Costing out a Renovation

December 13, 2011

Renovate to Sell

When I have a property under due diligence, I ask one of my property managers to meet me at the property of interest with one of his or her maintenance contractors (these guys own their businesses but use subcontractors, e.g. builders, plumbers, electricians etc). I tell them what I want done to the property, and they give me a price then and there. The advantage of using one of my property manager’s maintenance contractors is that not only is he is an expert at quoting, he can also get his team organised immediately.

Trying to do all this yourself is a logistical nightmare – not only do you have to find the tradesmen, but you then have to co-ordinate them to be there at the appropriate times. It’s also highly likely that you’ll have to wait for weeks before any of these people will become available to start work for you in the first place.

The other way to figure out the cost of renovations is to talk to a coach or another experienced property investor.

You might well ask why I don’t do the work myself, especially if they are not major renovations, but from the beginning I knew that my time was much better spent doing deals. In the 120 hours it would take me to renovate a property I might do five deals and make $20,000 on each one. As I’m sure you’ll agree, this is a far more profitable use of my time, especially as I have no particular skills when it comes to building or renovation work.

In order to be a successful property investor, you need to leverage your time – at all times. The word leverage is actually a mantra that I keep in the forefront of my mind when dealing with each and every aspect of my investing, and I suggest you do the same: think leverage, leverage, leverage!

Paying for the renovations

The easiest way for me to pay for renovations is by using my revolving credit facility because once I have the property refinanced after the improvements have been made, I’m immediately in a position to pay back the RCF and can therefore avoid incurring the higher interest costs.

If you don’t have an RCF, however, there are other ways to fund your renovations. One of the best ways is to apply online for five or six different credit cards, each with a limit of $10,000, and all on the same day. It’s likely you will get approval from three or four of them and hey presto – there’s your renovation money for several properties! The reason for applying to all the banks on the same day is that each one will carry out a credit check on you. And while a credit check will reveal that you have applied for finance with another bank, that information is only updated once a day. Therefore, when all five or six of the banks check, no other credit card applications will show up. But if you were to apply over several days it would be a different story! Of course you must be in a position to repay what you owe on the credit cards, and if you renovate and refinance quickly and efficiently as detailed in this book, you should have no problem.

If for whatever reason you prefer not to use this method, don’t overlook the possibility of taking out a personal loan from your bank, or borrowing the funds from co-operative friends and family members.

The above post is based on the book “The 15 Million Dollar Man” by Sean Wood, to read more click Property Investment and download 2 free chapters.

For further reading on Property Investment NZ, click on the articles below:

Setting Goals for Financial Independence – click here

Tips for Becoming a Property Expert – click here

Buying Rules for Property Investment – click here

5 Tips to Add Value through Renovation – click here

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