Presentation on theme: "BUY RENOVATE SELL. Ferny Hills (12km NW from CBD) Median 3br house - $442k Skinny Laneway Backs on to Main Road 300m walk to train station Renovation."— Presentation transcript:
Marketing at its best! ● Agreed price $250k, 28 day settlement with early access
Cash Out Positive Cashflow & Capital Growth Potential ● Purchase Price $250k ● Purchase Costs $9k ● Reno Costs $60k ● Misc Costs $1k ● Finance Costs $5k Total Cost Base - $325k ● $450 per week ● 7.2% Gross Yield ● 0.6% stock on market (undersupply - high capital growth potential) Expected Valuation $395k Budgeted Numbers Equity Gain $70k + Capital Growth (Whilst being slightly positively geared)
Had To Move Fast! ● Found advert at 10pm Tues Night (on phone...) ● Figured out in about an hr that it was a cracker opportunity. ● Wed 8am Phone Call. In car driving to Brisbane @ 8:27am. ● Called Broker & Accountant. ● Council Visited - Threatened to Condemn and fine! ● Seller in financial trouble. 10% fixed loan, no rent. ● Other buyer drama - already waited 4 months. ● We had example feaso & REIQ Contract on the back seat ready to go. Did deal on bonnet of car.
A Rollercoaster Ride ● 4pm Thursday, Buyer SMS accepting offer. I was on a call! ● 4:40pm, Buyer SMS revoking acceptance. (original buyer) ● 9am Friday. I Suggested Buyer to Check with Solicitor ● 4pm. Booked Flights to Africa (Leaving followingTuesday!) ● 4:20pm. Buyer SMS accepting offer, if at the house at 8pm. ● 8-11pm. Sitting around kitchen table, signed contracts. (21 days finance/building & pest. 28 Days Settlement.)
1 Day before Africa ● Mortgage Docs. - Thanks Sonnee @ Velocity Finance! ● Renovation Plan - Jane @ Hotspace Consulting ● About 20 other tradies to quote on things. ● Booked people in to start on my return (14 days) ● WE NOW HAD 3 PROPERTIES UNDER CONTRACT!! ● Cat followed up with other tradies while I was away.
Back in Australia 13 days later! ● What a Day! Arrived 11pm Sunday into Australia. ● Monday 5am start to be in Brissy to meet demolition tradies & treeloppers onsite. In the meantime that same day we... ● Settled on another reno/subdivision project (not without issues) ● Went unconditional on a 3rd reno/subdivision project!
Projected timeframe ● 6-8 weeks ● Major works required for finance ● 3 separate valuations! ● 1 finance extension (then unconditional - without finance!) ● Increased deposit to $3k (non-refundable) for 2 weeks settlement extension. ● PLEADED for extension. Increased deposit to $33k (non- refundable) for 13 more days. Would have done whatever it took! (buyer had already booked holiday to France)
Mistake #1 Underestimated power of schizophrenic valuers to $%#! us over at the last minute. Lesson: Have multiple financing contingencies in place in case original funding falls through. (We ended up with 3 approvals/funding options within 3 days after going unconditional). “uninhabitable”, “risk ratings”, ridiculous comparables
Major Eustress! ● Finance approval fell through on finance date (“risk rating”) ● Irony - Could have settled cash a few weeks prior... ● Carpenter couldn’t work to timeframes. At all. ● Crew onsite 15 days straight to get decks/stairs/roof done, ready for final valuation (2 days before settlement).
Mistake #2 Overestimated reliability & work ethic of Contractors. Lesson: Know when to call it quits with unreliable contractors. A delicate balancing act. (“Jack of All Trades” = Poor workmanship.) Turned up for a total of 3 hours in the 10 days after settlement - without updating me.
Poor Choice of Contractors ● I Attempted to do the entire project on gumtree. ● At the start of the project, generally employed the cheapest & most available tradies. ● Halfway through, realized that “available” tradies are available for a reason. ● Re-interviewed new guys, paid much more attention to interpersonal skills, knowledge & interest in the project. ● Remedial works (tiling/plumbing/landscaping/painting)
Got things back on track. ● Fired people. Changed locks. Set clear deadlines (booked construction clean & furniture hire 3 weeks in advance). ● Employed our awesome handyman neighbour (started new business) full time for 5 weeks. Had someone I trusted onsite at 7am everyday! ● Built about 80% of a fantastic team. ● Drove to Brissy about 4-5 times per week for 4-5 weeks. ● Pushed through to completion - plus Remedial Works (tiling/plumbing/landscaping/painting)
THE GANTT CHART! A month late, but completed it to fire ourselves and tradies up to get things back on track. (thanks to Cat!)
Old Rusted Out Tilt-Doors New Single Motorized door Panelift Garage Doors
Sharp lip cut, soil removed. Tinted to Match Colour Scheme Extend Concrete Driveway
Sold stuff... ON GUMTREE!! Trampolines, Spa, Iron, misc..
Render Brick Wall, Turf, Footpath, Gardens. Front Yard
Listed with local agent I liked. ● Was going to go joint exclusive. But other agent irritated me with huge marketing contributions proposed on 60 day exclusive appointment. (I was born in the night, but not last night…) ● Gave to local agent, who paid all costs. Photography, floorplan, featured listing, signage. (It’s good for them to have some skin in the game..) ● Gave agent 30 days exclusive. 2-3 opens per week. Made sure he was working for his listing. ● Found the right buyer.
End Result ● Renovation cost - $64,500 ● 8-9 weeks renovation (vs 6-8wks planned). Early in project, realized higher valuation potential and made conscious decision to do extras. (stone benchtops, asbestos, rendering, retaining) ● Decided to sell & utilise cash/equity elsewhere. ● Difficult to Price! - unknown product in suburb. ● Originally Listed “offers over $487k” - agent suggested “offers over $499k”! ● After 2.5 weeks, changed to “offers over $449k” ● Within 7 days, House under Contract for $452k
Cash Out Cash In ● Purchase Price $250k ● Purchase Costs $9k ● Reno Costs $60k ● Styling & Staging $4k ● Finance Costs $7k Expenses $330k ● Sale Price $452k ● Minus Agent Commission $11,300 Conveyancing $350 Net Sales Proceeds $440k Actual Numbers Gross Profit = $110k (before tax)
Summary of Actual Numbers ● Would have been under budget, but remediation costs balanced out. We then made a conscious choice to do extras - which bought us about $4k over. ie: $64k vs $60k ● Projected conservative end value of $395k and got $452k! ● Saved on big items (roof, kitchen, staging) ● Cash on Cash Return was 73% (annualized approx= 293%*) ( 150 k cash in - deposit, stamp duty, reno & project costs) ● 3 months between settlements
Summary of Actual Numbers ● Good to take profit & capital to reinvest vs positively gear ● This was an “in-between” project while waiting on council/DA’s for for other developments. ● Maybe we could have achieved a higher sale price, but absolutely stoked and ready to roll cash into other projects as soon as possible. Look for Opportunity = We weren’t looking for a “Reno”!
Tips ● Choose contractors based on character, communication skills & genuine interest in the deal. ● Develop & review project Gantt chart weekly. ● Change course quickly when needed. (firing/hiring) ● Take the profit when it is there. Not worth the opportunity cost to hold out for capital growth. ● Be ready to move really fast, & work really hard! ● Don’t take ‘NO’ for an answer. (Indomitable Spirit). ● Don’t dismiss opportunity! ● Don’t give up. The deal of a lifetime comes around once a week! (we missed out lots of these this year...)