The Biggest Mistakes Renovators Make (263)
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There are A LOT of potential pitfalls and mistakes that new renovators make. Today I talk with Jane Slack-Smith from The Ultimate Guide To Renovation about the biggest mistakes renovations make.
My suggestion: Learn from these mistakes so you don’t make them yourself and then go out there and take action. It is better to take action and make some mistakes than to not take action at all!
View my previous interview with Jane – How To Choose The Right House To Renovate
The Biggest Mistakes Renovators Make – Ep 263
Renovating for profit can be tricky business.It has a lot of pitfalls and mistakes that renovators make and it’s not actually as easy to make profit as we might think.There’s a lot of people who go out there and renovate and the only reason they make profit is because the market goes up in value. If u actually analyse the property and look to the capital growth you could that the renovation they did didn’t actually make any money and we don’t want to be these people. We want to avoid the mistakes that other renovators have made so we can ensure that we take the right steps to maximize our returns on renovations. To I’ve got with me Jane Slack-Smith from the Ultimate Guide to Renovations.She started off and knew she wanted to renovate a property didn’t know how to get started but started listening to the mistakes that everyone else had made in their property endeavours. She learned from those mistakes and she ensured that she didn’t make those mistakes and has gone on to be a very successful investor. She now helps hundreds of people improve their renovations and helps them to renovate their properties for profit. So I wanted to get her opinion on some of the biggest mistakes that people make when they’re renovating a property.So here’s the interview with Jane Slack-Smith from the Ultimate Guide to Renovation.
Hey guys this is Ryan here from onproperty.com.au your daily dose of property education and inspiration and today I’ve got with me Jane Slack-Smith who is my go-to person for renovation and also the creator of the Ultimate Guide to Renovation and today we’re talking about the biggest mistakes renovators make. Jane has a course where she works with hundreds different people helping them to increase their profits through renovations. So if anyone knows the biggest mistakes she’s either made them herself or she’s learned them from other people. So thanks for coming on today Jane.
Jane: My pleasure Ryan.
Ryan: all right so let’s not waste any time, let’s get straight into it. What do you think are some of the biggest mistakes that renovators make?
Jane: I have so many I want to share with you. So when I started investing [[inaudible]] over 15 years ago I went to all these free seminars and things and I was diligently writing down everyone’s tips and they all became the same. Would then I got really interested in them saying I made $1,000,000 and then I lost it and then I made it again. I was like I want to know how you lost the money and so I started then taking notes on everyone’s mistakes. And my thought was if I knew everyone’s mistakes and how they had done it I could plan how not to do it. I could just jump over that period of 3 to 5 10 years of learning that everyone else had and go straight into profitable renovations. So I’ve kind of collected the mistakes of others have made over the years and that’s what I do. I teach people how to get rid of them. So I guess my number one mistake renovators make is that they’re renovating is it’s in the wrong location.
So they’re renovating in an area and I have its what I call my strident strategies so as a low risk investor myself and wanting to protect my very small nest egg that I started with it was important for me that I understood that I was going to be making money not just in one way but I decided I wanted to plan A B and C to make money. I developed this strident strategy which was mine below the market so I could make money immediately buying in an area set to grow with growth potentials. So time heals all wounds. If I got everything wrong [inaudible] sit on it for 50 years and it was never going to go all in value rather than what I had planned at the time. I wanted my properties to double in value in less than seven years and then I want to add value. I’m going to manufacture equity and springboard rather than having to wait to create equity over time and with growth by renovating. So three ways to make money so if you’re buying property in the wrong location that doesn’t have the [inaudible] that growth I think that’s number one mistake renovators make.
Ryan: yeah and as well people who pay more than what a property is worth because they get emotionally attached to it or something like that then that doesn’t work with your strident strategy where you’re saying buy below the market value so you get instant equity there. If people are buying above market value because the do get emotionally attached so they don’t know their research like you’re saying people should do when even if they do renovate it and bring it up in value chances are they’re just going to bring it up to what they already paid for it. So I think
Jane: exactly and you see people at auctions they get there’s this kind of like ego thing that happens. Now it’s like uhh he went a thousand more than me. It’s only an extra thousand and you know 20 grand later he’s got like and I won I’m like did you really win you just paid 20 grand more than what it was worth.
Ryan: well that how real estate agents do auctions for a reason cause people get sucked in to the hype and that ego as you said. Yet more moremoremore and they end up paying too much for it. So I think knowing how much to pay for your house is very important and knowing what area is very important. We’ve talked a lot about that in the last interview that we just did. So I’ll link that up below and so people can check that out if they want to learn more about how to choose the right area to renovate in. Why other mistakes do you think people make?
Jane: so starting with the right area it’s and then doing a research so as you said you need to have comparable sale. You need to make sure that the property has a capacity to add value to it. You need to make sure it is renovate-able and you need to understand that this profit and I know we’ve discussed that before but one of the things I find people think is that un-renovated equals value. And that’s not the case. You can’t make a profit out of just a property that needs a good lick spit and polish.
Ryan: so when the real estate agent has its just says on the listing renovators [inaudible] or handy man special or whatever it is they say it doesn’t actually mean that it’s a good renovation.
Jane: well it could be but just not to make money out of.
Ryan: it’s fun to renovate and it’s good to renovate but you’re not going to make anything.
Jane: I think in 2014 there was that I actually had the chance to go and visit the block and have a look at the properties there and for so many of the people here spent their blood sweat and tears in those properties in renovating. They were renovated wrong for their market place. It was completely wrong location and if there’s an example of how the wrong location can actually make u not make money it’s sitting there in the block in that instance cause it would just, it was a let’s face it. So wrong location, not doing a research that’s not going to comparable[inaudible] so you can validate the right price since so you can buy below the market. Not understanding that properties have the capacity to add value so you need to be able to we’re not talking about house and packages here. We need to have a property that you can do up but just because you can do up doesn’t mean that you can make a profit. So understanding there’s money to be made and doing it to budget and doing it to the target market understanding the demographic. I find time and time again people going with the notion that you simply can buy with a notion as well and that they’re renovate with a notion and it’s well like you know my jury bathroom at home is not getting a makeover but hey what about this great [[inaudible]] I can have in this house and I can have all its my dreams fulfilled.
Ryan: yeah and this toilet that’s $2000, I’m going to go ahead and put that in because we all absolutely love that.
Jane: or it could be a bidet with a toilet next to it. Oh I don’t know let’s not go there. It’s understanding what that target market is. So if you don’t renovate to the demographic and understand the demographic you want thereafter and this means it’s for every let’s say 10 houses that I look for or 10 [inaudible] I look for in the suburbs I’m adding on one that’s renovated to the standard that I want. So I want to understand what that standard needs to look like and I’m also adding on an extra property that’s a rental property on the market at the moment and I’m sitting around doing a bit. You know pink panther detective work there listening to conversations that the people walking around the house going “oh it doesn’t have a dishwasher or it doesn’t have air conditioning or it doesn’t have bars on the window, there’s no carport and I’m listening to their objections to renting the property or they might walk in and go “oh wow it’s got a bookshelf.” So I’m like bookshelves mental note, $200. Bookshelves are going to get my property a renter [[inaudible]]. So if you just understand what your market wants because if you are buying renovating to hold then you need to understand what you’re target renters want. It’s not what you want.
Ryan: So when you say you’re adding one that’s renovated and you’re adding one that’s being rented, do you mean you’re doing recon work? You’re going to those open for inspection.
Ryan: You’re more there to listen to what the people who are looking at the house are saying more than you are to look at the house itself is that right?
Jane: exactly and also I do a bit of pre-interview work on my rental managers. So I might say to the person where’s the bus stop, oh I don’t know. You might ask something like would the landlord put in foxtail or is that needed like do people do that? Something that is important to you and if you’re sitting there going like is seriously I’m on my blackberry, I’m having a little chat with my mates on Facebook [[inaudible]]. This is not a rental manager that I want. So when I want to rent my property so I’m doing a bit of recon on who I might have looking after my listing as well.
Ryan: that’s very clever. I think going back to people who are emotionally renovating their property and renovating to their taste. That is a big mistake that people make over and over again. And I have watched a lot of renovation shows and stuff like that like Property Ladder. Everyone always ignores the data ignores what the market wants and just starts what they think is awesome. I love pink bathrooms some going to make it pink or whatever. Do you is there any way that people can actually avoid that emotion that they get when they are renovating a property because I think that’s just so natural to all of us to want to do it the way we want to have it.
Jane: I think you need to first put on your business owner hat and go I’m treating this like a business [[inaudible]] Hundreds of thousands of dollars here and you know I want to make money out of this and I didn’t ask to make money immediately so I can either pull the money out and use it on whenever I want or buy another [[inaudible]]. So you need to know the numbers are what you need to concentrate on. We’re not talking colour schemes. I’m right in the middle of doing a quick renovation in between tendencies of the little unit that I have in the eastern suburb Sydney and I’m based in Victoria. So I’ve got a project manager that sends me photos every day. I selected the titles of the photos he sends me we got four tiles which one did you want and which way did you want them laid. I’m not spending hours picking out the different tiles. I know he does bathroom renovations for landlords. He understands what type of tiles I need. We want the fabulous look but I want a low cost solution. So it’s numbers game, it’s like ok let’s get the quality product that’s not going to require a lot of maintenance, one that’s gonna look great and not be objectionable to people cause it is the pink or the blue. I’ve got marble tiles I’ve always wanted them myself. It’s all about the numbers. So I have a quick quote calculator that allows me to go in when I’m actually doing my significant due diligence on a property. That allows me to estimate what the price of the renovations going to be and then that becomes my budget. I define a little but further and so I’m measuring it against that when I’m doing my renovations and it allows questions when something comes up. I know my very first renovation I got a little emotional and I fell in love with this bath spout that was $500. I had this mental image of this bath spout being in the middle of this 6 foot long bath and you can kick on the water with your foot while drinking your champagne and one person could be on either end the plug in the middle so no one had to sit on the plug. I had this image in my head and I fell for this bath spout but I knew to buy the $500 bath spout I either had to give up something or make some money somewhere. So I ended up [[inaudible]] my kitchen on ebay to get the bath spout.
Ryan: so you got the bath spout in the end.
Jane: I got the bath spout. I think the valu-er was very impressed. I was impressed I got to live in that property for a further 6 days I think [[inaudible]].
Ryan: So we’ve covered a couple of mistakes that people make so obviously not doing the research maybe buying the wrong property you’re buying over value. Talked about emotionally renovating it to your needs and not renovating it to what the market wants. Are there other mistakes that people make like the ones I’m aware of?
Jane: ok well I’ve got one for you that you may not be aware of, and this is especially in the lower price [[inaudible]] so we’re talking less than $450,000. Is that, when we think renovations often people think I have to do the renovations straight away but I can’t afford it and there i can’t buy a renovation property with renovation potential and the reality is you can hold a property as long as it’s livable you can possibly do a few cleanups and move but I’m very very clear on the fact that often people think they have to renovate. Let’s pull out the bathroom and fix it up rather and replace rather than repaint. So I have a whole repaint or replace strategy. Which is if I’m going into a property I’m like hey can I just pull off the bench top and put on a new bench top or can I paint and one of the things I show, this video that I have is how I actually paint the bench top to make it look greyish. So less the $100 so I’ve got this whole new bench top and I think I had one student who attended the Ultimate Guide to Renovations back in 2013 and he had done 12 renovations. He’s quite experienced but he wanted to learn some more and he was going back to renovate some of the properties he had and I kind of force people to go through these calculations of making a profit and he went back and said he would have thought the successful renovator And going back through the numbers he realize that the capital growth had make him look like a sensation as 6 of the properties he had lost money on the renovation and he was in the midst of pulling out a kitchen at the time when he saw this video and he’s like what can I do And he’s saved $5500. He went back in and just top this up and you know he did that and I think that kind of mentality as I’m renovating and I watch these renovating shows and they pull everything out on the first day and then they get into a blank canvass. You don’t need a blank canvass often. Starting with what you have and understand should you be replacing removing or maybe repainting a [[inaudible]] something. That is a top tip on mistakes people make, they rip stuff out and go ok now I’m starting.
Ryan: I think that’s a good tip. I remember when It’s the we were renovating my parents’ house to sell it and we got the agent in for review before we dig up the place and we got him in afterwards and with the kitchen it just had it was a white kitchen with a white bench top with a wooden trim around it and so we painted the wooden trim white and we took off the old handles and put in the handles that were in fashion. When he came back it would have been a month later or something and he was like did you guys replace the kitchen? And we were like no we just pained one trim and replace the handles. So it can have a massive impact just by doing those sorts of little things. And you don’t have to spend $10,000 $20,000 on a new kitchen.
Jane: if you can think of that in relation to me and my strategies to create equity to pull money out to manufacture equity pull money out so I can do it again manage that conversation with the valu-er wow nice kitchen we’re like ye.
Ryan: New kitchen [[inaudible]] ye it’s new, sure it is.
Jane: so much time and effort wow and look at this beautiful bench top. I think people will also there’s some mistakes people make in potentially not spending some money so they’ve done a beautiful renovation they’ve bought the property in the right location at the right price they’ve got the right target market they’ve done the renovation and it’s targeted to who they are directing this rental property at and then they forget about street appeal. They do nothing outside. They may not put in a few plants and as I said I’m renovating for my valuer often. I’m remembering the tenants going to help me hold this property but number one is the valuer. He turns up on the street or she turns up on the street and they look at the property and they’re like another blah. It’s nice to delight them when they get inside but for me [[inaudible]] looks good. Most people if you’re going to sell a property they make the decision within the first 30 seconds of coming to the front door. I want this house. So if you’re flipping that street appeal and concentrating and I know when we moved from Sydney to Melbourne and we were having our house revalued [[inaudible]] my husband went and mowed the entire block [[inaudible]]. SO as the valuer drove into the street he was like this is a nice tendered street. My husband does like mowing still we took it to that degree and the property was consistent With the impression that the valuer had as he pulled up.
Ryan: Ye I remember there was this one property I used to walk past every day to the shops Back when I lived in Sydney and there was this house that just had overgrown grass it was disgusting. It had grown all over the footpath so there was no footpath left and I’m walking one day And like the footpaths’ clean. I’m like what is going on the grass is mowed. I’m like oh my gosh what is happening? In turns out the house next door was for sale and was open for inspections so they must have done the same thing as mowed these people’s lawns so the neighborhood looked better. I think from personal experience when you go and look at a property If you’re looking at the outside and it looks like a good property from the outside your kind of expecting the best on the inside And you go in looking for good things Whereas if you Can see the dingy garden And it just looks run down And you go inside looking for the problems So you don’t really see the good thing’s. So I think street appeal Is a very important thing for people to look into.
Jane: and I think that exactly on that same point Ryan is you walk into a house And you’re all kind of wow this is great there’s nothing objectionable here. It all works and you walk into a bathroom and you’re likeahh these guys had a go at tiling themselves. So what are the things they’ve done and cut corners on and you’re like looking for problems. So if you’re not a tiler don’t tile is my advice. Leave it to the professionals. It’s going to cost you in the long run.
Ryan: so doing a dodgy job is just gonna, because that’s the thing even though it’s not that much worse than getting someone to do it like you don’t think it’s that bad. You’d live in it. The soon as people start seeing little problems around they start looking for more problems and it’s like when you go to buy a new car and then all of a sudden you see everyone driving that car you see a problem and then you start seeing these problems all around your house. So how would people avoid that? Would that be just to get the experts To do things but wouldn’t that through you out of budget.
Jane: no I don’t think so. I mean if you’re very good at tiling and you’ve done your Saturday morning tiling tips [[inaudible]] or something and it’s something you’re really confident on and you’re at a lower price point in the market then I would suggest that when you’re starting off and you’re renovating yourself you don’t see the value Of having the professionals. We had this house we were renovating well two houses [[inaudible]] renovating when we first started and we were up at 6:30 to 7:30 every morning painting at 6:30 at night to 11 o’clock at night 20 hours on the weekend painting this three story monstrosity for like months on end and then I [[inaudible]] so the same property next door I think it was like $4500 or something this guy did in 5 days. So we wasted 3 months painting that in theory [[inaudible]] we’re saving money we’re doing other things as well so we didn’t lose money but if you’re losing that time because you can only get to tile on the weekends then you’re losing time in the market and that can be a loss that people don’t actually quantify but it is a loss. So the amount of time you’re learning how to tile or I’ll get around to the landscaping myself because how are can it be and I’ll build that retaining wall. [[inaudible]] is money.
Ryan: you’re still paying a mortgage on the property and you’re not getting rental income coming in and so those mortgage repayments are coming under their expenses I guess you wouldn’t have to pay if you got someone to do it and do it faster.
Jane: Exactly and just simple things like you can do [[inaudible]] walls to save money. So the painter can do the walls. I’ll go and clean things up and put things in the skip. I’ll hire the skip to save money on just doing the. You can do things. My expertise is finding the property, finding the potential, project managing the professionals in doing that and I know when [[inaudible]] and afford all those people and you try to give it a go yourself and that’s fine if you can’t afford it but just realize that time factor if it’s the delay there and when your property available to rent. In theory I understand from the tax office that you actually claim the tax deductibility of that mortgage repayment either. So the property has to be available to rent for you to actually claim an expense against it. So you could do things, like I’ve seen people, there is a doggy front fence so rip out the palings and go and put new ones up which is really expensive when in actual fact they could kind of just push it up and put in some new posts and paint it. That’s less than $100 and less than a day’s work they have got the new fence and they’ve got money in their budget. So just simple things like getting a clean, a pressure cleaner to clean the driveway or maybe you could [[inaudible]] with an [[inaudible]] gun jus to create the impression that you want without the expense because renovating for profit for me is about perceived value. It’s not about actual cost. So your renovations that cost you $10,000 that adds $40,000 in value, that’s what you want.
Ryan: Ye and like we talked about I’m not sure if it was this interview or the last interview we were saying things like the electrical work and all that sort of stuff doesn’t get seen and so it doesn’t add profit and so you’re right. It’s not about the cost it’s about what people perceive the property to be worth and the work that you have done to be worth. So do everything you can to create maximum perceived value with minimum cost and minimum effort.
Jane: Yep absolutely and look just do your research. I mean the biggest mistake people make is they don’t do the research upfront. They don’t renovate for the target market which is understanding who and what they are and then over capitalizing and not keeping to your budget cause [[inaudible]] an extra $500 what’s that and those $500 they add up.
Ryan: it quickly becomes $5,000 $10,000 and then all of a sudden even if you sell at the projected price you had you’re not going to make any money. So it’s very important to stick to that budget. Thank you so much for your time Jane. Me and Jane are going to be having a webinar together talking more about renovation and talking about her strategy of buying two properties doing one renovation and getting a $1,000,000 in the bank. So that’s going to be on the 4th of March. I’m very excited about that. If you want to get access to that webinar absolutely free go to onproperty.com.au/reno and you can get access to that. That’s going to be a pure content webinar so there’s going to notes styles pictures at the end there. Can you talk a little bit about that webinar and what we’re going to be covering Jane?
Jane: oh look I’m really excited about this. It’s going to be about 90 minutes so we’re going to squish in as much as possible that I can but really I wrote a book “Two properties One renovation – A million dollars in the bank” cause I think that a lot of believe that they need to have hundreds of properties to make money and the reality is that if you can have two well positioned properties with on renovation that you accumulate over 5 years and you can rest for the next 10 years while they get on and growing in value and paying rent and covering your costs and you know 15 years later you sell them off pay your capital gains tax cause that’s a cost a lot of people forget and pay your selling fees etc pay off your loans, put $1,000,000 in the bank and before taxes a $50,000 passive income in today’s money and 5% return. So I really think every day Australians if they’re looking low risk and they’re looking buying the right property its best the property they can and manufacture equity through renovations then pushing the rents up to help them pay for their costs. That’s a great strategy to allow anyone to actually achieve their dreams and that’s what I want to share with as many people as possible.
Ryan: I’m excited to delve into that strategy and to learn more myself and to share it with my listeners and my readers. So it’s going to be exciting so again you guys can get that by going to onproperty.com.au/reno that’s going to be on the 4th of March. So get on board with that. There’s not going to be a lot of people ask me are you going to have a replay of the webinar cause I can’t make it but we’re not actually going to have a replay of that webinar. So we do want to reward the action takers so get on board, it’s going to be a great webinar. Well thank you so much for coming on Jane and we’re going to be back talking bout how to maximize your return on renovation in the next interview. I’m excited about that.
Jane: me too.
Well I hope you enjoyed that interview with Jane Slack-Smith on the biggest mistakes that renovators make. I hope that you can learn from those mistakes and not make those mistakes yourself when you go out and renovate. Let’s try not to get too emotionally involved let’s try to do our research first and let’s try and avoid those mistakes. If you enjoyed the content that we shared then we do have a webinar coming up which we’ve already mentioned in the interview but that’s on the 4th of March and we’re going to be talking in more detail about Jane’s strategy which I love which I found very achievable for a lot of people and that is two properties one renovation and a million dollars in the bank. It’s a great strategy that I absolutely love and I’m looking forward to hearing more about that. Jane’s going to be talking more about that overall strategy as well as some renovation tips in the webinar. You can check it out by going to onproperty.com.au/reno and that’s on the 4th of March. So be sure to sign up before the 4th of March. If you’re watching or listening to this after the 4th of March then check out that link anyway because I’m going to have something special for you guys over there. I don’t know what it’s going to be yet but after the 4th of March there will still be stuff available so that’s onproperty.com.au/reno. I look forward to talking with Jane in the next episode where we’re talking bout how to maximize your return on renovation. So we are going through room by room in the house, what are the biggest ways that we can have an impact without breaking the budget without spending huge amounts of moneys? So that’s coming up in the next episode. So until then stay positive.
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