In this live, I will talk about our latest joint venture project and where we’re at. Our new partner that helped create this opportunity and the process of getting set up.
Good afternoon, everyone. I’m feeling very sheepish.
Stephen and I came down to Melbourne with Hannah yesterday because I wanted to visit my mum and the only way I can see her is if we travel by car and we don’t get on a plane. And so and I’ve just lost track of days. So I should have been in here at 12:30. And so I am really, really sorry, but I’m here now. So I just wanted to, I guess, give you an update of where we are at.
A New Joint Venture Project
We put an offer in on a project the other day. I think it was on Monday. See? I don’t know what day it is. And it was accepted. So now we’re sort of going through the process of getting set up. I’m really doing this to put a project through property circles to test out the process of doing a joint venture through our new joint venture partner.
And so at the moment, I think there’s 5 people in it. And so I am going to be project managing the renovation. And anyone in the group that wants to come and hone up their skills will be doing that. And so we’ve got 2 serviceability partners and 3 cash partners, of which I am one. And so the project itself is really an interesting old 60s redbrick a 2 bedroom apartment in Randwick. And we’re planning to turn it into a 2 bedroom, 2 bathroom, as opposed to a 2 bedroom, 1 bathroom, plus study with an open plan kitchen. And so that will make a big difference to the value of it.
At the moment, the feasibility is showing around $100K profit. But I am acutely aware of the fact that in a couple of months the market may take a nosedive. So I guess our management of that is firstly, we need to be willing to, if that does happen, to hold it and not to force the sale because when you’re buying, renovating and selling, if you’re willing to do that, then it minimizes the risk because you just hold it for as long as you need to hold it. And because it’s in such a great location, I don’t think we’ll have any problems with either renting it out or Airbnb. We’re just getting the logistics set up now. So, of course, that means a legal structure and finalizing the finance and so on. And yes, so that’s pretty much where we are with that project.
A High Risk Strategy
And I thought I’d just talk about the measures for reducing risk because buying, renovating and selling is a high risk strategy. There is no doubt about that. And I think the thing that brings the risk into it is the fact that you rely on selling at a certain point in time, because as we know, the market comes up and down at waves.
And so if you buy on a peak and sell in a trough and like I was doing a bit of an assessment over like the last 10 years and pretty much every year, there is a reasonably serious change in the market that it will either go up or go down. That’s just the natural rhythm of property. So if you buy on the peak and you sell in the trough, then you’ve got to be willing to wait until it comes up again. And for the last at least 20 or 30 years, it’s always come back up. So I figure that’s a really good risk management strategy.
However, if your deal is not sound and the beginning, then well, waiting, might help it. You might have to wait a decade. So first thing, you’ve got to have a sound deal. And what that means is that you need to do the research on which your figures are based needs to be really accurate. And so, I’m actually quite lucky because I didn’t have to do the research for this because one of the buyer’s agents that we work quite closely with actually just came to me and she said, “I’ve found this deal. And I really think that it’s right up your alley” and she was absolutely right.
Doing Due Diligence
So, of course, then our due diligence was looking at how we would add value and so there’s quite a lot of structural changes that need to be made. So we need to open a kitchen, the kitchen to the living room to get that open plan look. We need to take out a wall between the toilet and the laundry to create a second bathroom. And also they’ve actually closed in a balcony and which has made the main bedroom landlocked. Now, the fact that they’ve closed it in is good because it basically gives us an extra room but we need to do something with that main bedroom, take the window out and change it to double doors because at the moment, it’s quite dark and not appealing at all. So by doing that, so that’s another bit of structural work that will have to be done.
And then when you’re looking at you think, well, what if we’re not allowed to take those walls out? But it’s highly unlikely, but what if. So we’ve got to have a plan B in case that’s that is the case. So what if we have to keep the kitchen where it is? So we’ve got a plan B for that. So that we’ve sort of tried to preempt all the things that could possibly go wrong. So the other thing that really is good risk management strategy is understanding all the taxation limitations. So if we had to pay GST on this project, that would pretty much derail the profit potential. So I’ve got to make sure that we manage the renovation plans so it doesn’t attract GST because when you’re selling a property that incurs GST. Unfortunately, your buyers won’t be too happy if you go and say, “This is so much plus GST, it just doesn’t happen” so it’s got to come out of the sale price. If that’s the case. So our deal is to avoid the GST.
And then there’s the execution of the project. So you want to make sure that that happens professionally and we manage our budget and our budget is adhered to and reflects the feasibility because one thing to have a budget, but then sticking to it’s the second thing. Yeah, I think that’s some pretty much it with projects.
So we kicked off our bootcamp this week, so it’s going over 8 weeks and that’s going really well. We’ve got some lovely new students and we’ve also got some students repeating, which is always good because we learn new stuff all the time, like we play with things. It’s funny, I was having a meeting with property circles this morning, actually, so that sharing of information, you get different ideas on how to manage things. So they’ve always struggled with doing joint ventures because some people can get a loan, but they don’t have any cash. Where we’ve worked that out. So we were able to work around that. And so anything that we learn like that, we’ve tied into our programs. And because we’re constantly testing new strategies, new platforms, things that are gonna help us to get where we want to go. It’s an awesome way to manage a project.
I think that’s about all I’ve got to share today. If you’ve got anything you want to talk about, whack it on the Facebook group and I’ll check in over the next couple of days. Because I’ve been traveling, I’ve been a bit all over the place and having late nights and just generally being quite undisciplined but I’ll check-in.
She Renovates Podcast
Now, this week’s podcast episode is I’ve got a friend you would probably know him. His name’s Nhan Nguyen and I’ve invited him to come in and talk about development because I think at some point in time, renovators get on to move on to development because it’s got a higher profit potential. And so we’ve sort of threshing out some of the logistics of developing for profit as opposed to renovating and like in some ways renovating and developing go hand in hand because often you’ll have a project that has a house on it that you can renovate and sell off and then just keep the land to develop.
And then next week, I’m going to do a podcast episode on using the current home builders grant, I think that there is a great opportunity there for either just homeowners doing your own home. It’s a brilliant opportunity for downsizes. So if you’re contemplating downsizing, I’m really going to be working through how you can make that work for you. And what better time to do it, to be honest. So thank you for watching. I am sorry I’m so late and unfortunately, that’s me. I’m a bit flaky sometimes, but I’m here and and I’ll see you inside the Facebook group. Take care.