Nhan Nguyen is a successful property developer that has been investing in properties and developing them for many, many years. He bought his first property at the age of 21 and has been building his amazing portfolio ever since. We are lucky enough to have him share with us some of his expert advice and strategies on how to invest in property in the best possible way.
Join us as we discuss today’s topic of Renovations and the debate between cosmetic and structural, we delve into the biggest differences in both strategies, why you should be leaning towards cosmetic renovations if you haven’t had much experience with renovations, the risk and reward factor with structural renovations, and much much more!
– Nhan Nguyen
Renovations can be a powerful way of being able to add value and quickly turn a profit with the sale of your property. We find out about what the best type of renovation might be depending on your situation.
Oftentimes when people start in property, they always think about, Oh, I’m going to do a renovation. And I think it’s a really good place to start. Oftentimes we’re stimulated with the TV shows whether it’s Reno Rumble or this and that, you know, where they’re knocking down rooms and painting it and putting in floor coverings. And they’ve gotten pretty hardcore with it as it’s very, very popular, like the cooking shows. But I think we really need to break it down and take it past the TV show and put it in reality. Because sometimes, you know, people get excited, people think, I can do this, I can do that. But practically speaking, when you’ve got no skills in construction it doesn’t mean that you can copy what other people do. So we generally break down renovations into two elements, which is cosmetic and structural.
And from a cosmetic point of view, it’s kind of like putting lipstick on the place. It’s a cheap cosmetic makeover. You can do it very, very quickly. So I think the few elements and qualifications or criteria for cosmetic is one, definitely low cost. I like to think of a cosmetic renovation if you can do it for less than $20,000 is really, really good. You can do it very quickly. Some of the things you can do by yourself even. And when I say quickly, the relative time frame is 1, 2, maybe 4 weeks and at least adding twice if not three times the value of the renovation itself. So things that you can do as an example are, kitchen, bathroom, painting, floor coverings, fencing. Those are some really, really good examples.
Even just a bit of landscaping just at the front, you know, tidying up the lawns, planting a few trees. That kind of stuff can really, really make changes to the cosmetic side of the property. And I think that’s really interesting because I mean we’re just looking, as you said, cosmetic things. Just as you said, quick paint jobs, maybe changing a few fittings on the doors. Maybe tying in a few light bulbs here and there to make things look a little bit more pretty because if you go into an older style home, some things can be quite dated. So bringing it up by changing a few cosmetic things is quite a simple job. I guess maybe a lot of people would be wondering why should they even consider doing renovations? Because it does sound like there’s a lot of work that’s involved to even make a few bucks here.
I think oftentimes the thing with renovations that people like is that they can do a lot of it themselves and they can do it very, very quickly. So, as distinct from building a house, most people can’t build a house, they don’t have the qualifications, they don’t have the skills. But give someone a paintbrush and 9 times out of 10, if they’re able and they’ve got some energy, they’re happy to do it. In terms of floor coverings, all it is is just ripping it up and paying someone to roll out some carpet. Some people, you know, like to lay the tiles. I think painting is a really good example because you can paint the house, you can paint the doors, you can paint the fence, paint the carport, paint the shed. Anybody can do that. Other basic things like demolition people can pull out a kitchen, pull out a bathroom.
Obviously, you know, people, if they have a trade, if they’re a plumber or a carpenter, they’re handy. So, people who are handy, they want to try to save money, they can potentially install the kitchen themselves and install the bathroom themselves. It’s all the tap fittings. Put up a fence. You know, a lot of handymen do fence installations. So my point is that they can do it themselves and they don’t necessarily need approval from the council. So that’s why, you know, Bunning’s really thrives because it’s a lot of DIY.
It’d be interesting to actually talk a little bit about some examples of things where things could go wrong because I don’t really need to talk about the things that go great because you see them all on those TV shows like The Block and all that kind of stuff. So, you know, they’d been all cut into an entertaining show and they show how easy it could be or how glamorous it’s going to be and that the end result is to make XYZ profit. But when we actually peel it back and go, okay, what are some potential issues or what are some of the devastating disasters that could happen in this, it’d be interesting to take a step back and look at that because I’m sure that we’ve got plenty of stories to share. I can tell you my experience with one. But you probably also met many students who have gone through that. What are some possible situations where things just don’t go right?
Why go to the students when I can just go here to my own examples. So I’m very, very proud of some of the crazy things that have happened. Onsite workplace health and safety is a huge issue. You know, sometimes when you’re doing your own stuff at home and you’re a bit sloppy, you can leave stuff lying around, you know, nails, stepping on a can of paint, spilled paint. Crazy things like that. Like even we had this lino on the floor and I reckon it was there for like 30 years and it just would not come up. So scraping it took manpower to scrape it up. Had we known that, we would have just laid the lino over the top of the other lino. We were trying to just, you know, make it prettier and remove the lino and lay some lino on the concrete versus just laying the lino on top of the old lino.
I had one, it was a crazy one. It was combined with development where there was a garage that we built in and we put windows, took the garage doors out, but the studs in, bought the windows, turned it into a room downstairs. It wasn’t legal height but in terms of a storage room with windows. And then my council application for the subdivision came through and to fit this block of land in, I realised I had to cut that part of the building off. So my dad and my brother had done the studs, knocked out the garage doors, which was easy, turned it into an extension of a room and then we had to knock it down literally a month later. And that was pretty gut-wrenching because he’d spent all that money, he bought all the gear and then you knock it down.
Mine’s to do with waterproofing. They’re never good. Especially in my experience, I would definitely recommend getting a tradesperson to do it properly because when you try and do it yourself and just try to seal things up. Things just don’t go right and you learn just by watching how they do it. Because you need to be very articulate, but also at the same time have a very steady hand to do these types of things. So what we’ll try and do is and it wasn’t a big thing, you know, for us because it was a fish pond. We actually were doing landscaping in the back. My father loves to fish. So what we did was we managed to dig a nice big hole in the back and we were thinking, okay, we’ll get some bricklayers to lay the bricks and all that kind of stuff in the back.
And they did it successfully without a problem. And we thought, all right, why don’t we just pour a bit of concrete to concrete it all up and hopefully after that we can just lay down all the fibreglass to seal it all up so that way it becomes, you know, seal proof and all that kind of stuff and we thought we’ll install our own tanks and so forth. Anyway, long story short, after doing that for about two or three weeks, we poured all the water in and the tank itself was probably, and this is an in groundfish tank I should say in groundfish tank where we could put some koi and all that kind of stuff and we’ll try to create our own mini swimming pool really for these guys. After about two or three weeks of doing that, it was pretty much day and night that we were doing it.
We put the water in, had the tanks running and about, I think, two or three hours later we started seeing all the water gush out of the side. So it wasn’t a pleasant experience, but that lesson learned was, you know, at the end of the day, get some professional trades, people come in and actually had to rip the whole thing out and really lay the whole thing. I get him to seal it up properly. That was a pretty tedious task. But he actually did it in about, I think three days, you know, only maybe a few hours a day actually compared to what we did day and night. So I’ve learned my big lesson there and my hands were pretty rough after that same thing. So now I make sure I put the hand cream on every day.
No more gardening gloves. So I think that’s one of those kinds of lessons you learn that sometimes it’s actually faster to get someone to pay for it because the time that you spent doing it, even though unless you really enjoy it and you’re passionate about doing these things yourself and you want to learn and do it yourself, I don’t recommend doing it because the amount of time that you spend, the amount of time you could have actually done something else. It’s an opportunity cost that you could actually get someone else to do it is well worth it. It’s like changing some knobs if you’ve got a leaking tap and stuff. I did try and change it myself and I thought, it’ll be easy just to unlock it and you know, get a spanner, which I had plenty of tools and you know downstairs because my dad loves to buy tools every time you know something that’s leaked I thought, you know, I’ll just do it myself, unlock it and so forth and pop out the seal and replace it with a brand new one. I did that a few times and then I think unfortunately one time, for some reason that particular tab was like locked up and I didn’t know what was going on so I managed to hit it with a hammer and unfortunately, you know, that just exploded it.
You can imagine the whole place was flooded with water for a little bit and my dad wasn’t too happy with that. So the lesson learned was to make sure you firstly turn off the taps. Secondly, if it’s too hard to push over, don’t force it.
Let’s talk about the pros and cons of doing it yourself versus getting a tradesperson who’s qualified to do it. Let’s talk about that while we’re talking about cosmetics because I do find that it takes a while, especially when you’re starting out, to get your head around why you should pay somebody else. Cause I definitely think a pro of doing it yourself is if you know what you’re doing, let’s say you’re a carpenter. Even if you’re a carpenter, we’ll talk about the pros and cons of doing it yourself. One, the pros is you definitely saved money. If it’s $55 an hour, $60 an hour, you save money and you’re on-site, it’s your own house. You turn up, you do it on weekends, whenever, essentially you know you’re going to turn up.
This is the thing because you know that it’s your place and it’s your own and you’re going to turn up. The thing is it becomes, I’ll do it maybe tomorrow and then you have to delay and delay and that’s the thing, you keep staring at it, I’ll get it done. But the thing is because you’re there that you’ve got no urgency to do it and therefore it delays a project. And I’ve learnt so many times, like when I’m saying I’m painting a room just to clean it all up. By the time, you move everything all out you just stand there and go, it’s going to take me at least a few hours. I think I’ll go and play a video game or go out and eat and watch a movie and so forth and then you just end up delaying it.
So I think that’s the challenge if you try and do it yourself as well. Yes, you do definitely save money, but it may take a little bit longer than someone who is a dedicated person who will come in and say, look, I’m going to come at nine o’clock tomorrow morning, complete it in an hour. It’s all done. But yes, you know, you’ve got to pay that 55-$65 an hour for whatever it is. But that saves you so much time, which you can go and do other things. I think the other pro of maybe doing it yourself is you think that you can do it.
If you’ve never ever done something like that and you think you want to have a go, fine. You know you can learn something and I think maybe that’s probably where the DIY goes, I want to learn how to do this because maybe potentially in the future I can do it again for some other project and that usually never happens to be honest. You go and spend all that money on buying all these tools. You spend that money on trying to learn how to do it and in the end, you spend more money actually, in fact, to do it yourself than to actually get someone in and that’s what we don’t realise. See the difference is because you don’t factor in your time cost. You ask yourself, if you’re going out to work for a company and you’re getting paid daily rate, you know, 100, 200 or $300 an hour, for example.
How much does it actually cost a plumber to come in? If it’s going to cost you 55-$65 an hour, wouldn’t it be smarter for you to go work in your job and pay someone else that $55 an hour to do it for you. And it’s just, you know, factoring those things in and making those comparisons and having a mindset shift to think, I can actually go out there and do my own thing. Whether it be spending more time with family, going out to movies or having fun and someone else can do that job. So I think that those are some of the points I would say for pros and cons.
I think one of the other cons that people don’t see, especially when you’re wanting to do multiple deals as well, is that it takes you out of the game in terms of hunting for a property deal. I’ve had so many guys and girls, you know, if you’re in the middle of a reno, all you’re focusing on is the reno versus looking at your next investment or next deal or next investor or finance. Because there’s so many other elements of the property, not just the renovation, there’s a sales point of view, there’s a finance point of view, there’s the development point of view and acquisitions as well. So that’s a big part of why I suggest to my clients that they go and they focus on acquisitions. That’s where 80% of their energy should be focused, not on the tools.
And now if they want to turn up once a day for an hour a day, supervise, clarify things, make sure the mirror is straight, make sure the tiles are laid the right way, an hour a day, you know, over three to four weeks is more than fine. But necessarily it’s just focusing on the end game and focusing on the acquisition. I found clients have, let’s say they’ve done a 6-week reno and then they’re waiting for the building to sell or the property to sell. From start to finish they are out of the market for 6 months. And it can take 2 to 3 months to get back into the market because you’ve lost momentum. You’re not talking to real estate agents, not talking to the property owners, you’re just not on top of the game of what’s happening. So I think that’s, I personally think that’s one of the biggest costs is like you said before, the opportunity costs where you could be focusing on your job and making more money, but more so importantly I think is focusing on the next acquisition, doing market research so that once this one’s done and you’re ready to purchase straight away or it’s sold at auction, you’re cashed up, you’re already negotiating on your next deal. And that downtime is very, very difficult to make up with momentum.
I can relate to that completely because that’s what’s happening at the moment with my working partner. He is very good at doing the renovations and he’s been managing a lot of the renovations now, but I think it was a mindset shift over a period of time that he’s realising, you know, one deal can take you, as you said, up to 6 months or so to do the renovations. And not necessarily was he actually in there actually doing the renovations that often, but when he was in there, he didn’t have time to actually go meet with agents, didn’t go out and look at property and he was saying that to me, look, I would rather be doing subdivisions right now than to actually go manage tradespeople because too many tradespeople takes time out of your day when that potential time could actually be continuously looking for more deals as you’re saying, to consistently bring that kind of activity in to do more deals, therefore, generating more income.
So it’s that mindset shift of actually changing, okay, if I’m really going to do renovations, do I really want to manage people or do I want to just do like subdivisions as we’ve been talking about in previous episodes and continue to just manage that paperwork because I guess it is just the opportunity cost as you’ve just said. And from experience, I would rather be sitting behind the computer and managing paperwork for a few hours a day compared to being onsite with a tradespeople to manage them. That runs over 6 weeks. It depends on what your strategy is.
From a renovation point of view, and then that’s where the costs can mount up. And that’s where the deal has to be quite profitable. You might hire a builder to manage the tradespeople and all you’re doing. For example, let’s say I’m building some townhouses, what I’ll do is I’ll turn up once a week and then I’ll do the inspections and then I’ll ring the builder and say, I need this ordered, this ordered, this ordered, this ordered. So you’re not physically there. So different levels of management where you are micromanaging the tradespeople, you’re ringing them, you’re organising them, you’re correcting them, you’re paying them. That’s one way. Or you could engage a builder to manage those tradespeople and yes, it’s going to cost you an extra few grand to do that. But in terms of your time and leverage, that’s where it comes into leverage on. So that you have someone managing that team of half a dozen tradespeople who are painters and plumbers and electricians and all that to coordinate that. And so your 1 hour is effectively applied across a half a dozen tradespeople.
Actually you raised a very interesting point just a moment ago about the costs. So maybe just to mention in terms of a renovation con, you can say as well as there are unexpected costs that you may not see. See if you’re going to actually be building, for example, a brand new house. All the costs that’s associated are pretty much predicted and it’s budgeted all in. But for example, if you’re doing a renovation on something that you’ve never seen what’s behind the walls or underneath the sink or whatever mould that could come from wherever it is, there’ll probably be additional costs that would come into play, which is unforeseen. And that’s the challenge we face in here about renovations is that these unforeseen situations or circumstances that happen, for example, if you’re about to pull out a wall and you find out that inside that wall there’s been water dripping inside and you don’t know until you pull it out, it’s all mouldy and it’s affected the whole foundation of it, then you may have to get an engineer to come in and reassess the whole situation.
Some people pull out a whole wall or ceiling and find out that all the wiring is completely wrong. You know, it’s dangerous. It’s not safe. They had to rewire the whole thing. So instead of actually paying just as simple in a replacement of a ceiling because there’s maybe cracks and damages, that becomes a whole rewiring job, a whole foundation laid again. So these are the things that people probably need to take into consideration before they do any renovations or anything like that. And I guess that’s something that we, as I guess being in this game would gain from experience because we’ve done it and been there before. And I know from experience of doing a renovation in a few of the places that I’ve been in. Things just don’t turn out the way they expect. I mean the result at the end is great, but sometimes there are definitely going to be delays that you need to factor in and the additional costs because at the end of the day you don’t know what’s going to be expected there.
I think having settled that and all the pros and the cons, I think cosmetic renovations are a really good place to start to cut people’s teeth in on the process, on what works and what doesn’t work with renovations. Because once they’ve done a few they will realise hopefully that they’ve got to leverage their time. But I do find that the first one or two, people doing it themselves, they definitely get a sense of satisfaction. They realise how hard it can be to do renovations successfully, especially if you’re on the tools, how time-consuming it is. And sometimes people just go and learn the hard way. That’s what I figured out in terms of my training with people is that I can tell them until my face is black and blue on how to do it best practice. But you know what?
I’ve had to learn the hard way. And once you do, like I said, a couple of cosmetic renovations, you might make 50,000-$100,000 but you go, that’s the hardest 50,000-$100,000 I’ve ever worked for. Not just because we bought the house with finances, but you’ve also expended your energy and then your ears start popping open and maybe there is a smarter way. Maybe there is a better way. Maybe the other thing actually we’ll talk about being on the trades and the tools is there’s a cost on your body as well. And I’ve seen it time and time again, people in their 60s and 70s or tradespeople and they’re tough as, you know, in their 20s and 30s and 40s and they’re very, very tough. But when they’re in their 60s and 70s and their body’s falling apart, they’re not very tough anymore. So don’t get me wrong, there’s a place for it, but I’m happy to pay for that.
So it’s like a health insurance policy that someone else can be on the tools and be the hero, be the He-Man. That’s fine. Sometimes it’s even hearing noise and people going deaf from not being responsible on-site, you know, just managing that and allows you to leverage. I’m thinking about scalability. Can you do it long term? So, therefore, I look at things that you can do multiple times when you’re renovating one house and you’re on the tools, you can’t do five houses. You can’t do five townhouses, you can’t do 20 apartments if you’re the painter and painting every room. So it’s just a matter of limiting and thinking bigger. As a theme within our podcasts, thinking bigger, starting small, and looking at why we do things a certain way. Because it allows us to scale.
It means you don’t have to do a hundred apartments in one go. I’m saying, well, the principles we’re teaching means you can go do five townhouses, five lot subdivisions without, you know, having a heart attack or burning yourself out or hurting yourself because you’re just on the tools. You might have a hernia. You know, I had another client recently who was a handyman and also draftsman and a past builder. He can’t do trades. He can’t do handyman work anymore because he had a double hernia or something. And he’s not even that old, you know, the early 50s. But your health at some stage there’s a price to pay.
The next type of renovation is a structural renovation and we explain what this entails and how it looks like.
In contrast to cosmetic renovation, a structural renovation is usually a much bigger job and it usually requires council approval. So a really good couple of examples of it, it might be extending the house, you might lift up the house or you might have a removal house. So that definitely requires council approval and it also requires moving buildings and structural resources like walls and frames and pillars and posts and things like that. So because it is a significant renovation, but the last one with the cosmetic rather than roughly $20,000 or less, we’re talking, it can be 100,000-$500,000 plus. Some people on top of hills with city views, water views, they have no qualms about essentially adding to the house and spending half a million dollars because it potentially could make $1 million and double their return.
So there’s definitely a place for this. I’ve done a structural renovation where we extended our house. It wasn’t a big structural renovation, it was probably $250,000 for that. But it did include the granny flat, a kitchen, a bathroom as part of that granny flat as well as a carport. So some of the cons and pros of it. So pros are definitely, you can make a lot of money if you get it right. You might buy a property at Redfern that’s really run down and essentially you can’t knock it down for whatever reason, heritage-protected, but you can extend out the back with a $500,000 investment. Hypothetically you could make a lot of money from it because it becomes a dog box to a palace as an example. Definitely, cons is they do take a long time because they are a lot bigger. And also if you’re using existing buildings, integrating those two buildings together can be a pain in the backside because you’re trying to match, for example, timber floors, window frames and make it congruent with all the rooms and things like that. So it’s just very, very challenging.
I think it’s a really, really smart strategy to go down as well because at the end of the day, like what we’re trying to do is leverage and with, say, for example, structural renovations, as you said, it’s got to go through council. But at the same time, it’s not something that you’d probably want to do yourself. You’d probably want to get a proper builder to come in to say, for example, knock down the walls or to build an extension in the back. It’s not something you’ll be putting up bricks or laying concrete yourself. And I recommend that. So it’s actually probably more towards the way I would go rather than a cosmetic renovation. Like usually I’d be happy to do cosmetic renovation if it didn’t firstly cost too much and also the timeframe which we just talked about. But in terms of structure, if I know that it’s going to add say 3, 4, 5, 10 times the value of the property, then I’d definitely do it.
This would be an example of a great way to go down. Now I could probably share with you an example which I’m actually going through right now on a commercial property that I’ve got down in Victoria at the moment. And we’re just planning to redo or restructure the actual top floor to have two apartments or two units up there. Currently, at the moment, it’s got about, I think 3 or 4 separate rooms. And those 4 separate rooms were originally offices that were rented out. But as the markets changed down there, we thought, okay, it’s going to attract more of a residential market. So we thought we’re going to change the top part into residential two units there. Plus I’m also applying to council right now to extend it out for the third unit on the left-hand side.
And then on top of that, we’re going to try and get DA approval to build the third floor up as well too. So I’ve got a lot going on in that one particular property. But in saying that, I know that as soon as we’ve got those approvals and that structure renovation is done, which we’re putting approximately about $120,000 into that so the value of the property will rise from say $600,000 anywhere up to about 900,000 to $1 million dollars. So for that kind of return, I’d be happy to do that. Obviously it’s going to take a lot longer than say, you know, a few weeks, it’s going to be at least a minimum of 6 months for all that to happen. But as a long term investment and positive cash flow, a commercial property I’ve got here, it covers most costs anyway, it’ll pay itself off and it’ll become a long term passive income. So that’s like a structure innovation for me. I’m not knocking down anything in the back. All I’m doing is just adjusting the top and reconfiguring it inside. And it looks easy on paper because when you do the drawing out, I’m gonna move that room there and I’d be back around there and all that. It’s almost like a game of Lego, but when it actually comes to the real thing to be done, it’s a completely different story. So there are some pros and cons in that.
I guess what I was just curious about too is with regards to say for example, structural, is there anything else that, I guess we would probably want listeners to understand behind it because it’s great to see them all take it in, you know, see the end result. But are there any other major things that potentially you’ve experienced in your past that they would need to be aware of?
I think just like we’ve said before with the ladder of complexity, increasing budgets and increasing complexity of the renovation makes it riskier simply because you’ve got more moving parts and things are taking longer and you’re removing things. Like you said before, you can take down a wall and realise there’s water behind there, there’s a leak, there’s mould, there are termites. So it’s not for the faint-hearted once again, and if you’re going to start, definitely start with a cosmetic renovation because you can do that very, very quickly. You’re not stripping walls, you’re just adding lipstick over the top there. Budgetary wise, oftentimes a cosmetic you can do with your own resources, with cash, you know, you might chuck in 10,000, 20,000, $30,000 to be able to pay for that. Whereas the structural renovations on the other hand, because there’s a lot more finances required, you’re potentially going to have to borrow for that.
So you’re talking 100,000-$500,000 plus, not necessarily going to have that in your equity. So you might need to go to the bank with a building contract and finance that accordingly. There are other elements of risk, a bit more work involved. I think learning how to do the cosmetic renos is really, really handy. I’ve got a couple of examples I might throw in while we are fresh on this topic. How about we talk about a couple of the easy cosmetic ways to add value and then people can extrapolate that to structural if they want. And we can talk about examples that I’ve done as well. So a cosmetic one I’ve done in the past, for example, is in a house, it was a 5 bedroom. So cosmetic reno was we had a really big living area.
And so we just put up a couple of walls, put in a door. So turned that into a 6 bedroom house. And then at the same time the laundry, we turned that into a kitchenette, so it had two taps for example. And so we put a benchtop across that and a sink and then still had space for a front loader underneath that bench. And so that was turned into a kitchenette where you continue to put a couple of cooktops and things like that as well. So it turned from a 5 bed, one kitchen to a 6 bed with a kitchen and a kitchenette. And essentially it could be a dual key or a dual occupancy.
I’m looking at the actual floor plan of it. And the actual bedroom is in the middle of the house that you added in the lounge room. That’s fascinating. How long did that take?
I think it was for 2 weeks. So all up, I think it cost us $4,000. And those walls that we put up, it was a bedroom there previously, so there was a half wall taken down and then a full wall was taken down. And so we just refilled that half wall to a full wall and the other full wall. So it already had floor coverings in it. So I think we just replaced the floor coverings in that particular room because it was quite old and green. And so reconverted a 5 bed back into a 6 bedroom there and then added that kitchenette. So rather than renting for, let’s say $320, the rental appraisal came in at $450. And then we promptly were able to sell that. So in that increase of rental income of $150 a week is a fair bit proportionally, about a 30% increase in rent. And so the value of the property, we found it quite easy to sell because of that added value.
So what kind of profit did you make out of that particular property?
I think it was a $20,000 profit and it was just a quick turnover in a period of 10 weeks or something like that. So I’d secured it previously prior to Christmas and then we put it back on the market and sold it by February. So in 90 days, I think I just turned it over for a quick $20,000 profit and I really wanted to show my clients what they can do when they put their mind to it, when there’s an opportunity there, and then I can just get in and get out and get paid. The tradespeople, I can’t remember his name, actually, Jerry, I think it was. And he helped me out. He owed me a favour previously and that’s what we were able to work over Christmas and New Years.
A short period of time to make $20k, as you said, it only took 4 weeks for the renovation and then to sell it 10 weeks later. It’s a very, very fast turnaround so that’s an excellent deal.
Adding bedrooms is a really good way, especially if you’ve got big living areas or big lounge rooms that you can just put up a couple of walls and a door. Changing a 2 into 3 is a really good way, an easy way to be able to add value.
I think that that’s very, very smart in doing that. And I’ve heard a lot of success stories behind doing that because I can actually vouch that I haven’t done this in an apartment, but I saw where we were previously renting. There was a massive living room and I thought, if I had just put a wall just down that way or because the thing is the living room and the dining room were kind of combined and was so large I thought it would be nice to actually have another bedroom like turned into a 4 bedroom apartment. And I know that there are actually some 4 bedroom apartments in this complex too that we were living in then it could easily increase the value from say 700,000 to $800,000 just by simply adding a wall. And that wouldn’t have taken long, would have only taken a day or two for the tradesperson to come in. And then, you know, put in a built-in wardrobe and just, you know, those kinds of wardrobes that you could just buy from Ikea and so forth. And you would have made yourself a quick $100,000. Even just increase the rental buyer list, another $100 a week. So they’re very easy things to do actually.
The other things that you can do, as I mentioned is, you know, add a kitchenette or add a bathroom or things like that. I do find that houses with timber floors are a lot easier to do. Obviously, if you’ve got a concrete floor, it’s quite hard to do. But timber floors if you are adding a bathroom or adding a kitchen, kitchenette, things like that and taps, you may need to get council approval if you’re adding an extra toilet. But my point is that it’s just the principle of thinking about the timber floors, obviously because you just cut a hole in the timber and go underneath. Whereas with concrete floors, it’s very, very hard and difficult to be able to access that plumbing without costing you an arm and leg and inspections and problems and things like that.
So other things that you can do really, really simple, you could put a lean-to on for a carport. Fencing is really, really easy and cheap to do as well, you know, 50, $60 a lineal metre. Oftentimes you know, a house may have no front fence. So why that’s a problem is people might want to have kids and they just want some security or they might have a pet that they wanted to be able to constrain there. So having a front fence, nice white picket fence is really, really easy to do. Get it installed. Paint it yourself if you want to. A lean-to which is like a carport with two posts on the side of the house is really quick to do or you may need to get a building approval if you’re going to do a proper carport, you know, concrete driveway. And that’s pretty basic to do. Painting the outside of the house, installing air conditioning might even be a basic thing and a couple of fans for a rental point of view is really, really attractive. Polishing the floorboards, ripping up the floor coverings and if there are timber floors, that’s a really, really big value add for not a lot of costs to do that.
I’m just thinking back as tenants as well to what I’ve requested for in the past because I’m also thinking from the rental point of view and as you mentioned, air con is quite an important thing, especially in Sydney. It gets really hot and I kind of scratch my head going, a lot of the properties that I’ve seen in the past that are new I’m actually quite surprised why they don’t have air cons in the bathrooms and the bedrooms. It’s very strange because you know if the house has been built new and it’s quite a lot of like spacious areas. They only just seem to be putting in like a split system in the main bedroom and also in the lounge room. But I’m like, why did they not put it in the other bedrooms? Especially when they’re for kids and stuff.
It makes it quite challenging for them to rent out. And I’ve seen that on a number of occasions here and there and in the end you’d have to request for that to be done. And sometimes landlords are happy to install it. Obviously increasing the rent just a little bit, but that’s a really, really good value add there. I think what’s also probably really, really important is maybe a backyard area because a lot of times not having an awning or maybe just the carport. With those two stilts, there is an extremely good value add. But I think also just having like an extra sheltered area in the back seems to also add a little bit of value there because people, particularly if they’ve got kids or want to actually set up their barbecue in the back and eat out the back. That can add on an extra value.
Because one of the homes I’ve seen not long ago, they were very smart. They actually built out, there was this big, big backyard and what they did was they built out a little roof on top and then they had closing and opening doors almost like an Alfresco area. But it was also almost like a room as well too. Like an outdoor room. I don’t know what they call it in Queensland, it’s like an extra room, but you’ve got to open and close the doors on the outside. That extra value of adding that extra room, people have actually converted that into potentially another room to stay in like a sleep out a room or whatever it’s called. Things like that I think are really, really powerful to do. And if you implement something like that on the side of the house, if you’ve got a big backyard space, it can actually add a lot of value to it too.
Even just a sail out the back there with some nice grass. What I’ve been doing lately is with my rentals, if I’m going to keep it, I won’t necessarily put down grass, but if you’re selling it, you may get some really, really good grass, sail at the back. Sometimes it’s for, you know, barbecues or people want to smoke outside. It really, really works as well. I think that one of the things to maybe avoid if you’re thinking about various unique situations though, is that sometimes people think adding a swimming pool will add value. I think I’d rather suggest people not because people have mixed opinions on pools. And if you’ve got an area for people to install, let them do it themselves. Because pools can be a high maintenance thing and some people want it and some people don’t.
So I think that especially in winter if you’re selling a place, having a pool made people go, you know, it’s cold, we’re not going to use the pool why would we buy the place. So a pool is a personal preference. So I think that’s definitely something to leave out for now. If you’re going to buy it and live in it yourself and you want the pool, great. But as a selling value and a selling item as getting a return on investment, I think unless it’s a very, very specific scenario where it’s, you know, a monster block of land and you’ve got 10 acres and you’ve got acreage and you’ve got this and that and you want to add in the pool for lifestyle because you think it’ll add value to the end buyer. But in most instances, just leave it alone.
Everything’s got to have some kind of ROI. So if adding a carport or adding an extra bedroom and so forth, then that definitely increased the value of the property, then definitely by all means for investment purposes and, you know, looking to make a profit on it, I’d definitely go with that. And then I can think that’s the powerful thing about looking at it from so many different angles because having it from a structural, cosmetic renovation point of view, there’s just so many things that you can potentially do as well. And I guess that’s what’s really key about this. Is seeing with a sort of creative eye to see, okay what can I do potentially to this property to add more value to it that will be appealing to a potential buyer or potential tenant that will be interested in renting it as well.
Just a couple of other ideas while we’re finishing up because all the ideas that are coming out now right to the end. I’ve heard from one of my colleagues that rather than painting you can just get a gurney out now. Rather than painting a house is gurney the house down to get rid of the dust and clean it down that way and gurney the driveway, gurney this and gurney that just to remove the dust and the dirt and what’s underneath so it’s very, very clean. So just a last-minute tip before we wrap up.
I think that that’s a really, really powerful one. I mean I’ve seen it done on previous houses when I was actually looking at buying, this person was a developer himself on numerous investment properties and just before he actually put it on the market, I watched him just hire a few tradespeople, come out and just high-pressure gun everything and just tidy up the gardens and the appearance is made, the cleanliness, it changed it. It just made it look almost brand new again. And I think that’s what they do like straight after they’ve completed construction on a house or development. A lot of them come out because when they actually build it they’ve got, you know, marks of concrete all over the brand new bricks or whatever. They just pretty much are going to get all of that off and it comes out like brand new. So things like that can make a huge difference to the salvation of the home.
Well, let’s talk a little bit about then, what’s next in terms of an assignment or take away tasks for the listeners. What do you think we should provide for this week’s assignment?
The idea taken from the last podcast was talking about going and looking at some finished buildings. I think this time I suggest the listeners go out and look for some real rundown dog boxes. We’re talking about the innovators delight. And we’re talking even worse, you know, I’ve got a client, his nickname is the termite whisperer and he loves, the worse, the better. If it’s livable he is not interested. He wants stuff that’s the dilapidated and rundown. Structurally fine as in you could build around it and you can replace the kitchen and the bathroom and all that. But we’re talking crack dens. We’re talking termite dens, we’re talking places that need a bit of work. So that’s my suggestion.
Be on the hunt this time for and go and inspect five rundown properties and then make a list of, if you were to renovate them, what do you think you would do? Would you replace the kitchen? Would you replace the bathroom? Would you replace the floor coverings or would you polish the floors? What would you actually do? And not only that, add to it on the column on the right, how much do you think each item would cost? So floor coverings, it might be $3,000, paint inside might be $5,000, kitchen, $5,000, new fence, $4,000. So just get in the swing of going and inspecting some rundown properties and what you would personally do to make a buck on it. Would you do a cosmetic reno? Would you do a structural reno as well as what you think you could sell it for? Go inspect five run-down properties and come up with your mini business plan on what you would do to add value and sell the property on the other end.