Realistically can I make decent money when I do a buy, reno and sell

[Keen]

Well, having thought about ways to seriously get over the Debt Serviceability issue we all encounter sooner or later, I keep coming back to the same strategy.

Buy the traditionally real dump in the best street (structurally sound, but otherwise a real mess), spend say up to say 10% equivalent of the purchase price on renovating and look to sell within 3 months of purchase for an after tax profit of say at least $30k. Most work (bar say removal and clearing) would be outsourced (this is not negotiable). The place would be purchased in my wifes name as she is in the 30% tax bracket.

Is this realistic. Reno would be in the flattening Perth market.
The reason for the above strategy is to repeat several times and pay down existing debt to improve serviceability.

Regards and thanks

Keen

 

[Dunsborough]

Hi Keen
My first thought is we need more info, ie suburb, median for suburb, what improvements you doing, etc.

If it fits into first home owners budget that would be plus, also if you can hold for 12 months you will get 50% discount on cg.

Best of all would be to buy and hold and when clean and tidy get good weekly return?

 

[Twitch]

No, because the situation you've outlined includes these factors:
- No sweat equity
- Being done in a flattening market
- No change of use for the property

 

[Aimjoy]

No,

Because of what Twitch said AND
the transaction costs eat up all your profit.
i.e. Stamp Duty, Legals, Finance Holding Costs, REA Commissions, Legals again, Loan Break Costs yarda yarda.

Tried it 2 x in a flattening market (5% falling market as it later turned out) and ended up keeping the properties both times. Still it did not produce cash but did get me into more buy & holds

I'd be vary wary of purchasing in Perth unless you know the market really really well.

Aimy

 

[Celeste]

Hi all

All I can say is, buy,reno,sell is exactly what I do for a living and I am in Perth and making money. Also, the fellow across the road owns 7-8 rentals and he buys, reno, sells 1-2 a year for cash flow, his latest is across the road goes on the market next week end.

Tho, I will stress he buys really cheap and does kitchen (very basic no overheads, upright stoves etc.) carpets, paint and clean up and that about all. he does fast cheap turn arounds. He does it for strictly $$$$ He does ever one the same - same paint same kitchen etc

I on the other hand buy cheap do a really good reno (total gut - new kitchen, bath, laundry. flooring, curtains etc - I pick new colour each one, different kitchens etc.) and target the higher sale price.

I love it, I do it for the satisfaction and the $ and the lifestyle (my own boss come and go as I please) and interior decoration and SHOPPING.

You need an action plan. Why are you doing it and how can you acheive it? etc.

Also, in a slower market lower your profit expectations - instead of big chunks of profit do a couple with smaller profit.

 

[Ausprop]

you could also time the market perfectly - this lull is providing a feast of opportunity. If you sell later in the year you will benefit from the reno added value plus I would expect about 10% growth. even better tho, buy say somehting with a backyard you can chop off, sell off the block, reno the front and refi it to keep. or sell the front and use the funds to develop the back. plenty of opportunites

 

[Bandita]

Hi Keen,

If you're talking about doing this in Perth (or even anywhere in Oz) - a 3 month turnaround with a $30k profit maybe a very high expectation - or if you're looking at million $$ properties, it might be fine....

We're in Melbourne and we buy, reno and hold (and rent them out). Our previous renos have been very small and cosmetic, we're undertaking a complete gut and reno now - but we won't be selling.

Celeste does exactly what you're talking about in the Perth area - have a look at her posts, but she does ALOT of the work herself (amazing woman!!). If you're employing people to do most of the work, you (may?) find there will be some nice capital gains, but the costs of buying and selling won't be worth it for a 3 month turnaround - and you may even lose money in that short of timeframe.

If you're looking at doing alot of the work yourself - or you're looking at holding the properties you reno - you may be fine, but doing a reno using others expecting a sale with that kind of profit in 3 months might be a bit risky.

Cheers,
Jen

 

[sailor]

My thoughts are also with those who recommend buy cheap, do as much as you can yourself, and leverage to buy the next one; or sell if you must.

I used to think I would need to pay the tradies to do everything. I am totally unhandy...or so I thought. They charge the earth, and I don't have much in the way of reno skills. Some people are absolutely necessary like plumbers and electricians, because of the legalities involved.

However, Bunnings (and the like) have wonderful courses on everything. The paint shops will tell you everything you ever wanted to know about preparation and painting. The nursery will fall over themselves giving you good advice about how to reno a garden. And Google will find brochures and step-by-step guides on anything else you need. When you get tradies to come in for a quote, ask them all the other questions you have about everything...(like I asked the builder which walls I could knock out that weren't supporting the roof). And then there's SS...what more could you need?

From all these sources I've learned how to plan and renovate a garden, and what to plant where with what ground cover. How to prepare and paint floors, walls and ceilings. How to knock out walls and which tools to use for what purpose. How to plan a kitchen, and where to put what. What demolition items are reusable and what to take to the dump.

Ofcourse it takes me a lot longer than a professional, but I'm getting faster and learning heaps.

You can save thousands of $$$$$ doing what you can yourself. This adds immediately into profit. As you progress from one reno to the next, your skill set will increase, as you learn the tricks of the tradies.

Good luck with it, and let us know how you are going.

 

[Dazz]

(this is not negotiable).

Most things we do whilst playing this little property game fall flat on their face when we take a stance like this.

 

[Norwester]

Sailor,

Good to see that you're not sparkying and plumbing yourself..........

Does anybody factor in to the equation the cost of their own labour? The cost of running around town to find that particular widget for X dollars less. The cost having things rectified by professional tradesman?The cost of doing things in four times as much time as a professional would.

If you have the free time (off shift/FIFO) well great, but in cases where your earnings would be far greater........why would you bother?

Nothing is worse on the eye than a crappy reno with a poor quality finish that someone still wants big dollars for...............then again there always seems to be someone around to buy them.........

Not meaning to be a grumble bum or anything but you really can't go to Bunnings and expect to be a master painter /tiler/ chippy etc.

And we don't charge a fortune often..........generally only when we see wet behind the ears owner builders and renovators that we have never worked for before..........I used to call that the *disorganisation* surcharge.........

Finish and timing is everything

Just my 2 cents..........

ciao

Nor

 

[sailor]

Does anybody factor in to the equation the cost of their own labour? The cost of running around town to find that particular widget for X dollars less. The cost having things rectified by professional tradesman?The cost of doing things in four times as much time as a professional would.

If you have the free time (off shift/FIFO) well great, but in cases where your earnings would be far greater........why would you bother?Nor

Tis cheaper than going to the gym to get fit, and much more fun...and even though it takes me twice as long...I have a real sense of achievement! ...and I don't mind the accolades that come from the admirers.

 

[wylie]

For me, when we renovate, I am not trading my paid time at all, as I am not working (apart from looking after the family etc etc etc). Once you have done a few renovations you get a feel for what works and is do-able and what is worth spending money on.

We can tile as well as a tradie, but I would not touch floor sanding as I have seen enough bad DIY jobs to know it is a specialist task.

The other thing I would say is that whilst a tradie will do a quicker job on most things, many of them spend half their time (which we are paying big dollars for - think plumbing) on the mobile phone organising the next job or organising the other plumbers working for them. I find this really frustrating and something that didn't happen before mobile phones.

The last big reno we did, our plumber came to the job, took half an hour to explain to the chaps working for him how to go about the job and we were paying for both of them to stand there. This plumber is a great chap but when we first used him he worked on his own. Now he has a few working for him and he's getting expensive.

The other thing is that my hubby is more fussy with finishes than some of the tradies we have paid for.

Wylie

 

[Celeste]

Sailor,

Good to see that you're not sparkying and plumbing yourself..........

Does anybody factor in to the equation the cost of their own labour? The cost of running around town to find that particular widget for X dollars less. The cost having things rectified by professional tradesman?The cost of doing things in four times as much time as a professional would.
ciao

Nor

Hi all

As per usual it comes back to - what you want to acheive.

I for one do factor my time ( and I am dam expensive!!)

I am earning at this stage X2 my previous wages (for the man) I can take time off any time I like / do Coffee / do the school things, not go if I do not feel like / knock off early etc etc.

I no longer lay awake a night thinking of fixing SOMEONE ELSE'S!! problems.
I get total job satisfaction / mega retail therapy. I am using all my skills (senior Bookkeeper by trade) and I am crafty.

I work on a minium profit of $10k for 3mths (I had to work 6mth 3 days a week B4 to make this) I started anly working the same hours, until this year as the little one is full time school.

I am learning new things - my tiling is so good now, people think I paid someone.

All I can say is " you have to work out what you want and then find a way to get it"

Mega note: Reno's are not for every one they are dam hard work and you have an emotional rollacoaster ride during them and then great satisfaction at the end, you need the passion to keep doing it. You can sub most of it out, but the profit will be less, alot less.