vendor, and even agent. Lawyers helping meet all relevant insurance topics.

You claim to only take a cut above a certain level of profit, however don't outline what happens to the investor who through transaction costs experiences slippage beyond the nominal gain that may be made thereby negating any profit, or indeed manifesting a loss. What guarantee do your prospective clients have that they will not make a loss by utilising your services and tradies? We expect to make losses. Like any stock on a stock market, you are going to get it wrong sometimes. The elite property savvy team, will mainly get it right for the investors(fund providers).
If they dont, they get sacked, bahahaha.

any further questions/doubts, most welcome

cheers

 

[pinkboy]

How do you propose to get these 'elite' persons to join your team? If they are that 'elite', they will be doing it themselves.

pinkboy

 

[chindonly]

So - how may profitable renovations have you actually completed??

 

[pinkboy]

So - how may profitable renovations have you actually completed??

He has said NONE - he just knows the 'fundamentals' of renovation

pinkboy

 

[DaveM]

He has said NONE - he just knows the 'fundamentals' of renovation

pinkboy

Some lattes over a weekend, drama fights/bitchfest and rolling that last spot on the wall 30 sec before the judges walk in?

 

[Reno Funders]

Agree with many posters re the cynical factor re the high risk and experience of the main man. BUt moving on from that:

Does he realise:

un-renovated properties go for more pro-rata in most desirable suburbs then the renovated ones? I.e. inner city terraces needing work get 80% of the value of completed ones as they are cheaper to get so more buyers, as you price a property up, there are less potential buyers;

a rule of property is leave something in the deal for the next person, full renovated mean no value to add, a lot DINKS are happy to put in weeks and weeks of hard slow ALA the block, most even enjoy that

90% of owners want their own ideas and speaking as ex building designer, some of what the owners want can be very err, individual, a new kitchen can be pulled out the first week of settlement because it is the wrong colour, of white!

what about council Approval for development and building approvals, in the city take months, if not years, this assumes vendors want to sell and take their time about it, my experience is most vendors sell for very quick reason like divorce, new kid, new job, death, etc...thats why agents call constantly to catch that moment.

what stops a vendor doing this: own bomb worth $500k, you spend $100k making it liveable, valuation says it now worth $700k, agents list for sale $600k and vendor accepts first offer , from surprise, surprise, their brother. Insdider deal?

I could easily think of more...

As a professional project manager in the industry the average PM gets $130k a year. Why would they work for less than that for you?

Renovations are fraught with unknown costs, your $100k reno can easily blow out to $150k (watch grand designs!!!) the value added is $100k. You lose because purchasers does not value replumbing and rewiring only new spa and kitchen. Could easily happen.

Regards Peter 14.7

To answer some of your concerns

Starting with your last concern.
NO, blowout costs are our issue anyway, not the vendors.
vendor isnt spending a cent remember.
Plus, reno company want to keep getting it right for us, because we have thousands of vendors lining up to use service. So only the best of the best reno companies can stand up and handle the heat.
Thats what become an 'elite" involves. Rising to be the best.

Regarding agent listing at lower.
No, agent enters a contract to set a certain price target, post renovation. Must be realistic, but the target must be set, eg "offers above".
If it falls short, its our loss. Vendors aim to sell high, not low.

Regarding divorces, people selling fast, good luck to them. They wouldnt be our clients. Enjoy your new life as a single. Not a client we would choose.
Our client needs a little time
Also, a huge part of our market, are people that arent even listed.
People that are simply "thinking" of selling, and maybe maximising their home.
We swamp the non-listed market, renovate their home for them, at no cost to vendor, then they sell, and make that seachange they always wanted.
Much of our market will be non listed property owners, who are simply "considering a sale and move".
They use our service, at no risk to themselves, sell at a maximised price, then list on market.

Re council: as per any reno job. permits will be applicable when required and measured into costings. If its all too much, our team may reject being involved in doing the project. Remember, we may decline many vendors. We do still have the empowerment to reject any house we wish. If we view it as a bad stock, we wouldnt invest.

Regarding property that hasnt been renovated.
Incorrect.
Vendors sitting on un-renovated property, sell at a much lower price.
We renovate it for them, so vendor sells at a HIGH price.
We are only interested in Vendors, NOT BUYERS.

Are you trying to tell us that un-renovated dumps sell for higher than luxury renovations.. Ummm no.

Un-renovated dumps appeal to property investors who want to renovate.
Pity we BEAT THEM TO IT, because we sided with the vendor.

 

[chindonly]

Have you considered the stance of the ATO in this concept?

If there is a legal agreement to create as much profit as possible with a professional development company - and split the proceeds - I would expect it to be taxed as a business venture.

There could also be flow-on effects to the vendor potentially putting the CGT exemption of their PPOR at risk.

 

[Reno Funders]

We are Pre Sale Investors.
Not Post Sale Investors.

Its better to come in first, than come in 2nd

Post Sale Investors, buy dumps to do them up. (then pay capital gains tax)
We are Pre Sale Investors, who beat the Post Sale Investors to the job.
We are a MAJOR threat to Post Sale Investors. And we very much are aware of that.
Thats why Im practicing, coz the critics will be Post Sale Investors.

 

[Peter 14.7]

To answer some of your concerns

Starting with your last concern.
NO, blowout costs are our issue anyway, not the vendors.
vendor isnt spending a cent remember.
Plus, reno company want to keep getting it right for us, because we have thousands of vendors lining up to use service. So only the best of the best reno companies can stand up and handle the heat.
Thats what become an 'elite" involves. Rising to be the best.

Regarding agent listing at lower.
No, agent enters a contract to set a certain price target, post renovation. Must be realistic, but the target must be set, eg "offers above".
If it falls short, its our loss. Vendors aim to sell high, not low.

Regarding divorces, people selling fast, good luck to them. They wouldnt be our clients. Enjoy your new life as a single. Not a client we would choose.
Our client needs a little time
Also, a huge part of our market, are people that arent even listed.
People that are simply "thinking" of selling, and maybe maximising their home.
We swamp the non-listed market, renovate their home for them, at no cost to vendor, then they sell, and make that seachange they always wanted.
Much of our market will be non listed property owners, who are simply "considering a sale and move".
They use our service, at no risk to themselves, sell at a maximised price, then list on market.

Re council: as per any reno job. permits will be applicable when required and measured into costings. If its all too much, our team may reject being involved in doing the project. Remember, we may decline many vendors. We do still have the empowerment to reject any house we wish. If we view it as a bad stock, we wouldnt invest.

Regarding property that hasnt been renovated.
Incorrect.
Vendors sitting on un-renovated property, sell at a much lower price.
We renovate it for them, so vendor sells at a HIGH price.
We are only interested in Vendors, NOT BUYERS.

Are you trying to tell us that un-renovated dumps sell for higher than luxury renovations.. Ummm no.

Un-renovated dumps appeal to property investors who want to renovate.
Pity we BEAT THEM TO IT, because we sided with the vendor.

Thanks for the reply.

10 out of 10 for confidence and can do.

0 out of 10 for replies you don't understand. I never said un-renovated dumps sell more, I said pro-rata they sell for more.

-10 out of 10 for think you are bigger than Gates. If, and a big if, this works, then every man and his dog will copy you, market will be swamped, quality and return will have to drop.

Good Luck but i predict 6 months of boom followed by 12 months of issues then liquidation and tears.....

Peter 14.7

 

[MTR]

Agree with many posters re the cynical factor re the high risk and experience of the main man. BUt moving on from that:

Does he realise:

un-renovated properties go for more pro-rata in most desirable suburbs then the renovated ones? I.e. inner city terraces needing work get 80% of the value of completed ones as they are cheaper to get so more buyers, as you price a property up, there are less potential buyers;

Peter
this is a very good point and you are correct.

I live in a desirable inner city area and the un-renovated period homes sell for much higher price pro rata than renovated.

MTR

 

[MTR]

Thanks for the reply.

10 out of 10 for confidence and can do.

0 out of 10 for replies you don't understand. I never said un-renovated dumps sell more, I said pro-rata they sell for more.

-10 out of 10 for think you are bigger than Gates. If, and a big if, this works, then every man and his dog will copy you, market will be swamped, quality and return will have to drop.

Good Luck but i predict 6 months of boom followed by 12 months of issues then liquidation and tears.....

Peter 14.7

I think nothing will happen ..... its an absolute nonsense. Smoke and Mirrors

 

[Noodle]

All for budding entrepreneurs and new concepts, but there are SO many assumptions here on economies of scale and expertise (which you admit you do not have) and you know what they say about those who assume? They make an A S S out of U and ME

Seriously though, the ROI from your and investors perspective is derisory.

Lets set aside the crystal ball gazing that your market researchers are so much more adept at than property valuers/buyers agents/ successful investors etc.

How can taking a $400K property spending, $20K on a reno, now worth $435K be a worthwhile venture for your business or its investors?

Thats $3K for reno funders. With all that risk, operating costs, etc etc etc. The numbers simply don't stack up.

Happy to be corrected, but the margins and ROI are way way to skinny IMHO.

 

[Peter 14.7]

Peter
this is a very good point and you are correct.

I live in a desirable inner city area and the un-renovated period homes sell for much higher price pro rata than renovated.

MTR

No MTR you and I am wrong.

Did you not read our ernest friend's reply (ignoring the pro-rata and that i posted a question not a statement). We are wrong.

NO MTR whilst you and I have multiple IPS, and I have three formal qualifications in building, and built developments from $10k to $10M and own a successful business over 10 year with my own building company, I am wrong.

Signing off Peter 14.7

 

[Peter 14.7]

Have you considered the stance of the ATO in this concept?

If there is a legal agreement to create as much profit as possible with a professional development company - and split the proceeds - I would expect it to be taxed as a business venture.

There could also be flow-on effects to the vendor potentially putting the CGT exemption of their PPOR at risk.

Good Points KUDO! coming, Peter

 

[Reno Funders]

Margins can be skinny, and often might be skinny.
The best of the best reno companies, are capable of turning every $1 spent, into $3 to $4 return.
The more average ones, $1 to $2
Very bad result = $1 to $1.

Dont really care if margins are skinny sometimes. What we love, is the VOLUME of clients(vendors). Its enormous.
In one week of testing market, I got 200 vendors keen. I got swamped.
And thats just from sending crappy emails.
Who knows how big when we go live on air, and media/public knowledge.

 

[Reno Funders]

Its such an evil concept to help maximise a vendors property value at no risk to the vendor

Anyone who feels this cant work, is basically saying that when you renovate in the smartest way possible, you cant increase property value.
So is this forum anti-renovating to profit?
Thats interesting, coz there are plenty of millionaires who renovated to profit, and they even survived capital gains tax

 

[chindonly]

We're not saying your concept is evil.

You have asked for feedback on the reality of the concept, and you are getting it.

Everyone here loves to make money! But they are also careful and do the correct due diligence, which could take years. A concept is just a collection of synaptic impulses until someone develops a way to make it work in true life.

Sustainable businesses rely on a unique and defendable USP (unique selling point), sufficient working capital and cash flows, enough margin in each deal to make it worthwhile, and great staff that want to keep working for you.

Unless you have all of these, and much more, it will remain a dream.

 

[Peter 14.7]

Its such an evil concept to help maximise a vendors property value at no risk to the vendor

Anyone who feels this cant work, is basically saying that when you renovate in the smartest way possible, you cant increase property value.
So is this forum anti-renovating to profit?
Thats interesting, coz there are plenty of millionaires who renovated to profit, and they even survived capital gains tax

Mate, this last statement weakens your respect factor by asking rhetorical questions to obvious answers in a defensive manner.

Is you know anything about this forum you would not make these statement, except to get a rise up.

You already have (free) dozens of good feedback points and advice on issues form real professional investors . Dont let your positive energy ignore the bleeding obvious. A wise investor boss of mine once said this:

"Peter, praise the lord it ( what we do: develop property) is difficult, becasue if it was not, everyone would be doing it."

It will be very hard.

Thats interesting, coz there are plenty of millionaires who renovated to profit, and they even survived capital gains tax

Yeap, and lot of them are here.

Good luck, Peter 14.7