Problems to Avoid When Renovating A Property

Whilst we as renovators make our money from buying other people’s problems and coming up with solutions, there are certain problems that we definitely don’t want to take on.

Below are some defects and problems to look out for that can be particularly troublesome and should probably be avoided (or at least investigated with the help of a reliable professional and costed out with the utmost care!).

Avoid properties with problems with:

  • Large cracks in walls and foundations.  This can indicate that the house has moved, is moving or may move in the future and that foundations or the land under them may be unstable.
  • Rotten, warped or badly cracked weatherboards and wooden windows.  Replacing weatherboards and windows can be very costly indeed.
  • Damaged roofs.  Not only can it be costly to repair or replace a roof, if the weather has been allowed to come into the house there could also be water damage inside the home.
  • Drainage problems.  Damaged downpipes and guttering, faulty septic systems and blocked water pipes can also be costly, messy problems to deal with for which you get little return for your outlay.
  • Problems with foundations.  Issues of rising damp, moving stumps, uneven slabs and so on can be extremely costly indeed as there are many follow-on costs associated with their repair such as cracks in plaster, replacing windows and so on.  Make sure you look for any cracks in plaster and brickwork and also look for any signs of mould inside the house.
  • Electrical problems.  Fixing problems associated with old, faulty or illegal wiring can also cost you a fortune whilst adding very little perceived value.   Obviously, the older the house, the more likely it is that there will be a problem.
  • Pest damage.  Look for signs of any kind of pest or termite damage such as rotten, damaged or soft boards and timber.  If you have any doubts at all about this, get a pest inspection.
  • Illegal building.  Keep an eye out for any parts of the house that appear to have been added or altered illegally i.e. without a building permit.  Tell-tale signs will be poor workmanship or if the structure doesn’t seem to fit in with the rest of the house.  You can ask to see a building permit for works done recently or check with council to see if any permits have been issued.
  • Plumbing problems.  Check the water pressure of taps and showers, flush the toilets, note the age of the hot water system and see how hot the hot water is in the property.  If you have any suspicions about the plumbing it’s best to get a qualified plumber to check it out.
  • Access problems.  If access to the property is awkward or troublesome, it won’t only make it hard for you to renovate, it’s going to be hard to sell.
  • Asbestos problems. Most residential houses contain “non-friable” asbestos fibres, and experts agree these are not a health risk if they remain sealed and in good condition but if you have any doubts about asbestos in a property get an expert opinion to be sure.
  • Heritage-listed properties.  Renovations of these properties are usually governed by many rules and restrictions and often require “restoration” rather than “renovation” – that’s something we don’t do if we want to make a profit!

The Best Way to Find a Property to Renovate

Real Estate DealBy far the best strategy we have used to find properties to renovate  has been to build up a network of people who bring opportunities to us.

You will have to develop the network over time, but it will eventually pay off in more properties and more profits for you.

Real estate agents should be a big part of this network.  Frankly, I believe that the best way to find properties is to develop a relationship with agents. If you’re professional with your approach, let them know that you’re serious about purchasing property for renovation and educate them as to exactly what you are looking for; they can be your very best source of leads.

So, my advice is to build relationships with as many agents in your target area as you can. And keep in regular contact with them (at least weekly).

If you have the money, you can also hire individuals (called “bird dogs” or “buyers agents”) to go out and locate properties for you. This is a relatively inexpensive method, especially since it allows you to concentrate on fixing up and selling houses instead of losing time searching for and driving around target areas.

No matter who makes up your network, it’s up to you to let them know what you’re looking for and to “educate” them to think of you first when a likely property pops up (often even before it’s even advertised to the public).

To build and maintain a network, treat everyone fairly and honestly and make them feel appreciated. After all, they’re bringing more profit into your life than you could manage on your own!

Anyone Can Renovate For Profit

laying paversAre you inspired to do a renovation but don’t know if it’s really possible to make real profits?

Do you think you have to have a lot of money to do a successful renovation?

Maybe you think you need to have special skills to pull off a profitable reno?

Or maybe you think you don’t have time?

Well, I’m here to tell you that anyone can renovate for great profits and I can prove it to you.

Let’s face it – I’m a bookkeeper and Ted’s a wool classer.  We’re pretty ordinary folk.  We don’t have building skills.  We’re not good at interior design.  We’re not real estate agents.  And we’ve always had day jobs.

But we’ve managed to make over $650 grand in profits having a go at renovating.

But I haven’t forgotten the feeling of being a bit confused about where to start, and how to do things in the right order. So I thought I’d do something to help you out. I’m going to give you a “guided tour” of our renovating business.

The “tour” uses a cool bit of software called Camtasia, which allows you to look at my computer screen. I’m going to show you some photos of some of the properties we’ve renovated and subdivided. But more importantly, I’m also going to show you how much money we made on each one! I’ll take you inside our accounts, so you can see exactly how much we sold for and how much we spent…!

Why would I do this? Because I’ve seen how people get motivated and excited about doing it for themselves, when I show them this information. And I get a real kick out of helping people to succeed the way we have in property.

As a mother of two, I know how great it feels now to be able to spend time with my kids. It’s heaps better than what I used to do – working nine to five (or usually much more!) and being too tired and cranky to really enjoy the kids when I finally got home.

So enjoy. Get motivated. And if you would like some extra help with getting your profitable renovation underway be sure to let us know or you can click here to see how you can get started today.

Click here for the guided tour of our property renovation business.

Make the Best Deal

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Reduce the Risk

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Find the Right Property

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Financing Your Renovation

house with coins 145x178When it comes to property renovation, money is definitely everything!

I’m talking about a fact of life. And that fact is that there‘s no point in going out into the market to search for properties to renovate unless you have some idea about what you can afford to purchase and what you can afford to borrow!

Here’s what I mean: You’ll need to have funds available to…

  • Buy the property.
  • Pay for stamp duty and legal costs
  • Fund the renovation, and,
  • Cover the costs of holding the property until it’s re-sold.

Before getting into the different sources of funding it’s important to understand some basic but fundamental concepts: here goes:

Debt, leverage, and loan-to-value ratio – it’s essential that you understand them right from the start so you know that you have the proper financing in place for any renovation project.

Good Debt vs. Bad Debt

In basic terms, ‘bad’ debt is money borrowed to buy things that lose their value over time and that don’t help you to earn any income. This might include cars, boats, or any luxury item.

‘Good’ debt, on the other hand, is money borrowed to buy things that go up in value over time and help you make more money…like houses!

My point is that, it’s okay to borrow money if you are going to use that money to make more money.

The Power of Leverage

When we’re talking about property, leverage (or gearing), is the use of debt to purchase a house.

Leverage is an important part of property investing, and here’s why: Banks and other lenders see property as a secure investment. So, that means they’ll allow you to leverage a small amount of savings to buy a property and have that bank fund most of the purchase price!

Now, when you borrow for a renovation project, you only need funding for a relatively short amount of time, so it’s not as critical to get the “perfect deal.”

However, if you intend to hold the property and rent it out, then you’ll want to get the best deal possible. That way, you can keep the costs of the loan down over time.

The objective of obtaining finance for a renovation project is to really just to secure the deal.

Sure, you don’t want to pay ridiculous rates of interest or exorbitant establishment and exit fees. These costs will reduce your end-profit. But you do want to get the funding or you won’t have a project to do!

Loan-To-Value Ratio (LVR)

This ratio is used by the finance industry in order to determine risk in terms of any property loan.

Generally speaking, lenders have lending policy limitations in place based on LVR. This gives them a buffer to protect the debt in case legal recovery of that debt is required.

Here’s how LVR is calculated: You divide the value of the property by the loan amount. Here are a couple of examples to show you how the calculation is done:

  • Example 1: If you purchase a property valued at $300,000 and you borrow $240,000, then the LVR is 240,000/300,000 or 80%.
  • Example 2: If you’re paying off your home which is valued at $400,000 and you owe $200,000, then the LVR is $200,000/$400,000 or 50%.

In general, the value of the property is determined by the lender’s valuation process which is usually the lesser of the purchase price or valuation conducted by the lender’s appraiser.

Provided you meet their lending criteria, most banks will fund up to 80% of the value of the purchase price of the property using the property itself as security.

So, how does this relate to you? Well, you may be able to get a higher or lower LVR, depending on:

  • Your ability to service the loan
  • The location and type of property you want to buy
  • Your current level of borrowing, etc.

Welcome to Renovating Riches!

Hello and welcome!  Renovating Riches is a site that is dedicated to helping ordinary people make extra-ordinary profits renovating houses.

This blog is currently under construction and we are really looking forward to sharing with you all of our 10+ years experience in renovating houses that has helped us to make over $650,000 in profit on a part-time basis.

In the meantime, please visit us at www.renovatingriches.com where you can get lots of information on how we do our profitable renovations.

If you have any suggestions or specific questions on all things renovating please feel free to leave a comment or send us an email to info@renovatingriches.com.

Cheers

Deb and Ted Wilson