Purchasing for renovation/onsell

After leaving the paid workforce, we wish to get into buying, renovating and selling houses. While there is a wealth of info available to all and sundry, we would like some views from people who have either tried this or currently doing this.
Financing is a major issue as I picked up from a post from from another member. The concern being we have no income stream so to speak of. We would like to use the equity we have in an investment property (it also has a mortgage) as a deposit and working capital for renovation on a next house to resell quickly. Rest of house financed by mortgage.
Can any people give us some help in how to get started. We do not wish to sell the investment property, but use it to access finance.
Thanks

Possum
 
Hi Possum,

Your question is heavily slanted towards the finance side so if you don't get a good response here try reposting the question in the Finance forum where the Finance brokers hang out.

Mike
 
Hi Possum,

There are many members of the forum doing what you propose; leverage off existing equity, buy, renovate, sell (or hold).

There are two parts to the equation; renovation as a business to fund your lifestyle and renovation to enhance the capital value of your investment. Whilst both seem similar there are some distinct differences - mostly to do with mind set.

How many renovations have you actually done? If this is going to be mostly new stuff may I suggest you do one or two whilst still employed. It's not an all or nothing game:)

With a few under your belt you may well decide renos are just too easy to pass up and quit your jobs. Really work hard on the figures though as many renovators end up working for below minimum wages - spend $20k plus 4 weeks of hard work and only add $40k to the value which after stampduty and aquisition costs = a loss!

Financing the show is relatively easy with a good broker and some equity so post some specifics in the finance area.

Simon and Julie are a couple doing renos as a team and they have left the rat race due to their efforts. Ask specific questions and you'll get so great replies from them and others. The generic posts get less help I've noticed.

regards,
 
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Revovation costs

Hi Michael,

Thanks for the insight into how we should be looking at costs/rewards for performing renovations for a business, I personally did not even take the purchase costs into account when embarking on my renos...

I would be interested to know you appraise a property that you are looking at as far as working out whether it is a viable proposition for you to buy and fix.

Glenn
 
Hi

Thanks for response to date. I will post in the Finance area as this was the slant to my enquiry as I am looking for any creative or innovative ways to gain finance. Maybe contact witha broker through this forum will be enlightening. most I have tried from ads and phone book are not interested in anything out of the ordinary. See ya in the Finance Area!

Possum
 
Hi Glenn,

Oi yoi yoi, how long is a piece of string? And before I start I don't buy broken things so there ain't nothing to fix - well nothing major anyway. We are talking cosmetic 'fixes' I hope?

Anyway, I suppose I know my target market, costs and area extremely well.

If you've been looking for a while you'll know if something is "a good buy" or not, and if you can add value - simply.

If you know your costs you'll know how much this specific reno will cost.

Subtract the guestimated reno costs, including all your acquisition costs and time, from the guestimated value added and you have the net potential paper gain. If it's in positive territory your in front (obviously), how much in front depends on the foregoing inputs.

Is it worth it to you if you recover all inputs and make an additional $10k? How about $50k? What about $5k?

When I put my time into the equation I do it at tradesperson rates ie. $50 per hour, your reno figures should support this at least. Yeah I know we are worth more but you have start somewhere;)

It's a lot more complex than this in the field as a lot is done on the fly with 'gut feel'. This is not very helpful I know but the truth nonetheless.

Rental returns for a buy an hold is 2% or greater than my borrowing rate, AFTER the value adding and including all costs. Yeah yeah I can hear all the Sydney people now "no way man, I can't get 8% returns in good areas in Sydney!". No it ain't easy, but it is being done.

regards, Michael Croft
 
Thank you Michael.

Based on your response, I had better start looking a bit harder for places that can have cosmetic overhauls for less cash and spending less of my own time (I tend to get a bit anal) on the work...like anything, it can become addictive and is cheaper than therapy!

Glenn
 
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