Twenty-two years ago, at the age of 21, Cherie Barber made a profit from buying and renovating her first property.After this pattern repeated itself throughout her twenties, Cherie realised she could make more money renovating properties than she could at her day job. So she made the decision to throw herself whole-heartedly into the world of renovating.
Cherie is now a full-time professional renovator and since buying that first property in 1991 has completed over 35 successful renovations. Cherie is proof that with hard work and some street smarts completing a profitable renovation is in the reach of just about everyone. In fact this is the message she now instils in students who undertake her series of renovating workshops – which she designed herself based on knowledge she has gained from years of renovating experience.
This month Cherie gave Sydney Observer a taste of what she teaches in her workshops. She shares with us the key considerations anyone wanting to renovate for profit should make before picking up a hammer or chequebook.
Understand the difference between structural and cosmetic renovations
Cosmetic renovations involve a total transformation of the inside and outside of a property – this includes everything from internal and external painting, ripping out the carpets, polishing the floorboards, landscaping and refreshing bathrooms and kitchens. On the other hand a structural renovation involves drastically changing the layout and size of a property. Quite often structural renovators keep the front end of the house and then demolish part of the house, adding extra storeys or rooms depending on the site.
Normally in a six-week cosmetic renovation your profit margin will be anywhere from $20,000 to $80,000. Whereas a structural renovation will take longer – at least a year – but could result in profits in the hundreds of thousands.
In structural renovations: add more floor space!
In a structural renovation you have to add a minimum floor space of 40 square metres for it to be even remotely viable. There are a lot more costs associated with these kinds of renovations, like council approval, architect fees and holding costs. Therefore to add massive value to the property, it has to radically change – appearance-wise and size-wise.
Beginners should start with the basics
If you have never renovated anything before don’t throw yourself straight into a structural renovation. The best thing to do is start with a couple of cosmetic renovations. By the time you go through that process of renovating a number of houses, you’ll have more equity behind you, you’ll feel more comfortable and you’ll be in a better position to do well in a structural renovation.
Ensure every house has that little bit of ‘wow’ factor to entice buyers
A ‘wow’ factor is something in a property that arouses emotion within buyers. It doesn’t have to be the most expensive gadget or a jaw-dropping moment. It can be a series of little things that culminate to
ensure the buyer loves the property. For example a television above the bath, or hanging pendants lights in the master bedroom. Basically, the more times you can get somebody walking through your property to go “Oh I like that”, you are increasing your chances of a buyer becoming emotionally connected and then actually wanting to buy it. Every home regardless of the value deserves ‘wow’ factor – whether it’s a $200,000 house in Dubbo or a $2million house in Artarmon.
Think before you buy
It’s vital to have a strategy in place before you start a renovation. Before you buy a property ask yourself these questions: Am I going to be a cosmetic renovator or a structural renovator? Am I going to do buy,
renovate then rent? Or buy, renovate and sell? Should I buy in the inner city or
regional suburbs? Will I buy it under my personal name? Each of these decisions will affect your profit margin and the amount of capital gains tax you pay. A lot of people buy and renovate without considering these aspects. They may make a substantial profit margin, but then suddenly at the end of the tax year they are forced to pay half of the profit in tax.
Focus on a few suburbs
Rather than chasing renovated deals across the whole of Sydney, it is more beneficial to zoom in and specialise on a small cluster of suburbs – especially if you are planning on renovating over and over again. This means you can become an expert about the pricing and people within a particular area and use this to your advantage when renovating.
Get inside the mind of buyers
Renovations are really just about creating a product to meet the needs of a customer. It’s important to understand the demographics of your chosen suburb, so all those questions about how you renovate and what you put inside your renovation become clearer. For example the north shore is a family area, which means a big open plan; living, dining, kitchen area would be a drawcard, as parents want to cook meals at night while watching their children play. A bath and a garden would also be important for families with young children.
When you have an intimate understanding of the suburb and demographic you’ve got the license to print money. You become so attuned to what a buyer’s needs and wants are that when they come to the open house, they will love the property so much; they think with their heart not
Use brains instead of brawn
To DIY or not to DIY? This is a question every new renovator faces at the beginning of a project. However there are so many reasons why you should be the delegator and coordinator of experts rather than the “DIY-er”. It’s really important to work out the value of your time when it comes to renovating. Most tradies range from $40 to $70 an hour, and it takes them four to six years to study their craft. Hiring professionals will ensure a renovation is completed within the time frame, and to a high standard. Experts will take six weeks to complete a cosmetic renovation, but if you’re in the trenches yourself a six-week renovation can turn into six months.
Cherie Barber is the director of Renovating for Profit. Her company offers 3-day educational workshops that teach people how to become savvy property investors and renovators.
Cherie will be speaking free live event at the Zenith Theatre in Chatswood on December 3.
For your chance to WIN a 3-day Renovating For Profit Workshop click here.