ozperp said:In which case your profit is not from value added by the renovation, but by the difference between purchase and market price of unrenovated product.
I agree that Nathan seeks (and finds) both - bless him! And that's awesome, nothing wrong with having both! I was simply making the point that if you spend $20K on a renovation to get $20K more, then you shouldn't bother renovating. If it adds substantially more than $20K, then do it. And take the profit you gain from buying under market, and shifts in the market, on top..toe said:No its from the combination, if Nathan tried to sell one of his burnt out properties without fixing the problems in many cases he wouldn't find a buyer. The big money is from fixing a problem other people cant or wont fix
Thanks for mentioning Nathan and reminding me to correct myself, as he is the only flipper who's ever answered this satisfactorily, so my statement above is incorrect. (Apologies, Nathan!) Nathan uses a licenced builder for his work, who works inexpensively. Wish we could clone those!ozperp said:And, of course, the "elephant in the room" that no flippers have ever answered satisfactorily for me is how they get around this dilemma: if you have a builder, it's even harder to squeeze a profit out of the project. If you don't use a builder (or have an owner-builder's licence, which is only good for one reno every several years anyway) your renovations are illegal.
This is not true in QLD, and I suspect not anywhere in Australia if you really look into it. Most people in QLD will say something similar, even though I know definitively that it's not true, because I've received written advice from the Queensland Building Services Authority..toe said:This is only an issue if you need a building permit with a value over $5k, then you need a builder or owner builder status, otherwise you can repair and install anything you like.
In QLD, you must use a builder or have an owner-builder's licence "if you wish to perform or coordinate domestic building work on your property for a single project of a value of $11,000 or more" (my bolding). The project's value is calculated using the retail cost of all works necessary, including work that you do yourself. So even if you do all the work yourself, if it would have cost $11K or more to get qualified trades to do it all, you're in breach. So in Pa1nter's example, where the homeowner had a quote for $20K for the bathroom, doing that bathroom yourself (or Pa1nter doing it, if he didn't hold a builder's licence - but I believe he does) would put you in breach, because the QBSA would argue that the value of that project has been set at or near $20K. Whether it's structural or not, whether you need a permit or not, are irrelevant; the only thing relevant to whether you need a licence or not is the retail cost of getting the project completed by qualified trades.
I even put to them this scenario: what if you get new carpets installed for $11K, and then you do the work of putting in new skirting boards? The answer was that you need a builder's or owner-builder licence, because the cost of getting a qualified carpenter to put in the skirting boards for you would take the project's value over $11K. I'm not saying it's sensible or even desirable, but that is how things stand in QLD. Even the person at QBSA admitted that would be ridiculous, but as legislation stands, that's the situation.
ozperp said:I do think it's possible to make a profit from a renovation, but the profit has to be there even when using a qualified builder, and buying and selling at market price in a level market, otherwise it's not the renovation that's made you a profit.
That means that the $20K reno has added $50K of value (if the market's level), and that is a renovation that is probably worth doing. You've given a perfect example of when you could justify renovating..toe said:I dont think the simple arithmetic of 1+1=2 applies here. If you pull apart a deal that includes a reno and you say well the final value was 200k, the reno cost 20k, the house was bought for 150k, that doesn't mean the house could've been resold unrenovated for 180k. Its the combination that adds value, which is why i agree with you when you say it's not as easy as it looks, you have to be able to see in multiple dimensions