08: Q&A How To Avoid Renovation Mistakes & Increase Profits...

Did you know with just two investment properties and one single renovation that you could put over a million dollars in the bank? It's true. And why stop there? Welcome to your Property Success podcast, the show that explores the practical steps to making your property investment dreams a reality. And now here's your host, a lady who only buys clothes that don't have to be ironed. Jane Slacksmith.

I'm busy. It saves me time.

No, I totally agree with that.

In actual fact, the ironing board fell out of the cupboard the other day at me and I thought, oh my.

Gosh, what's she knew in a while.

It was like a sign from above.

That's funny.

So a big welcome to the youe Property Success podcast and episode eight. Thank you for joining us today. We really appreciate you taking the time to join us. And we have an extra special special episode coming up for you. Today we'll be taking some live questions and exploring a topic that is very dear to my heart and has been really the foundation of my property success and for so many other successful investors that I know out there. So let me start with a question. Today we'll be talking about a method that substantially increases the value of a property and builds your capital base quickly. This is an active property investment strategy that anyone can use and it doesn't rely on the market to increase the value of a property. And it can be one of the most powerful and effective ways to build a property portfolio quickly. Can you guess what strategy I'm talking about? I'll give you a hint. It works even if you can't swing a hammer to save your life. Of course I'm talking about strategic renovation. And who better to chat with me about strategic renovation than the gentleman sitting beside me, the co creator of the Ultimate Guide to Renovation. Hello, John. How are you?

I'm well, thanks, Jane. Hello everyone.

So, John, let me start by asking you a question.

Okay.

What's the definition of strategic renovation and why is it different to a normal renovation that mum and dad would do on their own home, for instance?

Yeah, probably.

Probably.

It's quantifiable, so it has a defined outcome. So that's where. Probably where the strategic part comes into it. So if you. Obviously if you're renovating for your home, you make it exactly the way you like it. You renovate to your own taste and there's nothing wrong with. But I guess where the strategic part comes into it is you're only concentrating the renovation on the areas that add the perceived value to the home.

And I guess the Key to that also is when you talk about the perceived value is that the perceived value is a lot higher than the actual cost of creating that.

That's the perceived part.

Yeah, that's what I love.

Yeah. It doesn't necessarily have to cost that much, but it needs to look like it costs that much. Yeah. And I guess it's also strategically selecting the property based on its capacity to add that value in the first. That's the other area where it's going to differ from a homeowner renovation is from the very start, before you even select a property, you only select it based on its capacity to add that value.

And that comes down to location.

Yeah, absolutely. Above all is location, isn't it?

Well, look, I think where renovation gets a bad name is where people get it wrong. You know, they just don't appreciate that the renovation itself is only one cog in that strategic renovation process. But anyhow, by the end of today's podcast, you will have learned the steps to carrying out a profitable renovation, and we'll be answering some of your biggest renovation questions as well. So a lot coming up for you in today's show, so stick around. Now, John, you have had a lot of experience in renovation. First on the tools, as a tradie. Yes. Solid plasterer.

I was a solid plasterer. Yep.

But how long?

About 13 years, I reckon. 13 years.

So you did the hard yards on site?

Yeah, I spent day in, day out, facing about 3 foot away from a wall. You get a little bit sick of staring walls day in, day out.

Oh, my goodness.

Yeah, it was good.

No, it was good, actually. It was. Keeps you fit. You spreading mud on a wall each day. Mud's what you call the render, you see.

Oh, okay. I was gonna say spreading mud. I missed that part of it. And then you had your own. Your own investment properties that you did cosmetic Renaults on?

Yeah, the first one I did was a hold or the first one.

Structural renovation.

Yep. It was doing structural renovations pretty well from the start. And just because I had, you know, I had tradie mates and all that kind of thing, so it wasn't that hard to get up to speed on the. On the. The mechanics of how to do it. And then, yeah, did a one. We. The first investment property was we added a room and. And held that property. So it was a, you know, change the structure and a higher and better use, and we got some good money out of that. Didn't buy it in a great area, to be honest. So I didn't really, at that time, this, this was 1999. I didn't really have the, the overall picture down at that time. I was more. Everything was from a renovation point of view. And then did our own house and, and then subsequent houses that we would, you know, renovate and, and move into and do the renovation with the dust, you know, around our plaster dust.

Going to work every day covered in.

Plaster dust and all that kind of thing. Yeah. And then moved on to flipping after that. Yep.

And then now developing.

Yeah, and then on to developing, which is kind of almost by accident in a way. We, I hooked up with another guy and we pulled some resources to do to look at some, some of the nice suburbs in Melbourne and, and we did the, the whole suburb selection exercise where we tried to discover which were the best suburbs that we could renovate in.

The pricing disparity was apparent, that difference.

In price between the unrenovated and renovated properties. What it was, we were looking in some of the areas like Kew and Camberwell and, and Hawthorne in Melbourne and we were getting outbidded at auction by these guys that were paying, you know, in some cases 2, $300,000 above what we considered to be market value. Even though the market was moving, wasn't moving at a rapid rate, but it was moving. And yeah. And turned out they were developers. And so we thought, oh, we'll run the numbers on that. And we did so and we found out why they were able to pay that money and so we decided to get into that too. So we did a couple of developments on the back of that. But I think I'll probably go back to renovation next.

So that's interesting. John, you're going to go back to renovation from developing?

Yeah, I think I'll go back to a renovation next. Probably just a straight up tried and strategy renovate, buy and hold.

Oh my very favorite. Well, now we're recording this podcast on the 20th of October 2016 and as we speak, the Ultimate Guide to Renovation once again is open for enrollments for just seven days. And this happens twice a year where we take a group of people and go through the 12 modules over a 12 week period. And in the lead up to this, this year we have a free renovation case study that we released to demonstrate for people what's possible using strategic renovation. And if you're listening to this podcast before the 27th of October, you can still find that case study at the ultimate guide to renovation.com au and as part of that video series, people had a chance to ask me questions directly. So we have been living and breathing renovation for the past fortnight. So what better time to have a podcast about strategic renovation?

Yep, why not?

So the majority of this podcast is actually part of a live webinar with our mentor students. So, John, some questions. Yes.

Who we got here? Lorraine's got her hand up.

Oh, it's nice to hear from Lorraine again. She's to send us a lot of questions. Hey, Lorraine, how are you going?

Hello.

I was good.

I was just wondering about spray painting walls and ceiling inside when you're doing a Renault, have either of you done that?

Yeah, I've done it quite a bit. I really like it. In the past, I've just hired them from, you know, coats hire or wherever, just nail a sprayer. And one of the jobs I did, I actually sprayed the inside and the outside and the roof in three days. So we'd spray that, we put a coat on the inside.

It would take me three days to do a room.

Yeah. Day of taping up. Yeah, Day of taping up prior. So, yeah, four days. But yeah. And you just spray. And you would do it the whole house a lot sooner than that if you didn't have to wait for it to dry.

Yeah, exactly. On a hot day.

Yeah. It uses a lot of paint.

A lot of paint, isn't it? Yeah.

That was a rental property. Now I just painted all the one colour, just a white whisper. White's normally what I use, but I've also used it in. I'm in a period property with a. It's got Victorian ceilings and big cove cornice. And I find it really easy to paint those ceilings as well. So if you're doing a cornice, it's way easier to spray it than get in there with a brush and paint it that way. And it's good for the ceiling roses and stuff.

Yep.

Can you do two different colors? Can you do like a wall color and then a ceiling color or does it always have to be the same?

That's what we did in this house. So we just sprayed the ceiling and we didn't care about the overspray on the walls because we then just went and cut in with the wall color and. And where we went, it's a lot faster.

So you cut.

You cut in with like a paintbrush.

Yeah. And just painted the walls with a roller. But even most. Most painters will use a roller most of the time. They'll spray the first coat on and then they'll have the second painter or apprentice or whoever running through with the roller. And it's more just to Give that the finish.

The texture.

Yeah, the texture, yeah. So when the sun hits it and then they normally just spray the remaining coats. You can paint exterior walls too. I use it on render, so it's great for render because you can really get around fast with that render. With a big. Normally you would use a big long nap woolen roller for a render. Doing the hand actions again.

Yeah.

But it takes. Yeah, it takes ages to paint a rented wall, particularly if it's cement because it sucks up the paint like nothing else. So spray is really good for that. Yeah, use a lot of paint. You've got to buy the big, big tins, the big 20 liter tins.

You've got some painting planned, Lorraine.

Yeah, Jump in that.

No, not yet.

Not yet.

I just wanted to know. I read about it and I thought, oh, I just want to know, can you. A ceiling white and then a color on the walls. I just didn't know how you do it.

Start with the ceiling first. Like with everything we say. Start at the top and go down.

Thank you.

Okay, next question from Christine. Thank you, Jane. This is very informative and I think intuitive. I know what to look for and where to put my dollars. It'll be interesting to see if your renovation videos prove me right or wrong. It's even more important now that I'm looking for another property, though in the past most have not had much in any work to be done on them. Now I'm looking for my daughter. So the dollars are even more important and I don't have a lot of money to spend on the property. So it will have to be a renovator's delight. Thanks for imparting your knowledge so readily. It's very kind of you. And something we don't see in this day and age of take, take, take, rather you give, give, give. Thanks again. Thanks, Christine. Sweet. So, Christine, what brings us to the question I think we could probably answer to where is the bang for the buck? Where spend your money, you know, and let's hope that she agrees with us.

Yeah, that's right. Well, I think it starts if you think of it from the buyer's point of view. And even though we might be renting the property out, it's the revalue that we're looking to do. Adding the value which comes from the valuation and the valuation comes from what someone would pay for the property. So if you think about when someone pulls up outside the house, the first thing they look at. That's kind of where I start to think about it. The street appeal and there's all sorts of figures that people throw around. About, you know, 60% of buyers make up their mind before that.

I think some people make up these. Let's go, 80% of buyers, whatever that is. 30 seconds.

Yeah, let's say a significant amount of people make up their mind before they reach the front door. So that's one of the. That's one of the big ones. Just from the outside point of view.

I know my husband, Todd, when we had the valuer turning up to get a valuation on the properties that we had renovated, he actually mowed the entire street median strip.

Yeah.

So the valuer came in thinking the street looks great.

Well, this is a good lawns in.

This, rather than the fact that they're around the corner from McDonald's and there's, you know, rubbish running up and down it. So that's. We took it a whole different level, but inside, you know, just the basics. Light and bright paint. Paint is like just an amazing spend for the value you get back and where people want to live. It's the kitchens and the bathrooms. It's the pretty bling and making the property look like a million dollars without costing a million dollars, you know, so. So really understanding what that level of fixtures and fittings are of the renovated properties in the area, not exceeding that, but, you know, just adding. Adding the value where the value can actually be seen the most. So it'. Fixing the roof tiles. It's not about, you know, removing the weather boards or even doing, you know, plumbing issues or putting in the new electricals because they need to be updated. Because that money doesn't get seen.

No, you don't see that money at all. It's. You often see things that require renovation. There's. There's improvements that can be done. And this is the trap that you look at it and you think, oh, I could. I could make that better or I can improve it. But if it's not adding that value, it's. It's.

You have to question why you're gonna do it.

I remember having. There's a fellow that asked me to look in on his renovation. It was in Coburg and around the. Wasn't even on the driveway side of the house. It was on the back section and the neighbor's side, you know, along the, you know, 1200 wide gap between the house and the fence that he was going to replace all the weatherboards. And they were, you know, there were some that were a little bit rotten in spots and so on, but nothing that had been a builder's bogus wooden fix kind of thing. And there was some peeling of paint that would just scrape off and so on. But he was just adamant that he was going to replace these weather boards. And I said to him, this adds no value. All you're doing is spending money that's coming directly off your profit. But he just couldn't live with himself leaving them on there.

And the thing is not only spending the money, but it's the time, you know, you lose that time in the project as well. And energy every day is a dollar. And you start some of those exercises and you pull off something and something else goes wrong. And it's never just the job is.

The way I look at it is you can come back and the idea is to generate equity in the property. That's the goal. So if you can generate equity in the property, then get a little bit of capital growth over the next months, years, you can come back and pick up those bits and pieces as part of the maintenance. But you then got a property that's actually working for you. You're not starting off behind the eight ball.

Absolutely. And it hurts. It hurts leaving some jobs undone, but sometimes it don't deserve to be done.

Yeah, no, it does. And. And I always think, if you had. And almost. This is the point where I start. If I had the smallest budget possible, what would I do? And it's nearly always painting and staging. Yeah. And I should just. For those that don't know, staging is furniture hire that you put into the house during the sales campaign. But you also use it for rental properties, Right?

Absolutely. So. Well, I actually. Not for the actual renting of the property, but for the valuer to come through and see property. And although I've spoken to so many valuers who say, look, we've been to uni for four years, we've done all our assessments of comparable sales. The walkthrough, which usually only takes seven to 10 minutes, is just verifying the fact that everything's in place and we've got it all there. But you can't tell me subconsciously walking through. When you're inspecting a property, you're inspecting that club, Club, club through the empty, echoey property compared to the beautifully finished rooms. And I've just seen. I run little surveys myself, but, you know, I see people walk into one bedroom, next bedroom, next bedroom, and it's like, yeah, yeah. It's got a, you know, a wardrobe, there's a window, there's security, there's not much to see.

Yeah.

Where. And they just put Their head in. It's like, yep, yep, bedroom when it's empty, but when there's a bed in there and a couple of side tables or whatever, they walk in and they open the wardrobes. You know, it's not like there's anything different between the wardrobes who are going to have anything in there, between it being staged or not. But it's just that connection that people feel with it.

Human nature, isn't it? I think even valuers aren't above it.

They're human, too.

Yep, that's right.

Actually, it's interesting. We have a couple of valuers in the private Facebook group, and it's interesting to hear their takes on some of the questions that we discuss openly as a community in there. But I just want to add a couple of things, Christine. Firstly, fabulous that you're inviting your daughter to be part of this process, especially because you've done it before. Because, as you know, we really believe that by educating your family and having your family see what you do, that you're creating a future for them that has the potential for them to replicate what you've done, but also for people with young kids, getting them involved with this process. So we really see this as an intergenerational kind of thing of giving back. But I started with $45,000 and I spent 25,000 of that, went to stamp duty on my first property. And I know that I made sure that I could buy in the very best area that I could buy. So all of my funds went into the purchase. Now, I subsequently got a private loan to personal loan to do the renovation. But what I'm saying is, if you had a choice of being in an area that wasn't so good and buying at $400,000 or keeping your renovation budget and buying in an area of $450,000 and being in a better area with the better dynamics, with the better growth potential, I would buy in the 450 area and wait until maybe you have some equity or have the cash or take a loan to actually do the renovation on that property. Because it keep is the location, isn't it, John? We keep saying that time and time again.

Absolutely.

So don't, don't buy, obviously, using all the tools and things that you've seen here with an eye to renovate and understand the numbers behind it and the profitability, etc. But realize you don't need to do it straight away. And if you're going to sacrifice anything, it wouldn't be the location, it'd be the renovation. Budget to buy in the better area.

Yep. I agree. You always do that renovation later?

Yep. Absolutely. Great question. Thank you so very much.

Tell us about your. How you got into renovation in the first place.

Oh, my goodness. Well. Well, I had been. I'd actually spent a lot of time researching on where to buy, and I knew that I had just a small amount of money. I. So I only had $45,000, and I had a borrowing capacity that was only getting me to around about a $430,000 purchase price. So if you do the math on that, you realize that stamp duty was going to go out for about $25,000. So I had, like, a 5% deposit, and I was really dedicated to buying in the best possible area that I could. So I had done all of that research, and I knew that if I wanted to create equity or even just get back my $45,000 in my bank, because I was a bit worried, the fact that I was draining the entire bank account. And if I wanted to do that quickly, I needed to actually create money. And it was like creating money out of th. And the only way that I knew to do that was in renovating. So. And it wasn't. You know, I'd kind of read books, and, you know, Jan Summers had talked about renovating a property, so I had not experienced it personally. And, you know, I kind of made some of the mistakes that everyone makes. But, you know, for me, that. That first property, you know, we bought in a fabulous location, had the renovation plan really strict on the budget and the timeframe to achieve it.

Yeah.

I took a personal loan to do the renovation straight away. And, you know, that renovation added so much value, I can. I can literally say it changed my life because, you know, nine months later, that $425,000 property was worth $700,000.

Yep.

And I pulled out over $100,000 and went and bought another property worth the same amount of money in Sydney.

Yep.

Beauty.

You know, so, you know, and I just then just replicated that and replicated and replicated. And, you know, that first $45,000, which the government got 25 of it.

Yeah.

You know, that. That was just. That the only time I ever put my own cash into purchasing a property, you know, and subsequently having bought many, many properties since and renovating since, I've used equity to renovate. Equity for the deposits, equity for the stamp duty, you know, so it just.

So it was the seed money for all of them.

Absolutely. And, you know, and it was a turning point in my life when I Stepped back and went, hmm, I just earned more on that property in nine months than I earned in a year working, you know, and you kind of look at it and you go, okay, well, I know I can't give up my job because you need to have the serviceability for the loans. But if you get to an equity position and you can do this from an equity position going forward yourself, then you less and less dependent on your own income, and you have that freedom of choice of deciding where you want to work or like me giving up work and starting my own companies. So, you know, I really, it was just an absolute, you know, moment, I guess, a turning point moment where I could have gone down the path of, you know, just keeping my money being saved and potentially buying a home and just having that home forever, or maybe upgrading or actually using that first property to develop a property portfolio that now allows me to do what I want, when I want, with whom I want, and say no, more importantly to the things I don't want to do.

Yeah.

So. But, you know, I made mistakes. I had a purple feature wall and. And it was lucky. You know, the people who moved in, the renters, you know, really were arty and work worked for the orchestra, actually.

As far as mistakes go, feature walls aren't too bad, are they?

You can paint over them. You can. It did take like four lots of antique white to get over the top, but, yeah, not that bad. Didn't overspend, kept to the budget. So very, very diligent on that. And I think, you know, other than those small mistakes, there wasn't anything that was too substantial because I guess I kind of put my engineering hat on and said, there's a timeline, there's a process, there's things that have to be done by when, by whom, and let's do it. So I was very focused on that. And I was very focused at the same time of watching the market and what was happening to other properties. And when I came up with my own valuation document to give the valuer of comparable sales, I knew that the other properties were minimum worth $700,000. So I knew that I had delivered on that profitability that I needed.

Great.

But enough about me, my renovation. I do like to reminisce. But look, let's get onto your questions. I'm going to try. We see engine is on a phone. So engine.

Hey, guys.

How are you? Oh, good.

Well, fabulous. How may we help you?

Okay, my question is, I know the way doing change the kitchen and the bathroom, the way it adds value how does it work when you put a deck behind the house? How does that work with adding value to the property?

Yep. Look, when we talk about bang for your buck and from a cosmetic renovation and adding value and trying to almost fill that gap of pricing disparity, which is the difference between unrenovated and renovated houses, to create that profit for yourself, you're looking about creating value. And the bang for the buck is usually on the street appeal. It's on the kitchen and bathroom. It's on those kind of big communal areas. Will the deck add value? Because I know the kitchen and bathroom will, but the deck may add value in Queensland, but it may not add value in Hobart. And it's around being in Blacktown. In Blacktown, well, it's about being fit for that market. So, you know, if that outdoor living space is characteristic of what your target market is and you looking to sell or to rent the property out?

No, to rent.

Okay. So if you're looking at renting the property out, sometimes it's nice to have that little bit extra. Whereas when I'm putting thinking a little bit extra, I'm thinking like two shower heads and a shower, I'm not thinking about a $5,000 deck, you know, so you often want, especially when, you know, for the valuer, if you're going to revalue and try to pull equity as well as the potential tenant, you want people to walk into the property. And that sometimes that little extra feature is the thing that's like, darling, we just have to have this, you know, either rent it or buy it. And I know I put in one of the properties that I had and you've probably seen in courses, because I use my. My properties are often in pictures, but put in some fixed bookcases in a hallway and the number of people who walked in to rent the property and just went, oh, my God. I've always wanted to have, you know, bookcases. And it was a silly little thing. It was a really wide hallway. It looked kind of weird. And we thought, well, we've got room to do this. And it creates extra storage in an air in an older style house that doesn't have a lot of storage. And it was. It was a real personal touch. Yeah, it was. It was a real kind of show showcase. It didn't cost a lot of money. If you're going to create this almost additional room by bringing the outside in, and it is a feature that you're seeing on other properties that are renovated, then you have to make the decision that whether It's a selling point for the potential renter that's going to say, yep, I'm never going to move. I love this. I'll pay, you know, the market price or a little bit more for it. Or if you're making the decision that says I'm going to spend and it's not going to add value like we know you can spend 50,000 on a pool that is not going to add 50,000 in value.

It's not a direct if I spend 10,000 because I've been getting quotes for it and it's actually coming back a lot more expensive than I anticipated. And unfortunately I've sort of jumped the queue a bit by. There was an existing concrete staircase and I've just been and knocked it out and now I've got no option but to put a deck in.

Yeah, okay, well that helps.

I might be able to help you a little bit. I'll give you a, I'll give you a couple of tips that I do even on higher end properties. One is I don't build out of Merbau or hardwood. I build out of treated pine which will shave, you know, at least a third of your timber components across off pretty well straight away.

Does that have to, does that have the durability the, the pine?

No, not as, not as hardwood will. But I find even with Merbu you're going to be staining every couple of years anyway. But there's a really good product. And also if you go to a, if you don't use the, the 70 or 80 mil board and you go to say a 110 or a 140, so the wider board you will get a more higher end look than just the standard deck. So once it's stained and the stains, the real secret to this, but if you use a wider board and then stain, you can really have a nice looking deck which is going to be fine for you could stick tenants in there for 10 years, come back and stain it and sell the house and it would still be perfectly fine. You know, the deck could look good as you know, assuming that it was well built. And the product that I use to stain it is made by a crowd called Ecodex, which I think is E C O D E X and it's a product called Quantum Q U A N T U M. We'll have a.

Look.

And it's, it's a Merbu stain and it's. I've had a crack at all the different oils and stuff on the market over the years. Sorry. And this is by far the, the best. So Quantum by Ecodex in a merboostane and it. And it comes up really good. And I'm using these on, you know, higher end developments as well.

Thank you very much, guys.

Okay, so back to the video series. Oh, there's so many questions here. Let's go through and grab one. So. Oh, wow, says Kim. What a wonderful transformation. So she's obviously looking at the before and afters. In video three, my favorite video, the property looked totally different. How does the paint wear on the bench tops and in the bath? Does it scratch or peel? Easy. Now what we showed in video two was the product that we used, which is a White night paint product and it's actually called White Night Tile and Laminate Primer. Now, John, you're the practical person here. Do you want to take us through the preparation and everything as well?

So just to give the background, it was the, it was a dated kitchen, but it was in pretty good nick. It was, it was pretty solid. Solid. It was probably, I would say maybe an early 90s kind of kitchen. So the decision was made that we didn't need to pull it out. And it was, this was a low cost renovation in a quite in the lower end of the market in the three hundreds. So the decision was made to repaint the kitchen. So it was the white night product that we used, the laminate primer and paint. And in terms of its durability, it's pretty good. You can, if you're concerned about the durability, you can certainly put another, you know, you can add an extra coat of the paint on and that'll make it a little bit more durable. But I know in one property I've had, I had to swap out the kitchen itself twice, whereas it would have actually been a lot better for me just to go back and repaint the bench top. You know, so in the scheme of things, for the purpose of what we were doing for that property, it's fine. And you can go back and paint at a later stage. If it does get scratched, it's not going to wear as well as a laminate top. It will scratch slightly easier and, you know, probably chip slightly easier over time, but, you know, it'll get you a good three, four, five years. And it's not that hard to do another coat if you need to sand.

It back into paint again. Yeah, Actually, it's funny, I spoke to a gentleman from Altona Meadows yesterday. He's got a property that he's selling there and he was asking specifically about the video to this White Knight product. And he was saying he had planned to replace the kitchen before he sold and he'd seen the video and went, wow, this is great. But. And he said, but my worry now is that I'm going to do the bench top. It's going to look so good and with the plastic handles on the doors, it's going to date it. I'm like, change the handles. Like, oh my gosh, yes, I can do that too.

It's really easy. Bang for buck. I mean, in that video series and it was only up until the 27th of October, so apologies if you're listening to this in the future, but it showed where we painted the cupboard doors and drawers and just replaced the handles, painted the bench top and it makes such a transformation. And when you've got a kitchen like that and it's in the lower end of the market and there's really no added perceived value for swapping that out for a new kitchen, it's just extra cost that comes off your profit. Whereas you can paint it, get the same, you know, 90% of the same wow factor. And it'll last you for a bunch of years too.

It's just about thinking about things differently. Remember Craig, who was one of the first testers for the Ultimate Guide to Renovation course, and he was in the middle of a renovation and he was about to rip out the kitchen, went, gosh, I hadn't even thought about it. You saved me thousands and thousands of dollars just by that one little tip. And we obviously go into a lot more detail in the course.

But he was saying that he used to, he would get, I mean, he think he did a dozen renovate, dozen renovations, I think. Yeah. And he would get. The first thing he would do is he'd roll up and he just cut the place.

Yeah.

And so half of the stuff, when he saw that video. Oh, you leave most of the stuff in there.

It's like, do we replace it, do we reuse it or we retask it somewhere else? Because there's things that you can do with things. So anyhow. But great question. Oh, another practical question here. Sandra. Hi, Jane. Finding your videos helpful, however, I am interested in how you approach the issue of asbestos and lead paint when renovating older properties. Look, the question about asbestos and lead paint is really relevant, especially with these older properties because there is is significant safety related risks with them and I just wouldn't mess with it. So if you do suspect that you do have lead paint, I would go straight down to your local Hardware or paint specialist and get some thoughts about how to deal with that. It's going to involve ppe, personal protection equipment. And the same goes with asbestos. You know, I had a lean to at the back of one of my properties and, you know, it involves getting the professionals in getting black plastic and you know, you have to dump it in specific parts of the council dump some dumps, don't take it, but get professionals to deal with this. Anything that's going to risk your personal safety is not worth it even. I mean, I used to wear still cap boots on my renovation sites, you know, just.

Yeah, it's worth it. It's amazing how many accidents happen. You're really upping your. Your odds of something. You know, an injury when you're working on a renovation site. So. Yeah, they happen all the time.

Same goes with kids.

Yeah.

You know, it's good to have your family involved, but. Yeah, just watch them. Keep them away for anything dangerous.

Yeah, that's right. And it doesn't necessarily mean if there is asbestos there that. Because often you'll find a lot of old houses have asbestos and it doesn't necessarily mean that you shouldn't buy that property. You just need to know what you're up against. So it might just be in a, you know, for instance, we bought a property and it was just in the sheds out the back and we got some quotes From, I think three or four asbestos removers. In the end, it cost us about $1,200 to remove all that asbestos. But it was clearly asbestos and it was exposed and everything and it actually ended up being an acid because everyone coming through the open for inspection, they recognized it, went, nah, not touching it. And you know, you know, it wasn't much of an expense to get rid of it.

A lot of our students renovating in Brisbane and it's not unusual at all, especially when they're doing bathroom renovations, that there is asbestos board there. Yeah, it does add to the cost of renovating. Yeah, obviously. But you are aware of that beforehand because you've done the right inspections. So you know all of these things. And that's why we say, you know, the quick calculator. Work up the cost of your renovation before you even put in an offer. Because you've got to know what the numbers are to make a profit.

Yeah, that's right.

There's no point in buying a property and then finding out you've got all these extra costs because it could eat up your profit straight away. Great question. Another question. I've got Jackie and Jackie says, I wanted to ask, I already have a lot of equity, but how can I buy and flip without losing or using my home to buy and flip another and to make it worthwhile? Well, it's a great time to buy. And in the past we've bought, renovated and sold and we've done very well. But the buying and selling fee and stamp duty is rather off putting. Look, Jackie, it's a good question. And I guess the fear is that, you know, sometimes if you've got equity in your home, putting that home up as security is a real worry and substantial one and one that we all have. And what There's a couple of ways that you can do this and flip properties. One is that you might, for instance, access some of the equity from your home. So let's just say you're buying a $300,000 investment property. So you might buy it with a 20% deposit. So you need $60,000, let's say $15,000 for stamp duty and legal fees. So $75,000. And let's just use a rule of thumb of 10%, you're going to use $30,000 to renovate the property. And so you know you're around about $105,000. Give yourself a little bit of buffer. You might take $120,000 of equity out against your home and then you'll go and buy the property. $300,000 property with an 80% loan to value ratio, potentially with a whole different lender. So you're going to take out a $240,000 loan. So you've actually separated to some degree the costing against those properties. Now, there is a bit of a problem with that, and that is obviously, if you do this regularly, you'll be hitting your credit file regularly. And we know with the changes of APRA and asic restrictions from June 2015 that lenders are being a whole lot more difficult about this. So this could create a problem. And you may find that lenders don't like the fact that every six months that you're refinancing. I do have a little trick that I use with my mortgage clients who do have this flipping strategy, and that is go to an initial lender that has portability as part of the loan product feature. So what that means is the day that you're actually selling that property that you have renovated and ready to sell, you could actually buy a property on the same day, back to back settlement, and you're moving that $240,000 loan across to the new property. Now, the Issue with that is that some lenders do require a new application and hit your credit file again when they change security. Other lenders don't. So it's around knowing which lenders do and which lenders don't. And these policies are changing, changing all the time.

Your timing's got to be pretty spot on there too. Yeah.

And this is the pain. Right. You know yourself having flipped properties, you're in the last, you know, days of the staging and you're trying to get people in and the market and you're at the auction coming up or you're trying to sell.

It's where I am right now.

And then you're trying to buy a property at the same time and convince them that everything's going to happen on the same day. So that corresponding thing is difficult. Now there is. I even have a more advanced trick that I use with some of my clients. I'm going to say flipping clients, but they sound rude when I say about flipping clients.

Maybe flipping about your flipping clients.

My flipping clients. And that is some lenders allow you to actually move the loan to a new security that's not a property, but might be cash. So you move the $240,000 loan to $240,000 in cash. But we don't all end up with $240,000 in cash. Right. So you can have like 100% loan to value ratio. You're paying interest, it's only secured by the cash until you secure the new property. The new loan, pretty advanced.

That gives you the leeway on not having to do the back to back settlement.

Exactly. And you're still paying interest on something that's not really incurring any income. Right. So you don't want to have that there forever. And once again, you want to be the lender that's not hitting your credit file when it then subsequently moves to a new asset. You have to keep the loan to value ratio the same. The reason that I did that example on a 80% is that paying mortgage insurance for a flip is just another cost that you're going to have to add on. Yes, technically a borrowing cost. Speak to your accountant about it. Borrowing costs can be claimed in the year that you know. For instance, the LMI is not is being discharged or as a borrowing cost, it's normally claimed over five years. So speak to your accountant about that.

But still, mortgage insurance, what?

Why pay mortgage insurance if you don't have to? As an extra cost and if you've got the equity in your home. But what Jackie Said is she doesn't really want to use a home, which is a bit of a problem. So you might be using cash that you have to do this whole flip some people and this is a way to get around that whole hitting your credit file. If you've got, say a million dollar home and a lot of equity and you've got $500,000 in equity, is tapping into that equity in your home and buying outright the new property, property, not getting a loan for it and then selling it and then, you know, building up your paying back your, say, line of credit to 500,000 again and a bit more, put $100,000 against your in your offset account that you might make off this deal and then do it again and again. So you're actually using that equity in your property. Now, the fear that I hear from Jackie and many people, and rightly so, there's no coincidence that chapter 13 in my book is flips that flop is that it can go wrong. And unless you understand the step by step process, the number, numbers behind buying before you even put it in a bid and how much profit you're going to make, then there is risk. So if you're pulling equity from your home or doing the entire purchase from equity in your home, or even using your cash, it is a risk if you get it wrong. So we're all about reducing risk here and hence why we spend a lot of time in developing a step by step process to help people to actually see how not to make the mistakes that we've seen so many do.

Great question.

So, John, let's just take a moment to talk about the renovation to sell strategy. And most people call it flipping. Yeah, there's a lot of information out there. I think it's almost a national sport. If you look at tv. There's a lot of people out there buying properties and renovating and selling. But it's not that easy, is it?

No, it isn't. And this is probably the area of renovation where we see most people come unstuck is the buy, renovate and sell strategy, particularly if they're going to give up their job to do it. I know, but it can be tough even if you're not doing that, because it really does come down to the numbers and it takes more due diligence or maybe not more due diligence, but it's more important to get that due diligence right. Because you haven't got that safety net of capital growth that you have with the buy, renovate and hold strategy.

Absolutely. And you have Getting the numbers right so important because obviously you're going to have a cost associated with the capital gains tax as well, depending. And that can change depending on whether you sell within 12 months of purchase or after or if it's your home.

And over and above that there's a. The strategies to work around those things, and we're not accountants, are quite advanced, which is what developers and professional flippers and so on use.

Absolutely. But there is a lot of benefit to flipping as well. You can make a large cash kind of nest egg and put that towards the next one. But the thing about flipping, which I find a lot of people miss, is that the target market is completely different to if you're going to buy, renovate and keep the property or rent it out. And in actual fact, we've shown that within a subur that there's specific streets where owner occupiers want to live and there's specific streets where renters want to live. And really, if you're going to buy and renovate and sell, your target market is the owner occupiers, isn't it?

Yeah. And it's really easy to underestimate how important that is. And I remember when I first came across you, in fact, which was you're doing a weekend seminar with Medine Simmons, inventor of the dot map. And I was actually flipping a property at the time and, and we were at the point of selling it and we had an offer, really awesome offer, which is terrible thing to happen when you're selling a property just at the start of the campaign. And then that offer dropped away. That buyer pulled out right at the last minute on the day of signing the contract. And it turned out that property, we went through the entire auction campaign and we didn't sell it. And it ended up selling three or four weeks later. But there was that period there where we were starting to get really, really worried. And that came down to the fact that it was a family house in an area that really didn't have a high percentage of families present. We knew that going in, but we thought we saw enough comparable sales to cover ourselves. But it turned out that it wasn't. And when push came to shove, there wasn't a broad enough market to sell it. And it really taught me a lesson at that time how important it is to get that demographic right. And, and that was when I met you and you were doing the course with Medine Simmons and you were all over that location and suitable property for the market and demographic research with the census. But yeah, really easy thing to overlook and a really important thing to get right.

And I think sometimes also I speak to people and they've bought a property and they're going, oh, I don't know if I'm going to sell it or if I'm going to keep it and rent it. Well, you should have probably decided that before you bought the property because you may be in the wrong area. So, you know, this is why it's so important to, you know, we talk about starting with your goals and then going to, you know, your property investing strategy, understanding your strategy and then your buying criteria before you buy.

Yeah.

Rather than buying a property and going, okay, how is this going to get me to my goal? And oh gee, what strategy can I use? And you know, and I find people miss that, you know, that whole pre. Foundational stuff right up front.

Yeah. You make your money before you buy. There's no doubt that that's true. And every single time that that's been the case for me and when I've cooked the books a little bit or cheated a little bit, that's when I've gotten to, you know, into trouble or got close to trouble anyway.

Well, and I think the other thing, remember when we had a chat to John Edwards about, you know, what kind of price point was the minimum to really justify enough profitability or enough pricing difference between the renovated and unrenovated properties to cover all of those costs and the profit and the renovation. And when flipping, and he suggested now they probably 18 months ago, he suggested around 650,000. I think we probably put 100 on top of that now and say, you know, around 750,000, it can be done at a lower price point because we know we've got students who do it and you know, it can be done. But the issue with it is that at that lower price point, you know, if you're looking at buying at $300,000 to cover your costs and profitability and profit and everything transaction costs, you know, you're not needing to kind of sell around around 450 and that's a big price jump within a suburb where a median might be, you know, 370 or something. So yeah, you know, buying at the 300 that far below the market and then renovating that far.

It is. And it's a bit of an irony of flipping that it's, it's riskier lower in the market.

Yeah.

But then again, it's also risky higher in the market if you're doing it for the first time because you're doing that due diligence for the first time, which is so critical to get right with flipping. But as you go higher, that spread of values does naturally increase. And also I think probably a lot of the renovators get knocked out of the market too. Like as you get into the millions and so on, there's less people that are needing to renovate. I think those flippers get knocked out of the market.

And usually to try to create that higher and better use of the property, we're talking about a structural renovation as well. So we're talking about our longer time frame. You know, we're talking about having getting approvals through council. You know, we're talking about more money because, you know, sometimes you're knocking off the back of the property, putting on a back on the box in the back. Our famous strategy. But you know, that costs more money. We're not talking about a lick of paint sending, you know, buy an extra $150,000 in the market.

No, no, that's right. And the idea with those structural renovations is you're literally forcing the higher and better use because it's not just relying exclusively on that difference between unrenovated and renovated. You're actually adding a bedroom or you're adding a substantial structure which knocks it up into the next category.

I guess flipping is a strategy that people really want to talk about a lot of the time. And when they get into the numbers, there's a little bit more work involved.

Yeah, that's right.

Now, John, do we have some more questions?

Absolutely. Let me just unmute some lines here.

Here. Hey, Farnaz.

Hello.

Hi.

Hey, how you going?

Can you guys hear me?

Yeah.

Awesome.

Thank you. I'll be quick with my question. I'm all for buying and holding and renovating, but I'm more interested in a strategy that would work for you if you're already a high income earner and not able to really take time out to do kind of renovations yourself.

Yep.

And I'm hoping that because I know a lot of investors, they buy brand new because of the depreciation and all the tax benefits. But I'm just wondering what your thoughts are around that strategy.

So can I just clarify? It's around should you buy brand new if you're busy and don't have a lot of time and can't renovate yourself.

That's right, yes. I mean, in terms of the time that you're putting in, I mean, obviously I'm on a very high tax bracket, so I need to make sure that it's worth my time taking time out to do the rental as opposed to just doing my day job and then buying something on the side.

Yep, absolutely. Actually it's funny, I was talking to the ex CEO of very very large well known mortgage broking company recently and he said one of the first things that he said to his office manager was unless I can make $400 an hour doing a task, you do it. So coffee, picking up laundry and everything. I thought oh, that's an interesting way of looking at it. So look, I respect what you're saying and I think there's two questions here and the first one is if you're too busy to A find a property or B renovate a property yourself, what do you do? And C the next question is if you are time poor then should you buy new? And I think the assumption is that if you are in a high tax bracket and maybe you're looking at maybe some negative gearing and tax legal tax minimization that can assist you whilst creating wealth with a property that goes up in value that there is some tax benefits obviously associated with the depreciation on newer property properties. The I think the risk that you could fall into here is one that I see often when I when I'm reading clients fact finders and looking at the. Looking at them with view of getting lending for them is that they've bought properties maybe off the plan units or house and land packages where they haven't actually done the house and land construction themselves. They've kind of bought from a developer who's been selling that as a package and the developers kind of making the margin profit and not the person who's ending up with a property. And I think that it's almost a false economy because the negative gearing component of that type of strategy is something that's one part of the big picture. The big picture is buying the $500,000 property that in seven to 10 years time is worth a million dollars and and you've created half a million dollars worth of equity and that's the big picture goal of it being fortunate enough to be able to cash flow. The negative gearing is fantastic and it sometimes is something that you just do knowing what the big picture is. That brings me back to does a new property necessarily have the growth potential to be able to create that value? Some new properties can do that, that but I think you need to be very wary. You know, I've know that the market reports as part of the Residex quarterly reports are coming out next Friday and they always give, you know, how what the oversupply or under supply of properties are in any given state. And it's really that supply of properties and usually the new properties where the oversupply is, which is where the risk is. So if you look around, you know, Brisbane, Sydney, Melbourne, at the moment there's a lot of development, there's a lot of inner city properties and we try to kid ourselves that we've heard the, you know, that be wary of these. But the reality is, you know, I spoke to a lady last year and she was lamenting the fact that they had this beautiful house in Kew, in blue chip area in Melbourne. They bought an investment property which was a house and land package in Point Cook, which is out western Melbourne, Melbourne, other house and land packages came onto the market. They were newer, the tenants were not really loyal to one house over another. So the next house that was newer and nicer at the end of the tenancy they moved to, people got a bit desperate and reduced the rent which then became their market rent that they had to accept. And they in the end, because they couldn't rent the place out, they ended up moving from their beautiful home to this property out in Point Cook and rented their home out because it was the economic advantage. But she said, so we've learned our lesson. So now we're not going to buy over 20Ks out of town and we're not going to buy house and land, we're going to buy inner city units. And so she's trading one strategy that is fraught with not having that capital growth potential based on oversupply and based on, you know, the potential of not having growth because it's not the population demand there or the income demand that you also need income growth that you need to build a suburb and you know, moving from a house to a unit and out of town to inner town. In actual fact, the same risk is.

There that swap to oversupply of land for oversupply of units.

Yeah, exactly. So I think you need to be very, very careful when you make that consideration. There are some very nice high end development opportunities that people do take advantage of. But often when you're going into that high end development opportunity or brand new unit in a boutique kind of development, we're talking over 750 to a million dollars. And then we're talking your yield usually comes down from maybe a four, three and a half percent rental yield down to maybe a 2% rental yield. So it's going to cost you a lot more money as well, so out of your pocket each month. So you kind of need to be very, very savvy in buying new. The reason that John and I are just such, I guess, God advocates of the renovation and the older style property is the fact that there is that scarcity of land associated with the typical, you know, three bedroom house in, you know, 10 to 15 ks in the CBD.

Why don't you paint that scenario? How would you do something like that if you weren't going to, for instance, look for the property yourself or do the renovation?

And I think this is one of the things that I find with some of our students is even Ultimate Guide to Renovation students. They get to module 2 and module 3 and module 4 and see the real effort required in finding the right property in the right area that has the right characteristics to suit their buying criteria. And the mere fact that they've been through that buying criteria allows them to know what, what the property needs to look like and the characteristics. And then it is too hard. And that's why we've kind of got a bit of a bonus there in the module that says, now if you need to engage a buyer's agent, then these are the questions you ask and this is what you do, but the fact that you've actually gone to a buyer's agent. So just to be clear, a real estate agent represents the needs of the seller and a buyer's agent represents your needs. And they're usually engaged for, for $1,500 to $2,500 as an engagement fee. But the success fee of actually achieving a property purchase for properties over $500,000 is somewhere between $8,000 and $13,000. So a buyer's agent, if you went to a buyer's agent and said, I've got $400,000 and I want to buy in Brisbane, then they're going to get your $400,000 property in Brisbane. If you went to a buyer's agent and said, my buying criteria interior is, the purchase price is $400,000, I want to have renovation potential, but I don't want to kick the tenant out now. I don't want to have to do the renovation now, but if I could change a three bedroom house under the same roof line to a four bedroom house, that'd be great. I want the property to be characteristic of the area. So if the majority of people are living in three bedroom houses, that's what I want it to be. I want to have 15ks from the city perhaps. Yeah, my rental yield be 4% I want to have the vacancy rate less than 2%. I want to have predicted growth for the area of over 7%. So once you have that buying criteria nailed and then you give that to the agent, that's what they're going to go look for. They're not going to go look for the low open slather. So buyer's agents can do that. Also, buyer's agents can recommend, and so can real estate agents recommend project managers who can actually manage a renovation for you so late last year? Well, I actually did two renovations last year. So if anyone's read my book, one of my strategies is a revamp. And that's, you know, often when as a property investor you get to maybe the top of your borrowing capacity, you can't borrow anymore. You know, look at your current portfolio and see what you can do. And one of my or two of my properties came up for lease last year. I took the opportunity to jump into both of them and do quick reno. And they're both in Sydney. I'm based in Melbourne. My builder managed the renovation for one of them. And you may pay a bit of a premium to have someone manage your renovation. My sister had someone manage, actually a project manager manage a renovation for her. It was a $30,000 renovation, and they charged $3,000. You know, $3,000 to get a renovation done. Well worth it.

Yeah, absolutely.

So does that help you? Whahnas? Yeah.

That's awesome. It's really good to see your perspective on it. I appreciate it. Thank you so much.

Hey, my pleasure. Okay. What Sharon says. Thanks for the video, Jane. I'm looking forward to seeing the completed cosmetic changes. I'd be interested to hear more about how you find good, reliable tradespeople who produce quality work. Oh, my gosh. This is such a worry for so many people, having good tradespeople, isn't it? Look, it's not just having good tradespeople. It's about actually even getting them to turn up and quote. Sometimes you're sitting there for hours going, where are they?

Well, I think that's a good place to start, actually. I have a rule. If they don't get back to me with their quote, I don't follow them up because I think if they can't even get back to me at that stage, how many problems am I going to have in the job?

Yeah. Looking after them. Well, look, look, there's a couple of things that I do. One of the things is if I've got a rental manager or relationship with a real estate agent in the area. I'll ask them for a recommendation. If you're looking to do a major structural work, often just driving around, you'll see someone advertising the fact that they're doing construction at the moment and they've got the builder's information up on the board. I'd also often go to the local newspaper, so maybe Wentworth Courier, for instance, Eastern suburbs, Sydney, and have a look at whose advertising advertising there. And I would also, if I've got a trusted tradesperson that I have used previously and you know, I'm happy with the quality of the work. They clean up after themselves. They turn up when they say they're going to turn up, they're, you know, professional in, in the, I guess the output of what they produce as well. They like working with similar people. So often what I'll do is I'll say, like Lenny, my builder in Sydney, for instance, Lenny, I'm looking for a tiler or a painter, you know, is there someone you recommend? And they recommend others that are proud of their work. And here's another little tip. Rather than potentially paying a builder 10% of the job to manage it or you're a professional project manager, often if the tradies know each other, they'll ring each other up at night and go, mate, don't turn up at 7, I'm not going to have the painting done. You know, turn up at 11 and you can then start the tiling.

Yeah, because from a tradie's point of view, they don't always trust that the owner, particularly if it's an owner builder, is telling them the right thing.

Exactly.

So they call each other because they want to actually get it from the horse's mouth. Are you actually turning up there tomorrow or not?

And look, I've also used serviceseeking.com you just put up the job that you're interested in and people quote on it. The good thing there is if the people don't turn up and you can can give feedback and say this person didn't turn up for the quote, they get struck off if they haven't turned up two or three times. So you can actually look at what they're doing. And I've put a couple of jobs up on Airtasker. Just simple jobs, getting people to do simple touch up things. There's a couple of different things. And also the great fallback is go and speak to people that you know and ask them what they've done. And once you do find some training, ask them for a referral so that you can Speak to people that they've done work with.

Yeah, referrals are great, aren't they? I think that's, you really need to do that. The other thing is just asking to look at their past three jobs because you don't want them cherry picking the best jobs they've ever done, you know, for their brother in law and their mate and whatever.

Back in 1976.

Yeah, that's right.

Mum loved my kitchen bench.

Yeah.

If you can look at their last three jobs and then you're. And they give you the phone numbers to speak to the people and you ask, you know, when did, oh, when did he carry it out and you know, blah, blah, blah. That's a good way of doing it. What I've, what I found just in as a general observation is there's a couple of different types of tradies. You get the, you know, if you think of the, the nightmare ones that everyone's kind of worried about, the kind of dodgy brothers that they really go from job to job and they don't do repeat business. So they're just kind of flying under the radar, you know, stinging someone, doing a nasty job and then disappearing off to some other unsuspecting person. Then you get the. At the other end of the spectrum is the tradie that's really building a business. And he's a, he's a small business operator. He's got the nice van with the sign writing and he might have a couple of other tradies working for him plus, you know, two or three apprentices and that kind of thing. And they're definitely at the, they're definitely at the more efficient end. And they'll return your calls, clean up and everything after them. And they're really good tradesmen but you pay a bit of a premium for that conversion, convenience. What I like and what I go for is the. There's a kind of a meet in the middle. And they're tradesmen that work for builders. So the builder really coordinates them, directs them to which job they go for. But they spend most of the time working for one or two builders. And they're really good at their trades, but they're not necessarily good at all the business side of it that the guy with the van and the three apprentices is good at, you know, but they're really good at whatever their trade trade is. They tend to work for, you know, let's say 40 to $60 an hour, depending on what kind of trade there are. And they will charge you the same rate most of the time or similar rate that they charge their builder. So instead of paying, you know, your $85 or whatever it is for the guy with the, the sign writing on the van, you're paying kind of builders rates for trades that can do the job really well. And even if it comes down to the fact that they, you know, you know, are not as clean as the guy in the van, you know, grab the vacuum cleaner and clean up yourself because you're gonna, you're gonna spend a lot less money. And it's not that hard to do a little bit of cleaning up at the end of the day too.

Absolutely. Nope, I completely agree. Okay, so next question. Let's see who's online with a question.

Okay, here we go. Stacy.

Hey, Stacy, how are you?

Hello. Yep, loud and clear. Hello.

Good evening. I don't know what's up with that technical problem, but anyway, if it's working, that's good. I've been getting some quotes on the new acquisition that we have.

Congratulations.

Thank you. Yeah, very excited about it and scared too.

But we.

I've done. Yeah, it's probably healthy fear, isn't it? I think so we. We're two hours from the property. So far, I've done two quote days, and on those two three hour blocks, we've seen six tradies in each block. So, yeah, pretty tight planning. But it was really interesting seeing how much the quotes vary. So, for example, one I wanted to get your thoughts on. When we bought the property, what we were expecting after building inspection was probably some degree of re blocking to level the property. As is probably common with a lot of building inspections, we couldn't get a really good look underneath without removing baseboards, which of course we couldn't do. But we could see a mix of concrete stumps and red gum stumps under the building. So we knew that something had been done and there was some existing damage in the areas of the house that are still lather and plaster. Anyway, so I've had three quotes so far for leveling all companies that have a very reputable name and they've come in at the first one suggested $13,500 for a total restumping, the second 1,889 for what was a mixture of some restumping, some re blocking, and then finally another local crowd for just reblocking only for 3,800. And it's really interesting that they're differing so wildly. So I'm sort of interested in the builder's perspective and your perspective too, Jane, as having done a Number of renovations.

I've never re. Stumped, though. Stacy, you're on your own with John here.

Yeah.

You've probably run away from that one. But we couldn't.

There's opportunity abounds when people walk away from those kind of things.

Is it when you walk in, Stacey, does it feel really at sea? Like, does it lean down in all the corners?

No, it's solid. Okay, well, yeah, it does. Yeah, it is, it is. The floors are wonky. No doubt that it varies up to 50 mil. And you can see chimneys on either.

Side of the building.

It's an Edwardian building. So, you know, you can see based on where the chimneys are, where everything else is kind of sagged.

Yes, that's right.

So when the building inspector went through and had a. He's a big man and he said he jumped around in all of the rooms to get to really test out how strong the floors were. And he said it's really solid but wonky.

Okay, so where you can see it's. It's you always. That's a telltale sign around those chimneys because they've got the big blue stone foundations and the. And the joists kind of will stay. That's the original level. And the rest of the house sinks and this and the chimney stays where it used to be. So. But you're saying it's only still 50? Like if you were to stand in the corner of the room that's got the chimney in it and you looked across to the chimney, you reckon it's only a 50mil rise?

50 to 60.

60.

One of the Reese dumpers used a water level to get a fairly accurate idea.

Yeah. And are you going to have boards. Are you looking to have polished boards in the hallway and the bedrooms or.

Yes, yes. Well, yeah, in the hallway and carpet in the bedrooms. Probably. I'll have to do the numbers still.

Because one option which will cut down your costs, and I normally do this before I try and do it, before I quote or I let them know that I'm going to do it, is pulling up your floors in the bedrooms. And if you've got carpet going down, it's not expensive. You've got to be willing to let go of your floorboards in the bedrooms, but you can actually sell them to the yards because everyone loves the old floorboards. But if you're willing to lift the floors in your bedrooms, you can shave thousands off your re stumping that way. And it's quite cheap to replace flooring just with sheet flooring. Yellow tongue, orange tongue, whatever. It is in your state, chipboard flooring, which is only, you know, let's, let's say 200 to $300 for each room. So that's one option. Lifting the floors.

And why does it make it cheaper? Because you got easier access.

Yeah. Because they're not crawling under the floors. So it's a really horrible job having to crawl under floors to do. It's a big job. They've got to dig down, you know, often 600 minimum to get some clay before they pour their little footing and then stick there, hang their stump in. Yeah. It doesn't, I mean it doesn't sound like a major. If it's 50 mils, I mean it's just a little bit past kind of wedging because often what you'll do is the, the loose ones, if it's not bad is you just stick wedges and the stumps are solid. You just stick wedges over under those bits and, and shore up all your joists and it's gets rid of all the bounciness and, and that will kind of do for the most part. If it's. Is it a rental property or is it going to be a rental property?

Property.

It is going to be a rental property.

Yeah.

With the, with the possibility that we would use it down the track. If it's 50, that muddies the waters just a little bit.

But if it's 50 mil, Joan. What in. Across a room, you're saying that's not such a big deal.

I'm surprised you can even see it really.

And so what would be significant? What would constitute.

Well, a lot of the ones you go in, period houses in open for inspections would be. Be 100 to 300 mil.

Okay. So 50 mil, you could just use wedges and fix. Did anyone suggest that if I would.

It won't fix. Yeah, not that fall on the floor, but we'll fix the bouncy section.

Yeah.

So. And it's the kind of job that a, a carpenter could do. And often carpenters do that kind of thing. And it's, you know, maybe half day a day kind of work.

Okay.

But.

Less than $500.

Yeah. Yeah. Typically. Yeah. So it might, I don't know if you're thinking about. I mean it's kind of something you have to make a call on because obviously you want to hold the property for years. And, and it's definitely not a bang for buck. It's a low return or it's a no return item. People just expect the floor to be level. So it's it's you're not, you won't make anything back on it. But at the same time, if you are selling it is a buyer objection. Potentially it's a renter objection as well. But the other thing you've got to consider, if you are doing any replastering or anything like that, particularly if you're putting new sheets up, then you should do it. Because what happens if you decide to replaster and then you decide in 10 years time after it's sunk to 100 mil that you want to jack it up? It's going to pop all your plaster off the walls. So all your new plaster.

And that's really where the issue is right now. It's like there's two scenarios. There's you do the foundation and have it absolutely right and there's already some cracking from whatever from either the previous job or from the consequences of it over some time. And if we do the floors, but if you just do the plaster now and leave the floors as they are, the property manager that I had in and had a good look through the place said look, a person in this area, in this market anyway won't not rent it because the floors are a bit wonky as long as everything else is fresh and nice to be in. However, from our point of view, if you're going to spend spend money painting, plastering, painting, there's a few wiring touch ups that have to be done to have to go back and then redo all that again once you decide you do want the property.

Yeah, particularly if you're putting new sheets on walls, if you're adding any walls and putting new plaster sheets as opposed to just patching the lava and plaster. So yeah, I can kind of see that there's, there's the two options there. I think if you go down the re stumping road, I would just give you getting multiple getting more quotes and you'll kind of find a middle ground there somewhere that you after gleaning some information off each one of those RE stumpers I think you'll just get a bit more informed and be able to make a good decision.

$10,000 is a big difference, isn't it?

Yeah, it's huge. And I see there's a no return. Yeah, see this in a lot of cases too that you get a huge variation between quotes. So I always try and get four quotes myself. The other thing is, yes, the with lather plaster one of the best ways to patch it and it patches up pretty well and will hold for years is using corner cement. So if you get a plasterer and what they do is they get like an old chisel or a big wide screwdriver, they rake out the cracks, and this is something you can do yourself. It's not a really skilled job. So they rake out all the little cracks to make them mouth of the crack wider. And they wash it out with a bit of water and a paintbrush so it gets all the dust. And then they fill it with corner cement, wet corner cement, which is an adhesive, which is really, that really gets in there and sticks. And it's also flexible, not just like normal, you know, base coat plaster or something that you use on plasterboard. And then they scrape it back, stick another coat of corner cement and then a little bit of topping compound, which is what you'd use as top coat on plastic plaster. But you can get that from bunnings and the little tubs and so on as well. And sand it back.

And I'm scribbling.

Yeah, you can listen to this. So two lots of. Two lots of corner cement, one coat of top coat. Or sometimes you'll see in bunnings, they'll call it a pre. An all in one, like a pre mix, which is exactly the same thing as top coat.

And that flexible corner cement just gives you a little move, a little bit of movement without cracking again.

Yeah, you can get years out of that sometimes. And often when the crack comes back, it'll come in a different spot. It'll actually hold where the cornicement is and it'll crack somewhere else in the wall, which wasn't correct. But you can get, you know, it might buy you another five or six years. I don't know what you, you know, if that's going to be a better situation down the track or a better.

Situation, especially if you're thinking about moving into it as a home in the future, you know, you might want to suspend some of that big expense until you, you, you can do that.

Yeah, yeah.

Oh, that's really good. Thank you very much.

Maybe we just saved $10,000. See, these calls are so worthwhile.

It's good to hear the extra perspective. I appreciate it. Thank you.

Yeah, no worries.

Okay, well, thank you so much for that question. Now, as I mentioned in the beginning of the podcast, this podcast is a little bit different because it's in celebration of the launch of the Ultimate Guide to Renovation course, which is only open for enrollments between the 20th and 27th October 2016. So for those of you who are listening live or within that period, There is a free video case study that is running at the moment of a renovation that was actually done.

Yes. To the 27th of October. So you can find out all about that on ultimateguide to renovation.com.

Oh, my goodness, Jon. Another huge episode and a lot of takeaways for everyone.

Yeah, I hope so.

Now, what time is it?

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Future questions because we are running out of those fast. Yes, that's right. Now if you would like instant access to the transcript, plus get access to some free training we have for our community and all of the show notes and links to everything we mentioned today. Today go to YourPropertySuccess.com ep8 that's YourPropertySuccess.com au forward. Slash the letter E for Echo, P for Papa and the number eight. Or just Google YPS Podcast and John, we should mention that the Ultimate Guide to Renovation 2016 is open for enrollment right now.

Yes, seven days only to the 27th of October. So if you're listening at this time, keep a lookout for the competitions and giveaways there too. You can find out all about that on ultimateguidetorenovation.com and if you're listening at this time and the video series is still running, you can pop your email address underneath the video to be notified of all the competitions and giveaway. We give away the Ultimate Guide to Renovation each year in a competition.

And an iPad.

And an iPad.

So a lot of information today. I hope you've enjoyed our very special podcast on strategic renovation and stay safe. And here's to your property success.

Ladies and gentlemen, it's important for you to understand that you need to take care in applying what you've heard on this podcast to your own personal circumstances. Everyone's situation is different and while we go to great lengths to ensure that everything we share is accurate, the information in today's podcast was based on personal experiences and opinions and is not intended to be specific to your circumstances. We are not real estate agents, financial planners, lawyers or accountants and are not liable for any loss, damage or misunderstanding caused by reliance on any information provided or inferred. We highly recommend you seek out the services of a professional or mentor to help chart your own path to property success.