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Renovation Business?!

Discussion in 'Renovation & Home Improvement' started by Property Hippies, 23rd Aug, 2016.

  1. Property Hippies

    Property Hippies Member

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    Hi Guys,
    With the current market does anyone think it is viable to start up a renovation business to flip or potentially buy and hold properties? We would be looking to start in Victoria but would be open to interstate for sure. My partner and I would undertake a large amount of work ourselves and out source the rest to one or two of our close friends in the building/trade industry. Obviously we would start small but eventually wanting to turn it into our full-time jobs and do something we love!!
    Thanks in advance for your help
     
  2. D.T.

    D.T. Adelaide Property Manager Business Member

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    Most of the info on this stems from American shows and authors as its a bit more popular there.

    Unlike America, In Australia we have stamp duty when buying, expensive labour when fixing, capital gains tax when selling. A pretty substantial return is needed just to break even there. It works out better to avoid the costs and just hold onto the property as a rental and use the equity pull as deposit on further properties.

    I think its possible if you use the PPOR hop method but its inconvenient.
     
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  3. Property Hippies

    Property Hippies Member

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    Hi D.T,
    Thanks for your feedback! I know we have it much tougher than they do in the states that's for sure! PPOR hopping is also an option we are looking at to avoid being taxed up to the eyeballs as it won't be too much hassle for us and we are happy to wear!! We are weighing up holding the properties long enough to avoid CGT or just setting them up as rentals. Do the same rules on tax and stamp duty apply if you are purchasing properties under a business name?
     
  4. Scott No Mates

    Scott No Mates Well-Known Member

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    Will you be required to hold a building licence
     
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  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Transaction costs for this sort of thing are generally too high. You would need to sell for around 10% more than purchase price price just to break even.
     
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  6. Property Hippies

    Property Hippies Member

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    Thank you for your feedback guys, so I am guessing the PPOR hop is probably our best option if we want to go down the renovation road
     
  7. Perthguy

    Perthguy Well-Known Member

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    I buy run down properties for rentals, fix them up then rent them out. This improves cashflow and decreases holding costs. My best effort was increasing the rent from $330 pw to $440 pw after a $12k reno. Myself and my investment partner did most of the labouring work to cut down on costs. So it can be worth buying places to reno if you intend to hold. It's more the on-selling after reno that doesn't work particularly well in Australia because of the reasons outlined above.
     
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  8. Brady

    Brady Well-Known Member

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    Have a client who has done well from the property hop. He's been on a low income (apprentice carpenter) but has the skills in the right area and hard worker. So each night/weekend/RDO he spends renovating his PPOR. He's onto his 3rd or 4th property now each time upgrading to better suburb/property. Now renovating a $350k house with debt around $150k whilst earning <$50k for last 4 years. Once finished this house will be worth ~$550k and debt will be around $230k
     
  9. bob shovel

    bob shovel Well-Known Member

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    I'm lung into the same at the moment but the business is first and work on IP's as a bonus to buy reno hold. Look at buying within the company name etc or any other fancy accounting things that can be done

    .... so watch this space sydney. ...and Australia! :cool: franchises available 2018 ;)

    Look into what @Scott No Mates is on, check your licensing requirements. I need to touch up a few areas top get my builders lic but as an interim i need to find out about structural landscaping and the kitchen, bathroom, ldy licences
     
  10. Property Hippies

    Property Hippies Member

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    Hi Brady,
    Thanks for the info! Anything we can do to get out of our 9-5's sooner is what we want to do!
     
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  11. Property Hippies

    Property Hippies Member

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    Hey Perthguy,
    Are you living in these properties while you do the reno's or are they solely investments?
     
  12. Brady

    Brady Well-Known Member

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    For future reference where he's gone particularly well was not only just improving on poorly presented property, but the best results came from large building size properties that had poor layouts and improving by adding a bedroom and/or bathroom. Most recent property is a 2 story house (not townhouse) 2 bedrooms 2 bathrooms 2 living areas (with the second living area being 6.2m x 6.2m) and a massive kitchen area. So he's moving the kitchen closer to the stairs, putting storage/pantry under the stairs, this creates room where kitchen was for dinning room allowing for 2 living areas downstairs along with the 3 bedrooms upstairs (and keeing the existing master w/ ensuite downstairs). So goes from a 2bed2bath2living to a 4bed2bath2living.
     
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  13. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    At least you wont cop clawbacks ;)

    Banks would need 2 full financial years history (A few will accept 1 years) to consider this as income for servicing so chat to your broker and accountant about the possible effects this will have on other aspects of your life and business.
     
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