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How much is enough?

Discussion in 'Real Estate' started by Jacque, 14th Mar, 2006.

  1. Jacque

    Jacque Team InvestEd

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    With my recent forays into investigating buying for the purposes of renovating and onselling (after holding for 12 mths), and doing all my due diligence with number crunching etc, I've come to the conclusion that my time is worth more money :)
    This particular property is coming up for auction and, after doing some quick calculations, I've figured I can make a tax free profit (hopefully!) of some $40-50K. The only person I haven't accounted for payment, though, is myself :)
    It got me to thinking, however, as to how much I'm willing to now sacrifice in terms of time (most would be weekends and after hours, naturally) on a project of this nature. In the past, the renovations that I've done haven't been on properties that I've gone on to onsell intentionally for a profit and I've been happy to have gone in gung-ho with my drill and paintbrush and work up a storm.
    Now that my time is much more limited, with the business, I find myself preferring to take on the role of project manager and consequently leave the jobs to the tradesmen. However, doing this entirely cuts down on the profit at the end of the day. Even allowing for paying myself an hourly rate at which I'd be happy to accept now, it may work against me.
    Ah, the dilemmas of modern flick and fluff jobs!!
    So, the question I need to ask myself is "How much is enough?". Only the buyers can answer this for me, in 12 mths time, I guess :) I can set up all types of costings and scenarios now, but anything of this nature is always a risk as you're basically at the mercy of the market a year down the track. Plan B is to keep as a long term B and H if I can't sell for my desired outcome.
    I'm still going ahead with all the DD pre-auction, however, as you just never know what's going to happen on the night. I have my walk away price and I'm sticking to it :D
     
  2. Glebe

    Glebe Well-Known Member

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    Let us know how you go!
     
  3. Nigel Ward

    Nigel Ward Team InvestEd

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    In your detailed costs estimates why not building in an expense item line with

    "Project Management" x hours @ $[ ]/hour

    Plug in some hourly rates then and see if the project will bear it.

    Particularly if you go with plan B, you should factor in additional rental yield from tricked up property.

    Perhaps you should also factor in the additional depreciation available too (altho @ 2.5% that may not be a huge factor).

    renovated properties I suspect (have no hard data on this) should rent more readily too, so perhaps a lower vacancy rate?

    On the flipside though, I often wondered, in the last boom, how much my renovating contributed to capital growth and how much was cause of the boom... :rolleyes: when I analysed the figures, adjusting for different lengths of ownership, the renovated properties grew more...but not as much as you'd think. I've also been fortunate in that the unrenovated properties' rent has increased in line with the renovated properties... But then a couple of them would have commanded SUBSTANTIALLY lower rents without the initial reno...

    anyway, enough of this idle speculation...

    N.
     
  4. Jacque

    Jacque Team InvestEd

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    I know where you're coming from, Nigel, with the wondering issue... :)
    It's the renovations that reap rewards in a flat property that really shine! After all, the old saying that you make your profit when you buy has never been truer than the market we're currently in. Why not make the best usage of your housing dollars by using the current market sentiment to find the better deals? Most vendors are being pretty realistic now with regards to price expectations, and if they're not, then they have a long wait coming to reconsider their position.
    The increased rental yield I will command is still not enough to excite me, but then again, this is Sydney :)
    Who knows? After plugging in my hourly charge (hmm...now how much will I pay myself?) I may well end up going backwards!!
    On with even more idle speculation.... ;)
     
  5. Jacque

    Jacque Team InvestEd

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    Well no profit buying opportunity in the property that I missed out on at auction last night. A bunch of emotional buyers ended up paying about $60K over fair market value. You should have seen all the head-shakers amongst those of us who didn't even get a bid in :eek:
    Them's the breaks though. You've got be in to win it, however not at any cost. Ah well, on with the search :)
     
  6. perky

    perky Well-Known Member

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    So it went for high 400's ?
     
  7. MichaelWhyte

    MichaelWhyte Well-Known Member

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    Jacque,

    As always, we're on the same page! :D

    This is exactly what I'm trying to achieve over on the Northern Beaches. I'm still looking for that value priced reno for around $550K that I can refurb and revalue for around $700K. Those prices aren't unreasonable. There's been a few close ones recently, but the dead cat bounce had put a bit of optimism into the market and pushed prices up a tad. They're settling again, and back half of this year might see a rate rise. I keep looking daily and hope to get the first one on the portfolio sometime this year. Once I've reno'd and revalued then I'll pull the equity with an LOC and repeat. If I get three of these plus the PPOR under my belt before the next boom kicks in I'll be set.

    Keep posting your results.

    Cheers,
    Michael.
     
  8. Jacque

    Jacque Team InvestEd

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    So Michael, looking forward eagerly to following the progress of the dvpt site you've just purchased in Mona Vale :)
    A new thread would be fantastic!
     
  9. MichaelWhyte

    MichaelWhyte Well-Known Member

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    Hehehe...

    OK, can do. ;)

    Cheers,
    Michael.