Does anyone buy renovate and sell for a living

Hi All,
New to the forum and have been reading through with interest.

As mentioned above,
Does anyone here buy renovate and sell for a living?

I have been considering it for a while and am interested in peoples stories (good, bad or otherwise).

I have a 3 properties at the moment and am pretty confident in my renovating abilities however taking the big step and treating it like a full time job is a bit daunting.

I have read all the property magazine stories however most stories appear to be from lucky or well informed people who profited during the boom.

Being successful in a slow market is the real test I suppose.

Cheers
Wazzza

Hey there

I actually have no experience with this at all, but would also like to hear from people who are doing this for a living or at least a supplementary income.

I think it sounds like fun if you're into interior design, etc.

In my understanding, I'd buy a really cheap place in a good area or soon to boom area, that's not disgusting or falling down, but just really old or needing an update, that you can just do basic things like new carpet, modern kitchen, etc, and instantly add a heap of value.

I think the things people get stuck on here is when they try and do way too much and too many little personal touches for too much money, and also when they simply choose the wrong property to begin with and discover major structural problems or the area sucks, or whatever.

Well said Grace…..the major thing to remember is …..Not to get personal with your new investment!

Buy it, do it up without spending huge amounts of money and do not put in what you like and want in your own home.

It’s easy to do, and I kick myself for not having done it!
I have all the tradesmen, suppliers and the know how, and yet, I just can’t get passed being too scared to take the plunge!

Yeah, like, if I was to do my own place (and had more money than I actually do), I'd be putting a heap of personal little things in that I love. Like plantation shutters, mixer taps, crystal door knobs, built-in shelves, louvered wardrobe doors, shiny tiles, glass mini french doors on the kitchen cupboards, etc. I may have a feature wall...

Whereas if I was just buying to do up and then sell at a profit, I'd just do the big changes for as little expense as possible like carpet, tiles if needed, nice blinds or curtains, any repairs...and I'd make the colour scheme neutral...I personally love neutral, and most people tend to as well I think. They can add their own touches then.

I know that I don't particularly wish to move into a place that's already had all the touches done. I want my own, thank you very much!

Grace_Slick and Michelle,
The two of you seem to have put a bit of thought into this.

I totall agree with you.

I try and keep the professional help to a minimum and if I am going to use a tradie it needs to be something that will add the wow factor or make a significant change like the carpets, lighting and the plumbing work only when installing a new kitchen or bathroom.

I love tiling, landscaping, (hate painting but it makes such a difference), and have done a couple of bathrooms which again makes a huge improvement.

I too am very nervous about chucking in the job starting out but in theory if you do it right there is money to be made.

Even in a slow market there are ways to make it work. If you buy and sell in the same market and don't overcapitalise on your reno's it would be hard to go wrong IMO.

My thoughts would be to buy a house, set a budget and set a 3 month timeframe to complete the reno's. I know that selling within the first 12 months will attact more Capital Gains tax but you don't pay tax unless you make money so I am willing to cop it.

Just need to save up for the next year in order to get a bit of a buffer in the bank.

Wazzza

Think you need to check the GCT a bit more wazza. CGT applies on any property that is not your primary place of residence. There is also the issues of cash flow whilst renovating and the time it takes to sell it. But it all can be done, just plan it right.
Steve

Steve,
Agreed,
If I were to start renovating for a living I would allow for probably around 100k in the bank prior to kicking off. This would allow for living expenses and also give a bit of a buffer whilst waiting for the sale.
To get the banks on side I will be preparing a business plan with concise financials with allowances for blowouts.
The CGT is a big one though, I am willing to cop it as the reno's will not be my primary place of residence however to make it viable the profit will need to allow for this. Our accountant will be the primary information source for this.

I think the key is to treat it like a business and research like crazy.

My views at this stage are quite simplistic and as I find out more information I will be sure to post it.

Steve,
As per share investments, CGT on investment property is effectively halved if you have held it for at least 366 days. However, I'm not sure how the cost of capital improvements are treated though.
Chris

I've posted this link before and I'm that you guys & gals will enjoy reading these.

http://www.bantacs.com.au/booklets.php

Steve

edit - To put gals in there too

Hi Guys,

I am happy to answer any questions you may have about doing property investing full time. My partner and I do reno's full time, with a few other speaking engagements, joint ventures and small coaching groups on the side (in our spare time ).

Regardless of whether the market is rising, falling or going sideways, renovating for profit is a property investing system which is proven to work in all markets. The difference in doing it as a business is to try and follow some principles and use a systemised approach. In a rising market, you can pretty much take a punt and just give it a go and were more then likely do make something from it. Whereas when there is uncertainty in the market, you don't really want to be dealing with any complexities or guesswork.

At the moment we are finding that the people that are getting the greatest results are the ones that are costing out the renovations property before they start, number crunching the deals to work out profitability upfront, negotiating to get the best starting price and terms, picking the most value adding things to renovate, doing them in the correct order to yield most efficiency, and then properly staging and marketing the property.

One of our favorite renovation strategies is to add rooms and bathrooms as well as the standard renos. We might convert a varandah or sleep out on a queenslander into an addition bedroom, walk in robes into additional bathrooms or laundrys into bathrooms, formal dining rooms into bedrooms, etc. However there is a nick to it. We use some templates that help us inspect properties in minute detail and cost out all the things that would need to be done to it and then number crunch the whole deal to work out its profitability. I personally only do deals that have at least 20% profit in them, which makes it easier if I have to negotiate at the end to sell it quickly and still leaves a lot of fat for me.

As to the capital gains comment that was made earlier, we don't actually pay any capital gains. We pay income tax on the profit we get from renovating and selling places, because we do it on a regular basis. A good accountant can advise you about this and if you would benefit from putting structures in places. The primary place of residence is not liable for capital gains tax. Further to that, you can move out of your primary place of residence and rent it out for a period of 6 years and within that time sell it and still not have to pay capital gains tax. The only catch is that you can't purchase another primary place of residence in the meantime.

I hope this has helped. I'm happy to answer any other questions that you might have.

Wishing you every success,

How do you know you're going to make (atleast) 20% profit before you sell it?

Hi Don,

I use a template into which I record all the details about the property including: purchase details, buying costs, selling costs, average selling price for renovated property, reno cost (based on my detailed costing of the renovation I mentioned earlier), other fees, rent if there is some in the process, loan costs, etc and this helps me get an accurate view of the profitability of the deal.

To start with you can also use a quick elimination formula, before you get into the detailed costing of the deal.

For example, if you look at the basic profit formula:
Renovation Profit = Selling Price – Project Costs

the project costs would be made up of:
Project Costs =
Purchase price +
Closing Costs +
Renovation Costs +
Holding Costs +
Selling Costs

Translating and viewing all project costs and profit as percentages of the purchase price, will allow you to use a formulized approach for deal evaluation.

So an example of Percentages might be:
5% is the average % for purchase costs
4% is the average % for selling costs
10% is the average deposit
10% is the average % spent on a complete cosmetic renovation
6% is the average % for holding costs, based on 6 mths & 8% interest
10% is the minimum % that could be expected for Profit

All these % add up to a Total of 45%

So to give you an example of how you migh use this...

Deal purchase of $300,000 (using the 45% factor identified above) would need to sell for
$300,000 / 100 * 145
= $435,000 to meet the Quick Elimination criteria

To achieve an after-reno sale of $400,000 (using the 45% factor), purchase price would need to be
$400,000 * 100 / 145
= $275,862 to meet the Quick Elimination criteria

You can use this to work out if the deal is worth looking into further and adjust % to reflect your own profit margin ideals, etc

It can also help you negotiate a deal to get it at a price which will yield the results that you are after.

I hope this has helped.

Wishing you every success,

ha! Ive done it professionally, and its hard to make good money from renovating. the money is in developing , but that requires a lot fo capital, out of most peoples reach.

Unless you are prepared to move into the house and have it as your Principle place of residence every time, forget it. Becuase in Qld you'll pay triple stamp duty when you buy it, you'll pay tax on it when you sell. Dont forget you'll be paying an agent nearly 10K to sell it. On a 300K home, theres at least 20K+ of costs you have to make just to break even.

You have to pick up a reaaly **** property that no one will touch to get a good buy. Houses are so expensive now, that the cheap end of the market is quickly bought up. theres very few bargains there, almost none anymore.