The government grant is providing work for tradesmen that provides an incentive for anyone who wants to take advantage of this to build your family home and increase your asset base.
Okay, so welcome, everyone, today. Yesterday, Jo, and I think it was yesterday, it might have been Wednesday, wasn’t it? I can’t think about it for a while. I did a podcast episode on what we knew about the government’s plans for grants for building. And wouldn’t you know it? This morning, they released the details. It’s quite easy to find the details. But I thought I’d go through it just to make sure everyone is across the issues or across what’s available. Basically, what the government wants to do is to provide work for tradesmen like carpenters, plumbers and builders, and architects, which we’re very happy about. So basically, that’s $25K available for eligible singles and couples to do renovations or build a home.
And that has to happen, well, a contract has to be signed between June and December. Obviously, you can’t actually get the work done at that time. But you need to have a signed contract with your contractor within that window. So it’s June and December of this year, of course. And so which is great because it provides an incentive for anyone. So basically, unlike the first homeowners’ grant, you don’t have to be a first homeowner to actually take advantage of this. It just does have to be your family home.
Now, I’m just going to go through the details. So basically, we are in recession at the moment for the first time in nearly 3 decades. And so this is intended to increase work for builders or the building industry so that it keeps the money going around. Now, people that are eligible for the grant. So if you’re single, the cap on income is $125K per year. And if you’re a couple, then you need to earn less than $200K a year and then you can access that grant to do building works. So the contracts need to be executed between the 4th of June, which is yesterday, and 31st of December. So quite a decent window to get organised.
To qualify, you need to be building a principal place of residence or renovating a principal place of residence, and the upgrade has value can be between $150K and $750K. If you’re spending less than $150K so if your building contract is less than $150K, then you won’t be able to access the grant. So for a lot of us that we do some DIY stuff, that won’t count. You won’t be able to access the grant to do work yourself. You will actually have to engage trades and a builder to do the work because you will have to present evidence of that to be able to get it.
So the existing properties, this rules us out unfortunately need to be worth less than $1.5M for the renovation, and the contract has to commence within 3 months of the contract date. So you can’t just get a contract drawn up and then rescind it. So they’re covering off as many loopholes as they can. They can be used for kitchen and bathroom renovations carried out by licensed contractors. Cannot be used for things like swimming pools, tennis courts, outdoor spas and saunas, and detached sheds and garages. So they’re really wanting us to use tradesmen and contractors to do it. And they cannot be claimed for investment properties or owner builders. So, as I said before, if you’re planning to do some work yourself, you can’t claim the grant.
But that is a great shot in the arm for renovators. And renovating your family home is one of the smartest things to do because it builds your asset base. And like I’ve mentioned it before, that Stephen and I have really leveraged our family home to do really build a career in renovating. So, you know what we did? We set up a line of credit, which these days is not so easy to do, but you can still do it. And that forms our bucket. And we use that to be able to pay the deposit and the renovation and the holding costs for a project. And so once the projects finished, the money goes back into the line of credit, which is secured against the house. And then you take your profit and you go and do something with it.
And so by doing a renovation on your home, you could really seriously increase the value. But so by the time you spent the $25K and also the $150K, so you’re talking about $175K. Firstly, you need to be able to get a loan for that money. So you need to have the capacity, the serviceability to be able to cover it. So not everyone’s going to be able to take advantage of this. But then you want to make sure that you’re not overcapitalising. Often, they say the marketers tell us that if you say something is free it makes customers irrational because they do whatever they can because that word free triggers a reaction to a desire to have the thing. So if this is free money, that’s going to have quite an emotional impact. And it’s very important that if you are getting that free $25K. And it’s motivating you to overcapitalized on your home, then that’s counterproductive.
So I’m really curious to know, is anyone on this session today, are you planning to claim on the homeowners’ grants, the renovation grants? Have you got started drawing up plans?
It’s really interesting because we had dinner with David on Monday night. And we’d been planning a reno on our own place for quite a while because the entrance, we live in a warehouse and the entrance is not that great. And we have an Airbnb on the ground floor. I really wanted to improve the entrance so that meant moving a stairway and basically, we want to put a lift in for when we’re old and decrepit. And so I’ve been talking to David for a while and what happened is the plans get, we start with modest plans and then they sort of grow. And anyhow, by Sunday night or Monday night, I’m completely moving the kitchen. And so I’ve gone from just a really small sort of moving of a door and changing the stairs to I’m going full scale, move a kitchen. But I think it’ll I guess for us, we’re thinking we’ve got to make the decision, are we going to stay here or are we going to go and find something more conventional? But I think we’ve sort of decided that we like being here. And a lot of the homes around here have that quite narrow. It’s hard to get a wide property. And so we had 6 meters here so we want to really maintain that. So yes, we’re doing a reno, but we will not be getting the grant.
So, Lauren Yeo, you are. Plans finalised next week for builders to commence quoting. That’s awesome, and you just scrape in. That’s fantastic. So that really is a bonus for you because it means that you were already planning the renovations and you’re gonna get a little cash injection.
What sort of reno? So the other thing, I didn’t read it out. But the other thing is they’re talking about substantial renos and substantial renovation is a term the tax department uses. So I’m not really sure whether there is some rationale there or not, because normally when we’re renovating for profit when we do a substantial renovation, that means that we actually have to pay GST on the sale price. And so GST is 1/11th of the sale price, irrespective of whether you made a profit or not. You think about selling a property and paying 1/11th of the sale price. So, of course, there are ways to reduce that so it’s very interesting that they’ve used that terminology.
I guess if you’re spending $150K, you are definitely doing a structural renovation because it’s hard to spend $150K on a cosmetic renovation. And if you spend wisely, then you should be able to add significant value to your home. So basically, I just haven’t had a chance to catch up with Jo today. But I will catch up with her. So we’ll still publish the episode tomorrow. But I will add an addendum to just let you know how this announcement actually impacts what we talked about.
But a couple of things that are happening. One that I’m really excited about is I’m looking at a property tomorrow. So one of our buyers agents let me know that there’s a deal that she thinks might work. And so I’m going to look at that tomorrow. So I’m very excited about that. We’ve been 6 months without a project, so it’s time. I’d really love to get going on something. So that’ll be a joint venture with some of our students.
And the other thing is that our Bootcamp is currently open at the moment. So whether you are renovating your family home or you’re wanting to renovate for profit. It’s a really good thing to do. Like, one of the simple things is you will save more than the cost of the Bootcamp in your materials because you will never pay full price for anything again or you will start buying wholesale. And that’s an incredible saving. So that’s just a really simple thing that you’ll get out of it. So if you are wanting to prepare for your reno, then that’s a really smart thing to do.
Now, the other thing that’s happening in the next few weeks is I’m actually doing a charity bike ride challenge. So up until 2 years ago, I used to ride in a charity ride in Thailand, 500ks over 5 days. And I broke my knee and kneecap and actually was quite debilitated for a while. And so I haven’t done it since. And of course, this year it can’t be in Thailand because of the restrictions. So it’s being done virtually. I’ve decided I’m not going to try and run. It’s 800 kilometers. I’m not going to try and ride 800 kilometers, but I’ll probably ride 2 or 3. And so as I’m going to Melbourne next week, so soon as I get back, I’m going to kick off with that. The ride has actually already started, but I’ve got a few other things that I’ve got to do. But when I get back from Melbourne, I will be pedaling away so that week the live will probably be off the bike, which will be quite fun. I think that’s all I’ve got to share with you today. Any questions before I head off? Okay, well, I’m going to declare the job done. So lovely to see you today. And I’ll see you same time next week. Take care.