Video Transcript

Hi. Welcome to our latest PropertyInvesting.com video blog. I’m Dean Parker from Your Style Homes and today we’re going to talk about design elements and how they can have a big impact on the finished product.

We’ll start by looking at this project behind me; one my friend has been working on and just finished. We’ll compare it to the project beside it.

You can see really easily just in the design elements alone how the two projects differ completely. One’s got a whole heap of detailing on the outside. It dresses it up, makes it look more appealing. The one next door, it’s really just a box. It’s got some render on the outside, and glass that’s even mismatched between the blue and the white. It’s not appealing at all. That’s just the first thing we can see that’s really simple that will make this project a whole lot more appealing and a whole lot easier to sell.

Now we’ll go inside this property and have a look around. Keep in mind, these are high-end townhouses, valued at around $3 million each. We’ll see the level of finish that’s gone into these and we can have a look at some of those design elements I’m talking about that will make this project stand out.

I’ve walked in the front gate and the first thing I’ve noticed is we’ve got paving instead of concrete, which is entry level, or exposed aggregate, which might be mid-level. These here are actual pavers so that dresses it up a lot more. We’ve got established plants that are layered nicely. We’ve also got some garden lighting. The first impression you get when you walk through the gate is everything’s dressed up that little bit more.

The first thing I notice inside, we’ve got floor-to-ceiling windows, which obviously lets in a lot more light and makes the space feel a lot bigger. This is a big entry. You obviously can’t afford this amount of space in every single home, especially in an apartment. The other upgrade that I notice here is the floating timber stairs. Rather than a standard staircase, this dresses the place up just that little bit more. Let’s go check out the upstairs.

All right. Bathrooms sell properties. The main features in here again from an upgrade point of view are the double vanities. It’s always nice to have a double vanity in your en suite. We’ve got plenty of cupboard space underneath. There are also lights over the vanity, which is always a nice thing. I think one of the main features in here is this herringbone pattern tile. I think that really dresses this bathroom up. It could be quite plain, but that’s a real feature. It wouldn’t be overly expensive to do that either. There’s plenty of room in here. This is again another luxury feature to have this much room, as well as to have a freestanding bath. All of these elements are definitely important.

All right. Here we are in the kitchen. The first thing I noticed here is the timber floor. This is a real timber floor. That obviously gives warmth to the environment and is definitely an upgrade. I think timber is probably the nicest feel out there at the moment.

We’ve got this kitchen behind us. It’s reasonably standard. You can see the laminate board and standard handles. There’s a nice tile in the background there. I think the key upgrade feature here is a 900 mm wide appliance pack with the cooktop and the oven. Also, you can see this nice chunk of timber here. This dresses the whole kitchen up and brings a wow factor to the entire kitchen.

I hope this has been a helpful update. I think it’s always important to try and bring as many elements into your design features as you possibly can. All these little things do add up. If you get it right, that’s when your project becomes really easy to sell and you can make a whole lot more money.

The post Tips and Tricks for Developers: How Design Elements Impact the Finished Product appeared first on PropertyInvesting.com.

The Australian Bureau of Statistics (ABS) released property price growth data last week, and home prices grew 2 percent over the June quarter across Australia’s capital cities. Over the same period, Sydney property values jumped 2.8 percent, Melbourne is up 2.7 percent, and Brisbane values increased 1.1 percent. Over the twelve months ending in June 2016, Brisbane property prices actually increased more than Sydney.

Once the data for the September quarter is released, we’ll likely see even higher numbers, perhaps up to 4 percent additional growth for Melbourne and Sydney homes. With no sign yet of a slow down over the December quarter, many investors are scratching their heads, wondering how much higher property values can go.

It stands to reason that at some point soon home price growth should flatten, as values keep pushing the boundary of affordability. Rather than speculating on continued capital growth, some investors are turning to more active, manufactured growth strategies, like renovation, subdivision, and development.

In this post, we introduce Dean Parker, a developer in Queensland, and a friend of PropertyInvesting.com. We’ve asked him to share with you some of his insights and wisdom that he’s acquired along the way. Keep your eyes out for more posts from Dean in the coming months.

Video Transcript:

Hi, I’m Dean Parker and I’m the managing director of Your Style Homes. In the coming months, I will be hosting a number of video blogs for the PropertyInvesting.com community.

I’ll be talking to you about the day-to-day challenges that we face in our development business and how we overcome them. My hope is that you will be able to pick up some helpful tips and tricks along the way. Really, these are just everyday issues that we come up against that require us to think on our feet and find solutions to.

To start with, I’ll give you a brief introduction of what we do. We’re a development company in Brisbane. We’ve been up here since 2011, but first began operating in Melbourne.

We now focus on townhouse and apartment projects in the Brisbane area. I’m standing now in front of a townhouse project we’re just completing in Coorparoo in Brisbane. There are eight luxury townhouses here, with city views. It’s a beautiful development.

As part of this project, we’ve been able to retain an existing Queenslander that sat right at the back of the block there. We’ve moved it all the way forward to the front. We’ve refurbished it, split it in half, and turned it into two townhouses. We’ve also built six brand new townhouses around that original Queenslander.

At this point of the project, from our point of view, we’re aiming to deliver a really high quality product to our purchasers. We’ve actually sold seven of the eight townhouses off the plan. We really want to make sure that when we hand these properties over that they’re of high quality and that the owners are extremely happy.

We could go and actually do our own defect checking and then give our feedback to the builder. We would do that at a high level just to make sure all the colours are right, the tiles are right and the fixture and fittings are okay.

But what we’re doing because we’re dealing with bigger projects – really, you could do this on any sized project – we’re employing a third company separate to us and separate to the builder to do our quality assurance check.

In this case, we’re using handovers.com, but there are plenty of other companies you can use out there that do a similar thing. Essentially, the process from here is the builder issues their practical completion to say that they’ve finished works, and then we get our independent company in to do a full inspection.

They’ve already been in for the first inspection two weeks ago and found 800 defects. That’s how thorough they are. They know the building code. They know what is a defect and what isn’t a defect. Any tiny little thing they find, they list it.

They basically get all this information to us on one really helpful spreadsheet. It lists the room, the defect issue and then the trade that they think would be responsible for fixing it.

We get that full list, then we give that to our builder. It’s a really easy process then for the builder to fix it. They print it off, they give it to their site supervisor, he goes through it, issues it all to the trades and then they simply work through the list.

Today, we’ve got our independent company back here again, now doing the second inspection. Hopefully, they’re in there behind me ticking all these items off, and we can then finally give the builder our final handover certificate to say that we’re happy with the product that they’ve delivered.

The challenge on this site really was to deliver a high quality product. Now, we’re not builders. We’re a development company, so I don’t really know the ins and out of every little building code that’s out there. That’s why we’ve got this third party company to come in. They know what the rules are.

The other great thing about this is they’re the meat in the middle of the sandwich. It’s not us being particularly difficult with a builder. It’s an independent company. Really, we’re just the conduit between the two.

The way that we’ve solved our problem here is to get this independent company in. They take away a lot of the headaches. It means that instead of us rushing around trying to do this defect processes ourselves, we can now deliver a really high quality project knowing that an independent company has done a full inspection and that we’ll get the project delivered on time and with a great finish.

I hope you got some value from our first video update. We’re looking forward to working with the PropertyInvesting.com community and delivering a lot more tips and tricks over the next few months as we progress through the projects we’re developing up here. We’ll see you soon.

This video transcript was edited slightly for readability.

The post Tips and Tricks for Developers: Third-Party Quality Assurance Checks appeared first on PropertyInvesting.com.

Once again, Caroline was kind enough to offer her expertise to the PropertyInvesting.com community to answer this all-important question: “How do you keep your renovation costs down?”

Interview With Caroline On Ways To Reduce Your Home Renovation Costs

Caroline, before we get into the nitty-gritty of how to keep costs down, can you share an example of a time that you over-capitalised on a deal? How did that impact your profit in the end?

One of my first deals is a great example of this. I bought a property with renovation and subdivision potential. The plan was to rent it out for six months during the subdivision process, and then quickly renovate it and sell both properties. It was a great plan, in theory.

In reality, however; we had a much harder time finding tenants for six months than I planned on. This blew out my holding costs from six months to 12 months.

Being my first subdivision, I didn’t understand the importance of thorough research prior to purchasing. I should have known exactly what I could build, how much it would cost, as well as what the process would entail. Subsequently, the subdivision costs were more than I budgeted for originally.

I also learned a crucial lesson on knowing the local market. At the time of my subdivision, a 300-lot golf course estate was released nearby, which meant there was an oversupply of land. In hindsight, I should have researched what other developments were being planned in the area, so I could accurately estimate my sales price.

Finally, the renovation took longer than I expected. At the time, I didn’t have any established relationships with local tradies yet, so we tried to do the painting ourselves.

A job that would have taken a painter just a week ended up taking us an entire month, because we were trying to renovate, work and raise a family at the same time. In the end, the project blew out from 12 months, to nearly 18 months.

All of these little mistakes added up fast and really hurt our profit. We had planned on a profit of $35,000, but in the end, we only made $15,000.

How have you learned to keep your home renovation costs down? Give us an overview of your top tips.

If I had to summarise the most important points, I’d say:

1. Know your strategy and target market.
2. Have a comprehensive pre-purchase due diligence process.
3. Determine your renovation budget before you begin.
4. Tailor your renovation plan to your target market.
5. Shop around for supplies and be creative.
6. Use reliable and good quality tradespeople.
7. Manage your renovation project efficiently.

1. Can You Elaborate on Your First tip, “Know Your Strategy And Your Target Market,” For us? How Does Having a Strategy and Knowing Your Target Market Affect Your Budget?

Investors renovate for different reasons. Some renovate to increase their rental yield, while others renovate to sell and make a profit. Each requires a different renovation plan.

For example, the type of carpet you choose for a rental property may be different from what you would choose if you were planning to sell the property straight away

Knowing your target market helps you form a more precise renovation plan to reduce costs by focusing on the areas that will make the most impact. For example, if your target market is a young family, having a bath in the bathroom will be important to this group of buyers.

2. Your Second Point Was Related to Carrying out Thorough Due Diligence Before You Buy. What Dangers are You Looking Out For in Your Pre-purchase Inspections?

Comprehensive due diligence prior to purchasing is essential. Knowing what’s involved in the renovation and understanding the amount of structural work required will reduce the risk of underestimating your renovation costs.

Structural renovations can be costly and add little perceived value to the potential buyer. Re-stumping is a good example. You typically also need to repair flooring and re-plaster walls once the re-stumping has been completed. These all add to the cost, but the buyer will not visibly see the value.

Another crucial point is to check council conditions, such as heritage overlays. This can affect what you will be allowed to do in your renovation. It could add time and increased costs if you need to comply with certain conditions. I always get an expert to do a building and pest inspection, because you don’t know what you don’t know.

3. In Your Third Point, You Said to “Determine Your Renovation Budget Before You Start.” Can You Walk us Through How to Assess The Financial Feasibility of a Potential Deal?

When preparing a budget to assess financial feasibility, there are a number of key items to consider. They are:

1. Your strategy for the deal.
2. The current structural and cosmetic condition of the property.
3. The physical work required.
4. The potential resale upon exit.

All of these items need to be carefully quantified in a detailed costing. You should also consider a sensitivity analysis where you consider the following:

• Alternative exit strategies.
• Various holding cost situations.
• Varying project costs.
• Different sale prices.

4. In The Fourth Point, You Said to “tailor Your Renovation Plan to Your Target Market.” Can You Share What a Renovation Plan Looks Like and How Planning for Your Target Market Can Save Money?

As I mentioned before, tailoring your renovation plan and budget to your strategy and target market will greatly help reduce expenses and time. For me, a renovation plan is a detailed list of everything that needs to be done inside and out. I call it a scope of works, and it literally outlines each item broken down by room, from floor to ceiling.

I even include the most basic items, such as a new light globe or new street numbers. Having a detailed plan allows you to get accurate quotes, and to only purchase the materials you need; thus reducing the amount of waste.

Many renovators make the mistake of planning to their own tastes, rather than to a specific market. If your property is in a higher end suburb, the question to ask is, “What are the buyers paying more for?”

They may demand kitchen granite bench tops, or double showers or a free standing bath. In the lower-priced suburbs, buyers are not going to pay you extra for these luxuries.

When purchasing materials, it’s tempting to get caught up in the upsell of products. For example, instead of buying a quality vanity for $200, you may buy one that has the handles you like for $250. Although $50 may not sound significant, if you do this on most of your materials, your renovation budget will blow out greatly.

When renovating, you’ll always find things you didn’t plan for that you’ll need to address. With one house I renovated, I only planned to paint the front façade, but I soon realized that I needed to paint the entire building, because the color difference between the old section and the new section was too obvious. To stay on budget, I re-evaluated my plan and in the end, I decided to spend less on backyard landscaping.

5. Your Fifth Point, “shop Around for Supplies and Be Creative,” Requires a Little More Subjectivity and Intuition. Is This Something a Person Can Learn? What are Some Examples From Your Previous Deals?

For me, this is the fun part of renovating. While it may fit my personality, I definitely think this is a skill that anyone can learn.

The internet is a great resource, as people often post their creative renovation ideas on Facebook, Pinterest and other social sites. I also take photos while on my tours around the local suburbs and during house inspections. This gives me ideas of what materials I can use.

Even when I’m not working on a deal, I’m constantly looking for new designs I can use on my next deal. Last week, I was at a local business and saw a creative way of putting a screen over some pipes behind the premises to create an art piece. I instantly thought I could use this, so I took a photo and archived it.

I once bought a dishwasher for one of my deals on eBay for only $99. It was installed, but never used. If I bought it new, it would have cost about $300.

I also look for what I can recycle and sell, such as old kitchens, clotheslines and security doors. As they say, “Someone’s trash is someone else’s treasure.”

On another renovation, I used $10 lampshades as light fittings. Sometimes you just need to think out of the box. I use my downtime between renovations to build my ideas.

6. In Your Sixth Point, You Said, “Use Reliable and Good Quality Tradespeople.” What Kind of Tradespeople are on Your Team, and Exactly What is Your Measure for Quality and Reliability?

Time is money, so using reliable and good quality tradespeople is crucial. If your tradies don’t turn up on time, they can hold back an entire project.

I have a wide variety of tradespeople on my team, such as a plumber, electrician, plasterer, builder, handyman, landscaper and pest inspector. To me, the ability of tradespeople to attend appointments and submit quotes on time are good indicators of their reliability.

Another sign of reliability and quality is whether your contractors take care to protect other parts of your home while they work, like covering up surfaces, so tools don’t mark them. I also inspect my renovation each day and do a quick tidy up. This helps me monitor the quality of their work.

You should get multiple quotes and ask around to ensure you are not paying too much. I look for tradies who can take on my vision for the renovation – those who have the experience to help me see where I can save money without sacrificing quality.

My plumber is a great example of this. When I purchase a kitchen, he advises me on the best type of sink and tap wear to get that is both well-priced and that will minimise my labour costs.

If you haven’t used a tradie before, ask for references from their previous clients, so you can speak with them.

7. Your Seventh Point, “Manage Your Renovation Project Efficiently,” May Be Your Most Important One of All. Can You Elaborate on This Point by Sharing What You Do?

Good project management is the key. Time management and good organizational skills will save you a lot of money on a renovation. In my experience, no one is going to care about my project, my timelines or my budget more than I do. Successful project management is all about ensuring I get the best outcome over the entire project.

Caroline, Can You Share Anything With Us About any Deals You’re Working On Right Now?

Earlier this year, I bought a duplex that has a potential ROI of 30 percent. My plan for this property is to renovate and subdivide it. My figures indicate that I can make more of a profit by holding this property for three to five years. Because it will create a positive cash flow, it allows me to keep investing .

There are a few challenges ahead with this one, but that’s why I got it for such a good price. I could see a solution that others apparently couldn’t. I’ll be happy to come back and share more on this one later as the deal unfolds.

If Anyone Wants to Learn More About What You do, How Can They Contact You?

The best way to reach me is through my website – www.smartchoicepd.com. You can find my contact details there, as well as some helpful renovation tips and free training videos.

Conclusion

As we’ve learned from Caroline, where most investors go wrong in the renovation process is poor planning and a lack of due diligence. Without a solid strategy and effective project management, you’ll be more likely to spend too much, resulting in a loss of profit.

In Steve McKnight’s Property Apprenticeship course, we offer a complete due diligence system that empowers investors to buy with confidence. By equipping our clients to create processes they can duplicate, we’ve helped hundreds of investors make significant strides toward their wealth creation goals.

To read how the Property Apprenticeship course has empowered Caroline to achieve her property goals, check out her comments at the end of this article. When you’re ready to explore the course further, you can register here.

What did you learn from this interview with Caroline? Please take a moment to leave your thoughts or ask any questions in the comment section below.

The post 7 Keys for Reducing Your Home Renovation Costs appeared first on PropertyInvesting.com.

Over the last four weeks, we’ve learned from Caroline how to find, buy, renovate, and sell a quick-cash renovation property. We’ve used one of her recent deals in Geelong as an example of how she applies her winning principles.

She chose this property because I asked her to profile a deal that was not her best. I believe we can learn as much from the mistakes that others make as we can from their successes. In this interview, I wanted to take a closer look at the final numbers on this deal to learn what she did well, and also where she feels she could have done better.

This particular property already had two homes, but they were both on one title. Council approved the subdivision, but the previous owner did not carry it out because of some unforeseen challenges. Caroline completed the subdivision and renovations before putting each property on the market.

Here’s how the property looked when Caroline found it:

And Here’s Some Photos Of Caroline’s Handiwork:

As you may recall from my second interview with Caroline, here are the figures she was aiming for in her initial profit projections:

• Purchase $390,000
• Acquisition costs $ 20,000
• Holding costs $15,000
• Renovation costs $20,000
• Subdivision costs $15,000
• Selling costs $15,000
• Proceeds from sale $520,000
• Potential profit $45,000

1. Caroline, How Did Things Go With This Deal? How Close Were You On Your Initial Cost Projections And Expected Sale Prices?

1. As you can see in the figures below, we were pretty close with our profit projection.

• Purchase $364,000
• Acquisition costs $22,000
• Holding costs $14,000
• Renovation costs $27,000
• Subdivision costs $23,000
• Selling costs $15,000
• Proceeds from sale $505,000
• Actual Profit $40,000

Our renovation and subdivision costs were about $15,000 over our initial budget. As you may remember, I mentioned in a previous article that we discovered some issues in our due diligence that required us to go back to the vendor to negotiate a lower purchase price.

We were able to knock $26,000 off, which came in handy considering our proceeds from the sale were about $15,000 below our expectations. The units were close to a railway line, which affected the selling price more negatively than we anticipated. Our initial aim was to make $40,000 profit, so even though our initial projection was $45,000, we were more than pleased with the outcome.

Apart from the financial gain, the knowledge and trade connections I gained through this project were priceless. Most importantly, I had fun and loved the whole process.

2. In Hindsight, Is There Anything You Could Have Done Differently That Would Have Increased Your Profit?

1. Not really. We increased the scope of the project by deciding to remove a wall in order to create a more open feel in the living area. This increased our internal renovation costs, so perhaps we could have avoided that. However, it is possible that the end sale price would have been lower as a result.

As I mentioned in a previous interview, I could have saved some labour costs by buying door handles that were easier to install, and plumbing costs by buying the vanity unit with drawers on the other side.

Although I was able to save in other areas, if I knew then what I know now, I could have increased my profit by a few thousand dollars.

The one buyer objection I could not change was being so close to the railway line. In hindsight, would this have stopped me from buying the property? Not at all, but what I have learned is that although you can’t overcome a buyer objection such as this through renovations, you can allow for a longer selling period.

3. Steve Explains Several Key Number-Crunching Formulas In His Property Investing Course. Which Do You Find The Most Helpful, And Why?

1. For quick-flip renovations we often use this very simple formula:

Purchase Price x 135 Percent = Sale Price

This quick rule of thumb allows me to instantly determine the estimated end sales price I need to achieve. Assuming you have a reasonable understanding of the property market in your area of interest, you should be able to test whether a resale of that value is realistic.

4. Steve Also Teaches The Benefit Of Conducting A What If Analysis To Consider The Impact On Profit And Return Projections, Just In Case There’s A Change In The Key Variables. Is This Something That You Do In Your Due Diligence Phase?

As part of our due diligence, we test our assumptions on high-risk items that we do not have complete control over. The obvious one is the end sale price, so before we enter into a deal, we prepare multiple scenarios. The What-If Analysis we undertook for this deal was to consider what would happen if the units sold under our expected sell price.Would there still be enough profit for the time, risk and effort we took? We concluded that the answer was yes.

Other variables that we test include changes in interest rates, and the duration of the project including the length of the sales campaign. Our main concern is how this could impact our holding costs.

We also have a Plan B exit strategy, just in case we can’t achieve our sales target. This could be to rent out the property to cover our holding costs until the market conditions for selling improve. We apply a higher interest rate to this scenario because external economic conditions, such as interest rates are out of our control.

There are also the associated infrastructure costs that come with subdivisions, which can be difficult to quantify. We can’t determine many costs until we lodge all of the formal applications to the relevant authorities. It’s important to be aware of the best case and worst case scenarios. Then you can make a decision to move forward or not based on whether you can still make money, assuming the worst case scenario.

5. One Final Question: What Would You Say To Any Up And Coming Investor Who Is Considering Enrolling In Steve’s Property Apprenticeship Course?

If you are lacking practical experience, Steve’s course will give you the confidence and knowledge base to get you started. You will become an informed investor, and feel empowered to make less random decisions. You’ll make decisions based on an understanding of the overall market and learn to choose a strategy that meets your long-term objectives and needs.

Even if you have a few property deals under your belt, I would still highly recommend Steve’s course, as he teaches you the fundamentals and number crunching skills you need to be a more skilled investor. When I started Steve’s course, I had already completed a few deals of my own, so I was questioning if I would learn anything.

I met Steve at a conference, so I asked him this question. He replied with his own question: “Do you think there might be one thing I know that could make all the difference to you?”

It’s what you don’t know that you don’t know that has the greatest impact on property investing. Steve’s course answers a lot of unknowns. I can honestly say Steve’s course has paid for itself, because the knowledge I gained from Steve has meant that I didn’t have to make the costly property investing mistakes that others make. If you have the chance to learn from an expert like Steve, why wouldn’t you?

For More Information About Steve’s Property Apprenticeship Course, Register Your Interest Here: https://www.propertyinvesting.com/store/property-apprentice

You Can Learn More About Caroline And Request Some Free Training Videos At Her Website: http://www.smartchoicepropertydevelopment.com.au

The post How to Profit Like a Pro on Your Next Renovation Deal appeared first on PropertyInvesting.com.

This is our third interview with Caroline Vass, a professional renovator who lives in Geelong. Having been trained by Steve, Caroline has been investing in real estate for about five years. While she loves the profit potential of subdivision and development deals, her greatest passion is renovating homes.

She’s so committed to the strategy that she’s even started a business helping other investors renovate their properties – either to update them or prepare them for resale.

To quote Caroline, “I love it when I finish a renovation, and friends and family are amazed at the transformation and ask me how it was achieved in such a short period, and within such a tight budget.”

Be sure to check out our last two discussions with Caroline. In Part 1 , we talked about “Finding a Profitable Renovation Deal,” and in Part 2, we covered “Buying a Renovation Deal that You Won’t Regret.”

This week, I’ve asked Caroline to share with us in detail how she turns a property from old and ugly, to looking new and beautiful without blowing her budget.

As I’ve talked to other renovators, the recurring warning I hear is, “Do not overcapitalize.” With Caroline’s help, you can avoid some of the more common renovation pitfalls.

Q. Caroline, Obviously We’re Investors, And We Renovate To Make Money. As You Shared Last Week, Your Profit Margin Hinges On Your Ability To Stay Within Your Renovation Budget. What Would You Say Are The Top Three Or Four Most Important Things To Keep In Mind To Avoid Spending Too Much?

1. Use Your Settlement Period As Effectively As Possible

I always negotiate for as long of a settlement period as possible, to allow me to prepare for the renovation before I own the property.

During this time I’ll obtain development approvals and building permits, schedule my tradesmen, purchase all of my materials, and finalise my renovation plan right down to colour selection.

This way, even if I can’t get early access, I’m not wasting a single day, once I take possession. Every day that I own that property, I’m paying interest, which decreases my profit. If I’m paying interest for my planning time, it means I’ve been slack.

2. Make Sure You Stick To Your Original Plan And Budget

During the renovation phase, it is very easy to blow your budget. To avoid this, I keep to my project plan and costing very closely. For instance, if I’ve budgeted $10 for a door handle, even if decide I like the $30 one better, I must be disciplined.

Those $20 preferences add up, and will kill my profit. The only time I ever consider making a change is if I’m certain it will add more in perceived value than actual cost, and therefore increase my profit.

Last week I mentioned the Geelong renovation from last year. On this deal, I originally budgeted to replace the carpet in the front dwelling. Once I took possession, it was clear that the carpet didn’t need to be replaced.

It just needed a steam clean. This savings ended up offsetting some unforeseen issues, because it turned out I needed to repaint the whole of the outside of the house.

3. Get Your Selling Agent Involved

I find involving my agent in my renovation-planning phase helps me to gain clarity on the details that are crucial, and those that could lead to over-capitalizing for that area. On this renovation, my agent and I both agreed that installing stone bench tops in this property would have been a waste of money, as these properties would be listed under $300,000. That market does not care about stone bench tops.

I also find that when my agent is with me from the beginning of the renovation, they know what the property looked like before. After the renovation is completed, they are better able to sell the property to potential clients.

4. Choose Your Tradies Well

When I first started, I had no option but to get multiple quotes and then compare price against quality. Over time, I began to build a rapport with my trades people.

Once they could see I would be repeating the process over and over again on future deals, they became very available and flexible and were giving me great quotes.

Quality versus value for money is always a balancing act. I’ve found that cheapest is not necessarily the best, particularly when it comes to higher-cost items like landscaping and driveways. I’ll take punctuality, responsiveness and a willingness to offer valuable advice over saving a little money any day.

Q. Profitable Renovations Hinge On Our Ability To Add More In Perceived Value Than Actual Cost. On What Parts Of The Home Do You Focus Your Attention In Order To Achieve The Greatest Impact?

It is important to understand the psychology and motivation of a potential buyer. I have learned to appeal to both the male and the female needs. I also create functionality and the impression of longevity in both the use of the spaces and the neutrality and style of finishes.

I focus on four key high impact areas to add maximum perceived value:

1. Street Appeal

Street appeal is crucial for me, as the majority of buyers decide if they like the place the moment they step onto the property. This is easy to achieve, whatever your budget. I generally go for a clean, tidy, modern-looking front yard consistent with the character of the dwelling.

Some basic landscaping goes a long way. In this renovation, the front yard had pebbles all over it. Once I replaced them with grass, the change in street appeal was amazing. We also changed the roof colour and trims from dark green to dark grey.  Generally I find an old brick veneer home will benefit greatly from a rendered façade and updated colors for window frames and guttering. A nice, freshly glossed front door without fly screens or security screens is a must.

2.Walls And Floors

The next most important aspect of the home for adding perceived value is the walls and floors. A great neutral colour scheme that will appeal to the majority of buyers is crucial. These improvements can be made very quickly. If your budget is tight, you can do the painting prep work and undercoats yourself, then let the professionals finish of the cutting in and top coats.

I’ve also used some great low-cost flooring alternatives, such as laminate boards that look like timber. I’ve developed a relationship with my local supplier for tiles and flooring products, which means he gives me a great discount, as he knows I will bring him repeat business.

3. Kitchens

The kitchen is extremely important. Depending on my budget, I might do a cosmetic refresh by using tile paint and changing door handles, or I might replace the kitchen entirely.

In the front property of this renovation, we replaced the kitchen, as the existing was not functional. In the back house, we simply refreshed the kitchen, as it was already in great condition. We painted the tiles, resurfaced the bench and updated the range hood and cupboard handles. These minor changes created a more functional and modern space, providing the feeling that it was an enjoyable area to spend a great deal of time.

4. Bathrooms

Bathrooms are another area that provide a lot of bang for your buck. In this renovation, I changed the tap ware and vanity handles, and painted the walls – all at a minimal cost.

Knowing your target market really helps. In the bathroom of the front unit, the vanity was extremely small. I knew that if I wanted to appeal to the female market, I needed to replace this.

I’ve done a number of renovations where simply replacing tap ware and shower screens, and re-grouting has made the bathroom look modern and new, adding heaps of perceived value for not a great outlay.

Q. What Do You Do When You Have A Home That Needs Structural Work? Where Do you Draw The Line On How Much To Spend In These Unseen Areas Of The Home?

If you buy a property, and then realize afterward that you need to undertake major structural repairs, then you’ve dropped the ball on your due diligence. As we’ve already made clear, the whole aim of a quick flip is to add more in perceived value than actual cost.

Structural work, such as re-stumping is something a potential buyer is not going to see. I therefore would have negotiated a lower purchase price to compensate for this added cost. What you invest in structural work should depend on the area. If you’re renovating a heritage Victorian house in a high-end suburb, the cost you spend on re-stumping will pay off. If you’re in a lower-end suburb, you’ll need to do your estimating carefully, as your renovation budget will be a lot tighter.

In this renovation we removed a non-load bearing wall to create a large open space living area and thus created more perceived value. Whenever I consider any structural work, I evaluate the cost and the benefit. In some circumstances, creating an additional room or bathroom can give you a huge profit.

Q. Do You Do Any Of The Renovation Work Yourself, Or Do You Outsource All Of It To Tradesmen?

Time is money, and I would rather be searching and preparing for my next deal than flinging a paintbrush around for days on end. If I’m doing the work, it takes a great deal longer and I’m not managing other areas of the project as well.

We’ve learned that doing it yourself can also be costly. On our first deal, my husband painted the house and in the process injured his arm. It took six months of physiotherapy for him to recover.

You must know your strengths, and then do what you are good at and passionate about. For me, that’s renovation planning, project management and property styling. On this project I did the majority of the cleaning, but I now outsource this, since my time is better spend on what I’m good at.

Q. How Many Different Tradies Do You Typically Hire In A Home Renovation Project?

We use specialist tradies. You will need a plumber, electrician, carpenter, render, plasterer and painter on nearly all renovations. Where external work is involved, you may need a landscaper, concreter and roof plumber for guttering and flashing.

Using specialist tradesmen rather than one person who does everything is usually less expensive and you’ll likely get the work done faster. You can negotiate the best price on multiple components, but handymen generally work for an hourly rate.

When the total goes beyond the estimated cost, they generally stop work and there isn’t much you can do about it.

Also, when using a single handy man, if they get sick or injured, you will face delays. I will use handymen from time to time to complete the tasks specialized trades don’t like, or those that would be very costly, such as installation of blinds and door handles.

Q. What Have You Learned About Effective Project Management In A Renovation? What Is Your Most Effective Role While The Actual Work Is Being Done?

While the work is being done, my role as project manager is to coordinate the timing of trades, ensure work is being done to the required quality and specifications, and make the life of my tradies easier.

I always provide them with access to refreshments, such as clean bottled water and snacks. I make sure I know what my tradies like, whether it’s a morning coffee, or cake during morning or afternoon break.

I also invest time building a relationship with all my tradies, which means they communicate well with me. I make an effort to let them know that I value their input. In return, I find that I am alerted to issues very quickly, which is a huge bonus when project managing.

Q. You Mentioned The Importance Of Asking Your Tradies How You Can Best Save Money. Can You Elaborate On This? What Are Some Helpful Hints That You’ve Picked Up From Them Along The Way?

I’m always careful to only tell them what outcome I wish to achieve, not to dictate to them exactly what I want them to do. They have a great deal more practical experience, so they will often have ideas to save costs.

On this Geelong project, I learned a few really helpful lessons. I had them put some big kitchen drawers next to my dishwasher, thinking it would be a great asset to the kitchen.

The only problem was that it meant my plumber had to spend more time fitting the dishwasher. I saved money sourcing a second-hand dishwasher, but spent it again for the additional labour costs installing it.

Another one to be aware of is buying the cheapest fittings. On this property, I sourced some really inexpensive door handles. The only problem was the installation took double the time. In hind sight, I would have been better to stick with a middle of the range brand, which is easier to install.

Q. Are There Any Other Final Tips You Could Offer The PropertyInvesting.com Community About The Actual Renovation Process?

The most important tip is to thoroughly plan every detail. A project plan, also known as a Gantt chart, is a great tool to map out the sequence of, and relationship between tasks.

It also lets you do a resource analysis to determine if you have double-booked your tradies. More time spent planning before anyone even picks up a hammer will save you time and holding costs on the other end of the renovation.

Don’t be afraid to ask other people for advice. I now spend a great deal of time building relationships with experienced investors and renovators, so when I’m doing a renovation I have a wealth of experience to call upon.

My final tip is to ask your tradies at the end of the project for feedback, and where they think you could improve next time. It’s amazing what pearls of wisdom you will get from being open to others opinions. I know it makes me a better renovator every time I ask.

Q. One Final Question. Any Update Yet On The Current Deal You Have On Offer?

Unfortunately we had to utilize the due diligence clause and pull out of the contract. We identified some major unknown cost factors that would reduce the profit margin and make our return on investment unattractive. It was a tough decision to make.

In these moments, I remember a question Steve McKnight taught me to ask: “What pain would be worse?” The pain of pulling out now with a small likelihood of a profit was not nearly as bad as the pain of making a loss after fifteen months of work.

Conclusion

In Part 4 of this five part series, we’ll discuss, “The Secret to Selling Your Renovated Property Fast.”

What stands out to you about Caroline’s renovation process? Take a moment to leave a comment and share any revelations you’ve had.

You can learn more about Caroline and request some free training videos at her website: http://www.smartchoicepropertydevelopment.com.au

The post Home Renovation Ideas That Will Save You Thousands appeared first on PropertyInvesting.com.

For a little over a year, I’ve been coaching one of Steve McKnight’s property apprentices, Caroline Vass. Caroline and her husband, Jozef, live in Geelong, and they have been investing in real estate for the last five years.

Caroline specializes in renovations. Not only does she and Jozef complete their own renovation deals, but she’s also created a business to help other investors renovate and develop properties.

Caroline was kind enough to offer her time and expertise over a series of interviews with me to delve deeper into the topic of property renovation. We’ll explore the entire process, from finding and analysing, to buying and improving. Then, we’ll discuss selling a profitable renovation deal.

1. Caroline, Can You Take Us Back To The Early Days And Share With Us What First Inspired You To Invest In Real Estate?

My parents were the ones who first motivated me to invest in real estate. As I was growing up, I watched them purchase and renovate several properties. Gradually, over time they’ve built up a portfolio that is now providing passive income for them in their retirement.

I always knew that I too, needed to invest in property, but it wasn’t until my first son was born that I felt a strong urgency. I knew then that I needed the financial freedom and flexibility to be at home with him, so I could watch him grow.

My son was eight weeks old when a friend gave me one of Steve’s books. It was through Steve that I learned the science of property investing and that it truly could be my way of staying home with my children, rather than returning to my nine to five job.

2. What Was Your First Deal? Was It A Renovation?

My first deal was a one-bedroom apartment that I rented out and held onto for several years. It was slightly positively geared, but it became obvious as my understanding of investing strategies grew that as a “buy and hold,” it was not that great. The capital appreciation was very slow.

Being a one bedroom apartment, the scope for increasing the yield was also limited without overcapitalising in the area. I decided to do a basic cosmetic renovation and sell it in order to use the cash for our next deal, which was a combined renovation and subdivision.

3. What Attracted You To Renovations As An Investment Strategy?

To be able to stay at home with my son, I needed a strategy that could make me money in a short space of time, and renovating and putting it back on the market seemed to match.

Renovating also seems to fit with the way I’m wired. It enables me to exercise my passion for making old and tired properties look new and homely. I love it when I finish a renovation, and friends and family are amazed at the transformation, and ask me how it was achieved in such a short period and within such a tight budget.  

And of course I love to shop, so being able to pick and choose surface finishes, appliances, tap ware and more, and then to find the ultimate bargain is a lot of fun.

4. Take Us Through The Initial Steps When Looking For A Property That Has Renovation Potential. Where Do You Start?

When I look for a property to renovate I look for problems that other potential buyers might be put off by. Where others see problems, I see opportunity. I look for a blank canvas that I can shape to achieve my primary objective, which is to appeal to the majority of my target market and minimise buyer objections.

Here’s a basic summary of where I start:

1. I first identify suburbs and streets where I see good renovation profit potential.
2. Next, I prepare a specific deal profile for the suburb and type of property that I’m seeking.
3. I begin my search by communicating my deal profile to real estate agents and by using internet-based searches.
4. Finally, I validate the potential post-renovation resale of a property by accessing historical sales data.

Once I decide to take a potential deal further, I prepare a cost estimate with the purpose of establishing how much I can spend on the renovation and how much profit I would be happy to make. Once I have a figure to work with, I then prepare a detailed outline of the work that would need to be done. If required I’ll talk to my team of tradesmen to narrow down the details of what the work would cost. If then it all looks viable, I make the offer.

Most of the time now I don’t have to look for properties as they then to come to me. I’ve developed a network of real estate agents that know I buy problematic properties. When they have one they think I’ll like, they contact me. There’s never a shortage of available deals and when I’m seriously looking, I could put in several offers per week.

5. How Do You Decide Which Area To Focus Your Search?

I tend to narrow my searches to the areas that I know well. I’ve spent a great deal of time analysing and watching the property market to understand which suburbs are well established and those that I think have potential for capital growth.

My primary indicators are median unit or house price, capital growth rate, the number of properties being sold in a given period, the demographics and how they are changing, and of course, the proximity to public transport, infrastructure, schools and shops.

6. You Mentioned Writing Down A Deal Profile. I Know That Is Something That Steve Teaches In His Course. Can You Clarify Why This Is So Important In Your Process?

A deal profile is essential for me. It narrows my focus and allows me to target specific types or configurations of residential real estate that meets the “formula” for a good return on my investment. It also gives my agents a clear picture of what I’m looking for, which saves them and me a lot of time.

Investing without a deal profile is like trying to cook a complex cake without the recipe. There is bound to be one ingredient that you would miss. When investing in property, the result, at best, could be breaking even and at worst, losing money.

7. Let’s Profile One Deal In Particular. Tell Us What You Set Out Looking For And Then How You Found That Particular Property.

I bought a property in Geelong back in November of 2013, and then had it back on the market in January of 2014. That’s probably a good one to look at because there were heaps of lessons to be learned.

I found this property after setting out to buy a potential cosmetic renovation with subdivision potential. Once I identified my ideal suburb, one that was on the cusp of a very well performing area, I began my search.

I always keep a list of potential properties that are on the market that fit my deal profile. Often they are deals that I’ve passed up because the asking price was too high. I’ll review this list regularly in case one of them is reduced in price or if one sells, I’ll mark it off my list.

Sure enough, this property had been on the market for six months, and then I noticed that the price came down. It had two three-bedroom weatherboard homes on the same title.

The owners had been granted a permit to split the title, but due to a lack of experience, they were unable to anticipate certain issues that made it impossible for them to finalise the subdivision. Through negotiation, I secured the property and was able to split it into two separate titles. I solved the problems the previous owners had encountered, and then renovated and sold each new property individually.

8. Can You Share With Us A Deal That You’re Currently Working On?

We just had an offer accepted last week on a property in Geelong that has both renovation and subdivision potential. This property was one that came to me through a local agent who keeps a copy of my deal profile.

He contacted me prior to this property even going on the market. We only had one week to do our initial research. We were happy to proceed, so on the day it hit the market, we put our offer in subject to due diligence. Even though it was on the lower end of what they were after, it was accepted.

I’m happy to share more about this deal in a future interview once we go unconditional.

Conclusion

Hopefully, one of your primary takeaways from this interview with Caroline is the importance of writing down a deal profile. Not only does this clarify her search parameters, but it enables her to communicate to agents exactly what she is looking for. Now that she’s established a network of quality agents, the deals come to her.

Over the coming weeks, we’ll delve deeper into Caroline’s renovation and subdivision deals from last year. In Part 2 of this series, “Buying a Renovation Property That You Won’t Regret,” I’ll ask Caroline to explain her due diligence process thoroughly, explaining why this particular property passed the test.

You can learn more about Caroline and request some free training videos at her website: http://www.smartchoicepropertydevelopment.com.au

The post Finding a Profitable Renovation Deal appeared first on PropertyInvesting.com.

Home staging

Presenting your real estate in the most attractive way requires careful thought and perhaps even professional help.

Furnishing

While it will cost more to furnish your property and you will likely attract shorter-term tenants, there are advantages to this approach.

The post Why home staging and furnishing is beneficial appeared first on PropertyInvesting.com.

To keep to your budgeted renovation costs, follow these planning tips…

1)    Get organised.

2)    Spend money in the right places.

3)    Measure twice and cut once.

The post Renovation costs – Plan your budget appeared first on PropertyInvesting.com.

Renovating real estate has always been a popular way for investors to combine a love of power tools with a desire to make money. And in recent times a new generation of would-be rehabbers has been captivated by realty TV shows that portray relatively easy profits, made by relatively pretty people, in relatively quick time.

However, professional renovators – investors who have carved a niche from strategically buying, adding value, and then exiting for profit – will all tell you that what you see on TV, and what you should expect in real life, are completely different. Indeed, you might be surprised to learn that what makes good TV usually makes for terrible investing.

This article is published to help you to separate myths from facts, and to provide you with three simple tips to stimulate further thought.

Renovating – The Basics

The basic mantra to getting rich from renovating is this:

Always add more in perceived value than actual cost

In order to make a profit from your renovation project, each dollar invested needs to return more than a dollar of additional value to property’s sale price. If not then you’re eating into your profit margin, up until the point where there is no more profit and you make a loss.

The science of renovating riches is therefore a function of knowing how to add the most perceived value for the least actual cost.

It should be noted that perceived value is not in the mind of the investor, but instead, and as explained below, in the mind of the person who is going to acquire the post-renovated property.

If you’re wondering ‘Well that sounds nice, but what adds the most value?’, then keep these renovation rules in mind:

Renovation Rule #1: Stick to strategic, not structural

Unless you’re an experienced renovator, stick to strategic renovations – projects where you concentrate on adding cosmetic value, and get in and out within six months.

In such cases, a good rule of thumb is to look to improve anything you can see, feel (touch) or smell, and to concentrate on highly emotive areas (such as finishes – new paint, new carpet, etc.) first. With that in mind, seek to prioritise areas where people live or spend the majority of their time.

As a starting point, try to conserve the shell as much as possible and renovate around it. An example is to keep the kitchen shell, but to replace the cupboards and bench tops.

If you begin making structural improvements (i.e. altering the sub-floor, roof, electrical, plumbing, etc) then it’s very easy to incur a lot of buck for very little bang. After all, how much extra can you charge for a new hot water service, or new central heating unit, or latest evaporative ducted cooling (when perhaps a split system wall unit would suffice).

Renovation Rule #2: Start with your end

A big mistake novice renovators make is that they focus on the property being renovated rather than the person who is going to buy (or live) in it.

For instance, compare these two approaches:

• Investor one buys a ‘renovators delight’, renovates the property to a standard and taste that they feel is tasteful, and, once complete, tries to sell the property for a profit.

• Investor Two sees the same property, but before buying, seeks further clarity about who might buy the renovated property, what that person might desire to make their enjoyment of the property more convenient or comfortable, and what might the target market pay for the post-renovated dwelling,

In other words, savvy renovators start with the end (next purchaser / target market), and end with the start (property under investigation). The alternative is to speculate, and that can work, but it adds a lot more risk.

Over-capitalising, or adding more cost than perceived value,
is the enemy of every renovator.

An easy way to over-capitalise is to renovate above the budget of the proposed target market, such that they cannot afford it, and such that those with the budget to buy don’t want to live in the area or feel that, even after renovation, the property is tawdry to their tastes.

Renovation Rule #3: Time is of the essence

Interest is a silent killer of renovation profits. Delays caused by trades not being synchronised, permits taking longer to obtain, dwellings taking longer to sell, etc. all add to the time needed to complete the project, and every delay results in more interest expense on your debt.

Consider this: a delay on a renovation project with a $500,000 loan incurring interest at 6% per annum will see your ultimate profit chiselled away by $575 each and every week, or a reduction of $2,491 per month!

A smart renovator knows this: clever project management can make (via savings) as much money as the actual renovation.

3 Tips For Renovation Success

Here are three highly useful tips for would-be renovators:

Tip #1: Outsource

The natural tendency of the novice renovator is to either do the work themselves, or else rope in family and friends under the guise of a mandatory working bee, in order to save money.

Perhaps this approach is okay for a first project while you learn the ropes, or if you want to be a handyperson who tinkers with investing, but professional investors use their minds, not their power tools.

So, instead of getting dirty and dusty, a professional investor uses his or her time selecting projects, performing due diligence, refining their success systems, understanding their target market, sourcing properties etc.

Investing is an intellectual exercise,
not a physical challenge.

Now, of course you can make (more) money if you do the work! But that gain comes from a labour saving, not an investing profit, and what savvy investors give up in labour savings, they make back in additional volume from having multiple projects on the go at once.

Tip #2: Renovation Budgeting

Gut feel is a poor substitute for accurate renovation budgeting.

Statements like “could, should, might, feel, maybe, etc.” need to be avoided wherever possible, and instead, each planned renovation should be costed as accurately as possible so you know, down to the dollar, what to expect rather than guessing.

Typically, if you found a property you felt might be a suitable investment, it would be prudent to get it under contract with a due diligence clause of (say) 14 days at which point you would create a master plan of proposed works which you would accurately price – either via quotes with sub trades, or else with your own spreadsheet with researched cost estimates.

Please – never wing it. If in doubt, arrange the necessary time needed to make an informed decision, or pass over the opportunity because the more things you leave to chance, the more chance things will go wrong.

Tip #3: Calculations

Smart renovators know that reno riches is a matter of crunching five numbers:

Step one: Ascertain the likely post renovation sales price

This can be researched by obtaining comparable sales data, either online or from a friendly local real estate agent.

In fact, it’s a great idea to spend time in the area you plan to invest in attending open for inspections to research what features of new houses are in demand and why.

Step two: Deduct the renovation budget

As mentioned earlier, if you don’t know what a planned improvement is going to cost, get a quote! Every dollar you under-estimate is a dollar less of profit in your pocket

Step three: Deduct the buy, sell and holding costs

Buying costs include stamp duty, inspections, legals, loan costs, etc. Holding costs include interest, rates, maintenance, etc. Selling costs include agent commission, advertising, etc.

Step four: Deduct the desired profit margin

Don’t forget to pay yourself! Only you can nominate your desired profit, but it needs to reflect your risk and effort. Furthermore, this profit will become your ‘safety margin’ to absorb cost overruns. The taxation consequences of the investment, including GST, need to be considered too.

Step five: Arrive at the maximum purchase price

After beginning with the end price and deducting steps two, three and four, you are left with your maximum purchase price.

Inaccuracy with any of the above numbers puts your profit at risk.

Summary

You could be forgiven for watching reality TV shows that have you believing that renovating is fun and easy, and that everyone makes profit.

But that’s not true. Like any investing, the more skill and expertise you have, the lower the risk and effort needed to make significant profits.

The biggest mistake made when renovating is to focus on the property being improved, rather than the person who will be buying the dwelling. Remember that it is people, not properties, that carry cheque-books and if you want to make a profit you must add more in perceived value in the purchaser’s eyes than your actual purchase, sale, holding and renovation costs.

Can you recount the renovation mantra? It will be your recipe for success.

The post Renovations The Right Way appeared first on PropertyInvesting.com.

As many successful investors know, tiling costs including building and renovation strategies have the ability to make or break a real estate venture.

While it is important to embark on a plan based on your vision of a finished product, you must take each individual component and give it your full attention to effectively budget your overall tiling costs.

The importance of choosing the right tiling strategy

Tiling is just one aspect of your property that can have an impact on the cost, durability and aesthetic appeal of your investment.

Choosing the right tiling strategy and allocating an appropriate budget can go a long way towards achieving the desired look and feel and attracting the ideal tenant or buyer.

Cost of tiles

Tiles can be very cheap or very expensive as they are sourced from an expansive variety of materials – including marble, granite, ceramic, stone and many others.

Tiles can be all sizes from one inch to six feet. Bathroom tiles of course need special preparation, such as a waterproof underlay and special caulking and fillers. The grout can be any colour you want as well.

When compared to other flooring options, tiling costs can be quite affordable – especially if you do the installation yourself.

There is also the option of adding bathroom and kitchen backsplashes, which are very popular and can sell your property.

Can DIY cut tiling costs?

The value of installing your own tiles can be measured in cost versus time in comparison to other options. As tiling is quite durable and attractive, the payoff can be one of the most rewarding tiling options – next to hardwood flooring. However, hardwood is very expensive to buy and install, making tiling the better choice in many instances.

The catch is that paying for tiling labour can be quite pricey as well, so DIY is likely your best bet if you are willing and able.

Renting or buying the tools – depending if it is a one-time gig or continuous strategy – will be necessary to get the job done effectively and efficiently. While tiling is a skill that many can learn and perfect, it is not foolproof.

In the beginning, you would most likely make mistakes and incur extra tiling costs. That said, getting the technique right the first time will help you to avoid any costly tiling mishaps, to give the best chance for reward.

The post Budgeting For Tiling Costs appeared first on PropertyInvesting.com.