Jen and Brad’s Renovation Story: +$80/Week Cash Flow
It can really helpful to hear about other people in the field, who are buying properties and doing renovations to both inspire you and give you ideas as well. Today in Story Time we talk about a renovation project that delivered a 20% yield on the money invested, plus a granny flat project that will cost overall rental yield to 7%+.
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0:00 – Welcome to this new segment “Story Time”
1:11 – Jen and Brad’s renovation project
2:00 – What financial result are they trying to achieve?
4:56 – The main property details
6:32 – The renovation project
11:44 – Building a granny flat to boost the cash flow even more
2 Properties to Financial Freedom Strategy – https://onproperty.com.au/2properties
Property Tools – https://propertytools.com.au
Success Story: Simon’s Buyer’s His First Property – https://www.youtube.com/watch?v=HP376QV3qi4
When investing in property, it’s really good to learn about strategy. It’s really good to learn how to do specific things. But it can also be really helpful just to hear about other people who are in the field, who were doing it, buying properties, renovating them and some of the stories of behind that to both inspire you and give you ideas as well. So today, I have with me Simon Everingham, buyer’s agent from Pumped on Property. Hey, Simon, how’s it going?
Really well, thanks.
And we’re going to do a segment a new segment that I’m calling storytime where we’re going to be talking about some experiences that Simon and the team have had in the field, and some of the success that their clients have had. So what’s what’s up for storytime today, Simon,
I just wanted to kick it off. Like, I think this is a really cool little segment that we’re going to be starting today. Because I know personally, I love hearing different stories, success stories of other people and what they’ve been doing, because it’s really daunting investing in property. And if you have a few people around you, or you’ve heard of a few different stories where these people have made some excellent returns, like it gives you that extra little bit of confidence. So I was actually on the road yesterday inspecting some properties for clients and got an opportunity to swing by one of our clients renovation projects that they’re working on at the moment, they were just getting the final stages done. And the property manager was actually coming around that afternoon to get some new photos so they could get it up online and start advertising it for a rental. And managed to get through do a bit of a walkthrough and hear some of the cool things that they’ve done, the ways that they’ve been able to manufacture value for their property. So these are some clients named Jen and Brad, based up here on the Sunshine Coast and just purchase their first investment property down in Brisbane. So we’ll walk through a few different things that these guys have done to increase the rental yield and the value of their property. So
let’s start by talking about what sort of investment they’re trying to achieve. Are they looking at the two properties to financial freedom strategy and investing for cash flow? Or that do they have a different strategy that they’re implementing at the moment?
So when we first touched base, which was probably early in the year, late January, I had a strategy session with them caught up in person and grabbed a coffee and talk with them about what they were looking to achieve from their short and long term property investment goals. So essentially, what they wanted to do was replace one of their incomes. So combined, they had a decent income, but they wanted to replace $100,000 worth of income through property investing. So we talked through a few different ways. We actually educated them a little bit on this two properties to financial freedom strategy, which I’m sure you could probably link up to that video below. So people know what we’re talking about. Essentially, they wanted a low risk property, they wanted to target a high quality Metro market. They were looking for long term capital growth potential, but they also wanted it. They also wanted to cashflow positive property, they considered themselves active investors. So they wanted to buy something that was a little rundown at a great price where they could get involved straightaway utilize Brad’s skills, and manufacture some value from the start and increase that rental yield from the start. So they had some interesting property investment goals. And I think towards the end of it, they were really happy from the feedback I was getting from them yesterday, they were kind of the property actually exceeded their expectations.
Yeah. And that’s really good. And I think that’s something worth noting. A couple of things that you touched on there, which is like high quality, stable Metro markets, where you’re going to have that long term demand, both in terms of people wanting to purchase there, as well as that rental demand as well, given the current market instability, in terms of basically the whole market across Australia. Having that stability in terms of rental income, having that stability in terms of long term capital growth is really important. And then obviously, what I’m really excited to talk about with their story is how they’ve done minor cosmetic renovation to be able to maximize the cash flow of the front house. And then they’re also looking to maximize the cash flow of a granny flat in the back, which is going to be really exciting for them. And I think it’s going to put them in a positive cashflow position by the sounds of it.
Yeah, well, it should, based on the numbers, they should be in a really strong situation. Once you factor in the cash flow, the rental income from the property plus the depreciation benefits from the granny flat in the backyard they should be expecting to be well and truly positive. Good.
So let’s have a talk about the property and you know, you said it was a bit rundown. They wanted something where They couldn’t manufacture some growth. So what have they done there?
Yeah, well, they kind of wanted to take matters into their own hands and purchase something below market value that needed a little bit of work didn’t have the most desirable appeal when you initially walk through the property, which is exactly what they wanted. So what they were focusing on, they had a budget of about $400,000 for the property purchase alone. So we managed to get them a large 600 plus square meter piece of land in a suburb about 24 kilometers north of the Brisbane CBD. In a really nice area where the average household income is higher than the average in Brisbane, the average amount of owner occupied is well and truly higher than the average amount of renters. Now. Then once we purchased that property, we got it secured at $400,000. They had about a $20,000 budget for the renovation of the property. So they settled on the property I would say just under four weeks ago now. As soon as it’s as soon as settlement came, Brad moved into the property, I’ve seen his little swag on the ground downstairs at the property. And he and a few of his mates have been staying there for the last three weeks just going hammer and tongs at this place. Pulling out all of the old stuff, he had a couple of his friends render the entire place out was a double storey brick home. So they completely rendered the front and sides of the house, which gave you that really nice straight appeal. They painted the stairs, they replaced some of the balustrade, they replaced the front doors, and landscaped all the gardens out the front of the property. So you pull up to this house. And it’s like, probably one of the nicer ones in the street after some nice landscaping out the front put in a beautiful garden bed, rented the break and made it look extremely nice from the street appeal. Then once we got inside the property, they painted the entire interior that made some slight upgrades to a few different things like replacing the carpet in the bedrooms, and upgrading some of the built in robes as well. So all of this stuff was cosmetic, there was no structural renovations to the property, it was all just cosmetic. So that allowed them to keep it extremely low, what allowed them to keep extremely low, as well as the fact that Brad is a handyman himself and had the skills and had the network around him to help him execute on all of these and keeping the live costs down. So they only ended up spending $20,000 on that cosmetic renovation now, we’ve been in contact with a property manager that looks after our properties and some of our clients properties as well. And initially, they were expecting before the renovation around $360 a week in rent on a $400,000 purchase, which you know, just didn’t necessarily stack up from a cash flow perspective in the beginning, now that they’ve spent $20,000 on the property that into it for about $420,000 now, and the property manager is actually expecting $440 a week in rent. So they’ve manufactured $80 a week worth of cash flow that they wouldn’t have got if they didn’t do this renovation, which is just almost insane.
Yeah. And $80 per week jump in rental return is very high for
Yeah, I wouldn’t be renovation. Yeah, for storytime, I wouldn’t be expecting that if if you’re planning on going out and getting a bit active with your property. But you know, it’s good to know that if you do spend a little amount of money, you should expect some sort of rental increase if you’re doing the right things.
Yeah. And I think that kind of sounds above what most people would expect to get. I think I worked out like the yield on that renovation. If you’re looking at $80 a week per year, and you spend 20 grand, it’s like a 20% plus. You spend and obviously, like Brad lived there, he got free labor or cheaper labor through his network and through friends, put in a lot of hard work for that as well. It’s not just something someone could go out. And if you are like painful rates for labor and things like that, then it would obviously cost more, you would get less of return. But it’s really cool to see that if you’re willing to be an active investor, that there’s opportunities out there to really maximize not just that’s obviously going to help the value of the property as well because now it’s a much more appealing property. But it’s really cool to see someone doing it not for Okay, let’s renovate this and flip it but let’s renovate this so that we can get better cash flow from our our process. put us in a lower risk position give us more cash flow buffers for our investments moving
forward, and for security and life. Exactly. So just another couple of things that I forgot to add there, they actually replace the curtain rods and curtains throughout, and also the light fitting throughout the entire place as well. So those two other cosmetic things that can increase that value, just give it that nice, fresh look. Yeah, like imagine you were wanting to rent a property or buy a property, what do you want in that, and then going out and putting those things in there. So if you’ve got nice fresh paint throughout the place, you’ve got nice light fittings, newer light fittings, nice curtains, you’re starting to get that fresh look, that minimalistic look rather than a lot of these old school homes built back in the 60s 70s, and 80s, that just have some crazy carpets and crazy colors on the walls, some crazy light fittings. So getting rid of all the dated shit and putting in some nice fresh looking cosmetic upgrades.
It’s amazing the difference that can make from something looking old and tired. And then just some fresh paint fresh carpet curtains, light fittings, as you said, can take place from old and tired where it is really on the bottom end of the spectrum in terms of rental price just because of that tightness. People don’t necessarily want to pay as much to live in something like that. But then as soon as you freshen it up. And as soon as you make it more modern, doesn’t necessarily have to be a modern house that’s built last year, but you just give it that fresh log, make it brighter, make it more desirable to live in that you can have the jump in the rental income. So you were mentioning off camera as well that they’re considering building a granny flat to boost their cash flow even further.
Yeah, exactly. So their plan is to add this granny flat immediately. So what they’re going to put in the lease agreement while they’re getting that main dwelling that they’ve just renovated rented out is is a clause that states you can accept this property, but we are going to be adding a granny flat in the backyard. And what Brad and his friends have also done is added a six foot colorbond fence separating the side of the house and part of the backyard. So when I was there, I was just like, Okay, cool. You like this is just the house because I hadn’t been there before that. But then they’re like, Oh no, we’ve got the space for the granny flat out in the backyard, we’ve already put the fence up ourselves. And I was like, Oh, cool. So I went around, had a look. And they had so much space in the backyard for a completely separate granny flat. And they still had plenty of space on the main dwelling for some outdoor entertaining and some grass area as well. So I just thought it was the neighbor’s fence over to the other side, it looked really really good. That install did extremely well. And what they’ll do once they’ve got some tenants in this property we’ve already organized with a granny flat provider in Brisbane, a fixed price contract on a brand new two bedroom, one bathroom 55 square meter granny flat at $120,000. So they’re going to get cracking with that and add it in the backyard. straightaway. Now, all permits and approvals are in place for that one already. So construction is pretty much due to start within the next month, which is awesome. And they’ll expect to have that construction completed within 60 to 70 days. And then they’ll expect to have tenants in that granny flat out in the backyard within one to two weeks after construction is completed there. And from indications by the property manager we’re expecting if the $300 per week on the granny flat.
Yeah, so I’m just writing down some figures here you got effectively 420 in terms of investment for the front dwelling, and then 120 for the granny flat making the total about 540,000. And then rental income 440 potentially for the front and then 300 for the back making that 740 per week. So that’s pretty cool. That’s pretty cool. I’m just gonna go into property tools and work out what exactly is the yield on that, because I know some people will, will want to know, but that’s definitely gonna be over a 7% rental yield just looking at it. They must be pretty excited for all of that to go through
fish oil and like these guys hadn’t done much investing coming into this purchase. And I was really happy to say that they were willing to get a little bit more active and get involved with this property, which was really exciting. And it’s nice to know that even though this is their first project, they had a great team of people around them, helping them secure the property, get those property managers get the granny flat providers in place and I was talking to them yesterday and I’m like you must just be so brain dead in so over this whole process from going through purchasing the property doing the renovation getting the tenants ready now adding the granny flat in the backyard and they were just like it was so simple like it wasn’t hot like it was hard work doing the renovation but they were walking into it expecting that and they said because they had a great group of people and team helping them and supporting them execute on this they just said everything just happened so smoothly and so easily so that’s always really positive that some people go in really nervous breaking out about these sorts of decisions in these types of projects but if you’ve got the right support around you it’s much easier than a lot of people think because it sounds like a lot of work but when you’ve got that team it makes it a bit easier
yeah and the rental yield on that i got it at 7.13% if they if they get the rents that you’re talking about there so and definitely definitely looks like it would be in a positive cash flow position especially given current interest rates are so low so it’s really yeah really exciting for them i’m sure they’re super pumped how well things have gone hmm yeah that’s
they’re so excited they’re really looking forward to getting tenants in the property and just letting it do its thing so they can focus on their next project but yeah it’s allowed them to achieve all of their property investment goals get positive cash flow being a good market at the right time where they’re likely to see some really strong long term capital growth and yeah it’s really really exciting
we just thought that would be a really exciting client story to share with you guys if you liked this segment please give it a thumbs up and also leave a comment in the comment section down below if you want us to keep this going and if you want us to talk about more of this sort of stuff i definitely find it extremely inspiring to hear it it’s also very exciting to just hear how it can be done and how straightforward it can be especially with the help of a buyer’s agency team like yourself or whether you do it by yourself just the idea that you it can be so simple purchasing a property doing a renovation as you said they’ve already put the fence up so when the tenants are looking at the front house it’s very clear what what they’re getting and what’s going to be allocated to the granny flat and then looking at the numbers there it’s really exciting as well to see that these people are going to be in a positive cash flow position which i love positive cash flow because it means if you lose your job if things happen in life the property continues to pay for itself continues to pay itself off and can actually provide you with extra cash flow if you need it during those times of need and then obviously yeah being in a good area as well being primed for that long term capital growth into the future
yeah so super exciting if this is something that you’re interested in doing then simon and ben and the team over pumped on property do offer free strategy session so if you want to get on the phone to them talk about your situation and how you can invest in property and achieve your investment goals that’s a complimentary strategy session where you can just really get clear on that and what your next steps are so go to onproperty com.au and you can learn more about that session over there and book a time that suits you but thanks so much simon for sharing this client story
and i hope everyone enjoyed it i will link up to the story that i did with simon about him buying his first property so that was kind of storytime but that was before we started this segment but a link up to that one so go ahead and check that out otherwise until next time stay positive