Basic Developing lessons on a cheapy reno plus a split.

Discussion in 'Development' started by Luke T, 16th Aug, 2019.

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  1. Luke T

    Luke T Well-Known Member

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    Hi Guys,
    Hope yr all going great!!
    I just wanted to share this other reno I did recently to hopefully help with some lessons for others.
    This thing bit me !

    I paid $227K( in oct 2018 and just sold for $364K.)
    Reno time about 6 months (full time work plus in and out time.)
    Spent :$103K all up- (including holding costs(interest not included as was all cash)
    Included $5K:a DA on the land for split off block .
    Also included in costs: I had a friend who came in initially as she wanted to learn reno s and subdividing.
    She found it a lot harder than it looked and so I bought her out after 3 months at a cost of about $11k to me (including stamps)


    Lessons: Make sure those you partner with have the ability to be a fair contributing partner.
    This house is a 2 story brick house so everything on these bigger houses costs double due to size(and even more importantly it takes double the time to turn it over)!
    Watch yr median prices for how much you can sell it for at the end.(For example if I had bought this property in raceview for say $260-270K I would have been able to sell for around $450-475K so the end profit would have been higher)
    Last lesson : I normally reno these cheapies in about 2 weeks and then rent them out and hold.Its a whole different ballgame when your renoing to sell as the quality needs to be heaps better and you need to go all the way .
    Whereas on the reno and rents I do I only do what freshens them up as I will probably need to redo most of it in 10-20 years time when I need to sell!

    Before:
    34 Bognuda Street, Bundamba, Qld 4304

    After:
    34 Bognuda Street, Bundamba, Qld 4304
     
    Last edited: 16th Aug, 2019
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  2. Lindsay_W

    Lindsay_W Well-Known Member

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    Yikes, it came up nice though!
    I understand you paid cash but did you get an 'as if complete' valuation on the property prior to beginning to get an idea of what the finished product would be worth? Or did you work that out another way ie. talking to local agents, seeing what other similar properties were selling for etc?
     
  3. Luke T

    Luke T Well-Known Member

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    Thanks Lindsay.
    I did talk to agents and have my eyes on the market a lot in there.
    This one was for more experience and to share that with a friend so I knew it wasn't big on profit before starting.
    I hadn't planned to go as far as I ended up going though at the start.Also part of the profit was a gamble anyway as I wasn't 100./' sure the DA would go through.
     
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  4. Simon Moore

    Simon Moore Residential & Commercial Mortgage Broker Business Member

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    So you ended up with $24k + a vacant block of land, is that correct?
     
  5. Luke T

    Luke T Well-Known Member

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    I haven't done finals but around $30K clear and no the block went with sale as was just a DA approval
     
  6. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Your fake furniture styling is a bit cheesy but the end result is nice and fresh and bright.
    How much is the extra lot you created worth and what are you plans for that?
     
  7. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    We posted at the same time - oh I assumed you had managed to keep a block out of this which would have made it all definitely worthwhile.
    Thanks for sharing the hard lessons!
     
  8. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Clear of tax ? Isolated profit making means likely at marginal tax rate but even as a CGT event it would be non-discounted in the timeframe
     
  9. strongy1986

    strongy1986 Well-Known Member

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    thanks for sharing Luke

    do you mind breaking down the $100k spent

    just seems like a lot to me?

    cheers
     
  10. wylie

    wylie Moderator Staff Member

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    That is a huge improvement. Is that really fake furniture? It looks real to me (on my little phone screen anyway)
     
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  11. Joynz

    Joynz Well-Known Member

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    New kitchen, new bathrooms, new patio roof, new flooring...it adds up.
     
  12. chindonly

    chindonly Well-Known Member

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    Hey Luke - nice job, shame you didn't clear more. I'm looking at maybe doing some flips in semi-returement, so I am also interested in the breakdown of expenses.

    I recently reno'd an IP I have had for a while in Middle Park - Centenary suburbs of Brisbane - and it cost about $40k including adding an ensuite.

    I also have an IP in Brassall. Did the same as you - got the DA to split off a battleaxe, but haven't gone through with it.
     
  13. Luke T

    Luke T Well-Known Member

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    Thanks for yr interest-
    I will do more specific breakdown and get back and post it all
     
  14. Archaon

    Archaon Well-Known Member

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    For first time developers, whatever time frame you think it's gonna take, at least double it when you are calculating holding costs imo.

    Alot of things out there to catch you out, even with experienced people on your team.

    Done a split that took about 4 years, really chose the hard route, but the returns were worth it, perhaps I got lucky as well.

    Bought 215k, 764m2 corner block. 2009
    Subdivide and sold old place for 345k. 2017
    4 year subdivision woes
    Subdivision and holding costs of about 45k-60k
    New build and landscaping 250k.
    Sold new build 2019 470k
     
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  15. Sackie

    Sackie Well-Known Member

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    I didn't even realise ( using my phone) it's fake furniture so ya got me! Looks much better than before Reno. Is the kitchen custom or ikeaish?
     
  16. Luke T

    Luke T Well-Known Member

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    Lol : the agent is a good friend of mine whom I try give a lot of work so they did the staging .FYI: as far as I am aware all the furniture is real except the beds are blow up !!
    The kitchen is mostly existing but I bin zinzer painted it to seal the cabinets inside. I removed the L section and stove and replaced those x2 only with Bunnings cabinets.
    Then a contact of mine replaced the doors for $1900 . We also knocked out the lining of the wall making the breakfast bar (this was a cheap way to add space and open up area
     
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  17. Sackie

    Sackie Well-Known Member

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    Me no fool afterall. Yay! :D
     
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  18. Luke T

    Luke T Well-Known Member

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    Well done on that one !!
    For me I could have kept the block but I already was in it for 9 months (6 months actual labour )and the longer I hold these the more I just want to get out . I did another 3 reno and holds during the time I did this bundamba one as I am wired for the 2 weeks get in reno , rent it and keep it and move to next one .
    The other issue was I was in it for $320k ish cash and I didn’t want to sow another $50k cash in to split it (plus another 3-4 months time holding costs ). That would have put pressure on the rest of my portfolio so I opted for wisest way for me and that was to take my $30-40k profit and my $320k odd that I spent and move on .
     
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  19. strongy1986

    strongy1986 Well-Known Member

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    yeah i understand that but i also know from past conversation that Luke is very hands on and has done a heap.in broken hill so he knows how to stretch the budget

    it just seems a lot of money when your doing a lot yourself so i was wonderimg if there were any exlenses.which surprised him
     
  20. Joynz

    Joynz Well-Known Member

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    Was Luke actually doing the Reno himself (e.g. laying the tiles etc)?