September 30th, 2019 in

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7 Great Renovating for Profit Tips for Success

Renovating for profit can be a very lucrative pastime, but it also takes a lot of research and discipline to do it right. It’s all about carefully adding real value to a property over the long haul. So don’t for a minute think it’s some sort of get rich quick scheme – or you’ll be sorely disappointed.

But one thing’s for sure, there’s a great chance that if you adopt the renovating for profit mentality then you’re highly likely to get a great ROI from a the sale of your property in the future.

There are many people who renovate multiple properties at once. But I wouldn’t recommend this – especially for a beginner. Learn the ropes first then scale up.

The good news is that most homebuyers will opt for renovated properties because they are able to move straight in and not have the hassle of doing the renovating themselves.

So the question is, could renovating for profit be something you could do?

renovation-for-profit

What is Renovating for Profit all About?

The main reason why investors are renovating for profit is quite simply to sell it for a much higher price once the work is complete.

Usually, a property that is dated and lacks appeal inside or out is unlikely to fetch a large amount when it comes to selling. Well at least not as much as a renovated home will. This is why many property investors see renovation as a great opportunity to make some extra cash.

Here are some things to keep in mind:

  • Make sure you purchased the investment property in the right location.
  • Don’t pay over the odds for the property to start with.
  • Purchase a property type that’s in demand.
  • Don’t blow your renovation budget or you’ll end up eating into your profits.

 

What is a Property Flipper?

Property flipping is a term coined to describe the act of investing in a home, repairing it and then re-selling it for a profit. And a property flipper is the person that actually does the property flipping.

For the most part, they don’t really care what they invest in, but they certainly want to make money from the buying, renovating, and selling process. There are lots of people who do property flipping for a living, investing their profits into the next investment and so forth. That way they build up their investment property portfolio and their bank balance.

renovating-houses-for-profit

In actual fact, property flipping is a very viable business option that can provide a steady income over time. But you do need to study the market closely in order to find properties that will bring a good return on investment.

One of the main downsides is that you also need to deal with extra costs that may or may not be recouped over the long run. This might seem problematic at first, but in the end, it’s the return on investment that should be your main focus!

 

Things to Consider When Renovating for Profit

 

COSTS

Keeping on top of costs are crucial when you are renovating for profit. Pay particular attention to the purchase and renovation costs right from the start.

As we mentioned earlier, these costs will vary quite a bit depending on the situation. Some of these include:

  • The purchased property price especially if bought at auction.
  • Stamp duty that is paid from your own pocket.
  • Mortgage interest during the holding period, something that does add to the total cost!
  • Selling costs – advertising, real estate agent fees, etc.

 

RISKS

As you can expect, there are quite a lot of risks to take into consideration.

Renovating for profit can easily place a lot of strain on your life and your close relationships.

It can be an all-consuming activity and you will rarely find the time to do anything else, especially if you are also doing some of the work. It might not be a problem at first, but after a while, it can eat up quite a lot of time from your life.

renovate-for-profit

ADVANTAGES

Obviously, there are lots of advantages that come with renovating for profit. If you can get a fast renovation and sale turnaround it means that your bank balance will be rewarded quite significantly.

If you invest your own time and do a lot of the work, you will get to keep most of the profit for yourself after taxes. Also if you do smaller renovations then there’s probably no need for a council planning approval and you can get the property on the market again quickly.

 

7 Renovating for Profit Tips for Success

 

1. Research Like Crazy

Remove the emotion out of the equation and learn which home improvements are the most likely to add value (and profit) for your style of home, suburb, and the current market conditions.

2. It’s Really Not About You at All

If you want to make serious money you need to focus solely on your target audience. Leave your own tastes at the door and keep design choices as neutral as possible.

3. Penny Pinching Comes in Handy

Whatever you do don’t blow out your renovation budget. You’ll only end up with cash flow problems and unhappy suppliers and tradespeople. It’s also likely to increase your blood pressure no end.

You could also hire a professional valuer to help you estimate costs and work out a strict budget. Always add a buffer for those unpredictable situations that might crop up.

4. Simple is Best

Often small, low-cost improvements can make a huge difference to your property’s value. So why not try a fresh lick of paint, new bathroom fixtures, new lighting, a splash of new door and window handles. These can all help a property increase its rental yield and sales price.

5. Your Real Estate Agent Is Your Best Friend

It’s a good idea to start connecting with real estate agents in the area you’re looking to renovate for profit. Agents often chat to a network of prospective buyers before they list properties. So make sure you share your goals with them so they can match you with buyers when the time comes.

buying-and-renovating-houses-for-profit

6. You Need a Good Team

There are so many contractors that you’ll need to hire during the renovation process. Rely on professionals to transform a property safely and soundly and make sure they’re licensed. Plumbers, electricians, roofers, cleaners, and painters are some of the workers you’ll need. Invest in a competent team you can trust and build good rapport with them. Grievances and misunderstandings cost time and money.

7. The Bigger the Better

There’s no doubt that Aussies have the biggest houses in the world and they love their space! One popular way to create more appeal in a property is by enlarging or adding more rooms. If you’ve already got big, unused areas, why not consider creating multiple rooms from them, especially if it increases bathrooms or bedrooms.

 

Is it Really Worth it to Start Renovating for Profit?

Although it might seem like it’s just a property flipping business, it’s a lot more than that. It’s a sustainable income for you and a business worth growing. It’s not just a flash in the pan opportunity.

At first, it will be hard to make connections in the industry especially sourcing good builders and tradespeople. But just take your time and be persistent. It will definitely pay off!

Is it hard to renovate for profit? Well it does require a lot of work and commitment but it’s one of the best ways to make a yearly income with just a few property flips. It certainly beats the 9 to 5 grind don’t you think!

Enjoy your renovation.

All the best,

James Mason

Book your free consulting call with me today! 

 


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September 4th, 2019 in

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Interview with professional mortgage advisers Mandy Taylor and Greg Wilkinson.

Recently I sat down for a coffee with Mandy Taylor and Greg Wilkinson from Smart line mortgage advisers to chat about what it takes to obtain finances for a renovation project. I fired a few questions at them that I thought would be beneficial for first time renovators and owner builders.

But before we jump into the questions let’s learn a little more about Mandy and Greg.

Mandy Taylor

Mandy grew up in Scotland and from her early teens helped her mum in the local building society working with customers to help them buy their first homes.  After moving to Australia in 1991, she has worked with companies such as CBA, St George and Bank of Queensland heading up lending teams throughout the North Shore and Northern Beaches & Greater Sydney Region.

When she’s not working with loan clients, she’s marrying them in her capacity as a marriage celebrant….. one of the few women who marry a number of men each year….to other women!

If she’s lucky to have spare time, it’s spent in the garden, fishing or sharing quiet time with her partner and adult kids.

Greg Wilkinson

Greg has spent all his life in Sydney and grew up in the Ryde area.  Worked for CBA and spent a short stint with Bank of Queensland before becoming a loan writer for another franchisee.  Decided over a year ago to become principal of his own franchise of Smartline Personal Mortgage advisers and has never looked back.

Greg is an avid NRL Bulldog fan (don’t hold that against him).  Loves his cricket, golf and plays recreational baseball with a couple of teams in Sydney. His favourite food is sausages and he reckons a good aussie beef snag covers all 3 food groups every day of the week!

Owner Builder Finances

If an owner builder wants to obtain finances for their construction project here in Australia, is there any particular steps or processes they need to follow to apply for this type of finance?

Preparation….preparation…..preparation and articulation are key!  Before sourcing finance it’s imperative to get informed about the different licenses required from the various government pages.

In terms of lenders and what they may be looking for:

  • A copy of your detailed project.
  • Resume of you and those you intend to employ to help you complete the build.
  • Your building plan with specific costing involved.
  • Estimates and quotes for work to be completed.
  • Timeline of your build (they prefer 12- 18 months max).
  • Extra funds you may have to complete the build if you go over budget.

Few lenders will lend for owner/builders and those that do often may reduce the LVR (loan to value ratio) as low as 50%.  Part of preparation and planning is to speak with a broker to find out the difference ratios for lenders who will lend for owner/builder projects.

 

What other types of finances and options are available for people who are looking to renovate their home?

Some renovations may not be extensive or require building licenses etc.  Depending on the cost, you may simply need a ‘top up’ on your existing (eg $50,000) home loan which can be done relatively quickly or if a small amount perhaps a personal loan would suit (less than eg $10,000).

If neither the top up or personal loan is enough for you to renovate, then using the equity in your home to access more cash may be the way to go as long as the repayments can be made and other criteria met.  Each loan would be on a case by case basis.

Some lenders will cap the amount of cash out required as well as stipulate maximum LVR.

 

What advice and tips would you give someone who is obtaining finance for their first renovation project?

 

  • Speak with a broker and find out first of all the likelihood of being able to obtain the funds and how to go about it.  Whatever the amount is, it’ll help you work out a budget.  Knowing what you’d like to do versus what’s financially possible could impact your plan either way.
  • Plan the renovation and speak to experts well beforehand.
  • Plan the budget and costs, get quotes.
  • Add extra into the budget to allow for the ‘unforeseen’ problems/issues.
  • Depending on the type of renovation, take into consideration the time of year and expected delays – this can often cost more as you may need to employ more people to get job done on time.
  • Research on following links as a starting point to help guide you –

http://housinglocal.com.au/renovating.aspx

http://www.yourhome.gov.au/you-begin/renovations-and-additions

 

What pitfalls should people be mindful of when obtaining any type of finance?

 

  • “Do your numbers” and don’t stretch yourself to the maximum leaving you short of cash if something goes wrong.
  • Speak to a broker as they have more lenders to choose from that your local bank, don’t feel ‘stuck’ with your own bank.
  • Speak with a broker who has experience and not just out to make a quick sale at your expense.
  • Whatever you’re obtaining finance for, if you can’t afford it, look at alternatives as the financial stress isn’t worth it, you may need to change your strategy and ideas.
  • Seriously consider life, income and loan insurance.  Most people assume their insured via their superannuation but not necessarily and at the end of the day, bad things happen to good people.  No point being over insured, however to ignore it is working on the ‘hope nothing goes wrong’ basis.
  • Ensure you don’t have to live on bread and water budget over the next 10 – 30yrs in order to get the amount you want – be realistic.
  • NEVER FEEL THAT YOU’RE BEING RUSHED INTO SIGNING UP FOR A LOAN nor that “you’ll get that investment quicker as I can get my ‘loan person’ to sort you out right now.”
  • Stay in control and avoid getting emotionally attached to the ‘item’ you need the loan for.

 

Do you have any tips & advice for first time renovators?

We cannot stress enough the importance of the following:

PLAN……PREPARE…..RESEARCH….ASK ADVICE OF EXPERTS ….RESEARCH SOME MORE ….BE REALISTIC

Renovation finance advisers

 

Well there you have it, some great advice from Mandy and Greg, and a big thanks for the time to answer some of my questions guys, much appreciated!

To stay up to date with what Mandy and Greg have going on, please visit – Their Smartline websiteFacebook page or Twitter account.

If you have any questions or stories related to finance please feel free to drop them in the comments section below or contact the guys directly and I’m sure they will be more than happy to help out if they can.

Till next time, happy renovating!

James Mason.

 


 

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