If we wanted our 4 kids to have the same opportunity as we did to buy a home in a decent suburb, we needed to employ some leverage.
We have used renovation to solve a range of problems that we face as a family, this was just another opportunity.
We’ve never been in the habit of handing out cash to our children, they have made their way in the world very competently and we are not so arrogant to think they won’t make it without us.
We figured that there were a lot of upsides to doing a project with each of the kids to help them without it coming out of our pocket.
So we came up with the Avocado Smash strategy – where we pool our resources with each of the kid, do a renovation together and split the profit. It’s a win/win in that we give the kids a decent chunk of money towards a home.
We committed to each of the children being $100k better off so we needed to decide on a strategy and a property to deliver that.
The first cab off the rank was Hannah – our eldest
We decided on an apartment flip with her because we were both time-poor so it needed to be something close to home that I could do with my eyes shut.
Generally, we work on a 10% profit for an apartment flip. And we always like to do more than a purely cosmetic renovation so that we really up the value.
Hence, we bought a 2 bedroom, 2 bathroom apartment in Moore Park Gardens.
Here is a list of the Improvements
Created a master suite by sectioning off one bedroom and bathroom from the living room with a huge barn door and building a walk-in wardrobe.
Second Bedroom and ensuite
Replaced and relocated the wardrobes to frame the window and added a master suite.
We removed the existing breakfast bar that cut the room in two and replaced it with an island bench for a more open plan look – making the area look more spacious.
Reworked the cabinetry to create a more functional utility room.
Heating and Cooling
Installed a reverse cycle split system in the living room and timber ceiling fans in the bedrooms.
We concealed the A/C compressor with slatted timber to create an area for the barbeque and we laid click together decking over the dated tiles.
- Placed new joinery in kitchen, bathrooms, bedrooms, and laundry.
- New composite stone benches, waterfall, and splashbacks to kitchen and laundry.
- Installed new appliances including a wine fridge.
- Both bathrooms completely renovated and tiled to the ceiling.
- Replaced bath with a double shower in master.
General cosmetic improvements
- New ceiling in some areas to allow for repositioning of lights.
- Installed new lighting throughout.
- New Powerpoints and light switches throughout.
- Placed new floor coverings.
- Put-up new curtains throughout.
The main challenge was the time it took for strata to approve our plan. We were able to reduce the cost of holding by furnishing and renting on the short-term market.
The Profit Split
We made more profit than expected. And so we split the profit: $100k to Hannah and kept $55k for our retirement.
|Purchase Price||Buying Cost*||Holding Reduced**||Renovation Cost||Selling Cost***||TOTAL||SOLD||PROFIT|
** Interest rates, utility, etc. – Holding costs reduced by short-term letting while waiting for approval
*** Stamp duty, styling, etc.
In under 12 months, we had Hannah on her way to finding her first home.
After a few auctions and months of looking for the right property, I am pleased to report that she has just settled on her first family home and we couldn’t be happier.
If you would like to find out more about our “AVOCADO SMASH” STRATEGY and how you can Fund Your First Flip, check out our events page HERE.