In this episode I will share with you “The Pareto Principle” and basically it means that for many events, roughly 80% of the effects come from 20% of the causes. And that principle applies to all aspects of our life.
How does it apply to a renovator? When you are doing a renovation for profit, the small amount of work like putting together the deal on your projects can make the biggest impact to create that 80% of your result.
Listen to Episode 82: The 80/20 Rule Of Renovating Profit
Podcast: Download (Duration: 23:29 — 23.65 MB)
- [00:00:43] Online Bootcamp update
- [00:02:11] Strategy call
- [00:03:09] Hands Across The Water
- [00:06:36] The 80/20 Of Renovating Profit
- [00:07:46] The Pareto Principle
- [00:10:08] A reno project
- [00:15:57] Applying the 80/20 rule
- [00:17:52] Taxation implications
- [00:19:02] Feasibility
- [00:21:05] New podcast reviews
Hands Across The Water
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Hello, everyone, it’s Bernadette back with another episode of She Renovates. And today I have a guest in Kathryn Fantov. Kathryn has a business called Innovative Property Advocates. She has real estate background. And I’m going to let her actually elaborate on her role.
But before I do that, I guess the reason that I’ve invited Kathryn on is because I have noticed that with a lot of our students, when they go to market, often they struggle with the decision around what agent to choose and the decisions. It’s quite a stressful time going to market because you feel like you’ve got the weight of the world on your shoulders when you are making decisions around office and a strategy.
And so Kathryn has a service that helps with that. And I wanted to flesh that out a bit more because a lot of people don’t know about this. And I actually think it’s a god send because for anyone that’s not confident. A lot of renovators and so on have bought and sold a lot, I bought and sold a lot. And I still get value out of having someone with that expertise to really bounce ideas off when you’re making those key decisions. Because often everyone is clouded with emotion at that time or their months of hard work have gone into this project they want the best outcome. And sometimes that can produce that emotion, can produce decisions that aren’t the best for your project. With that long introduction over, welcome Kathryn.
Kathryn Fantov: Thanks, Bernadette.
Bernadette: And I’m just wondering whether you can first tell us a bit about your background and what you do.
Kathryn Fantov: Okay. So I’m a licensed real estate agent. I’ve been a licensed agent since 1992. So I’ve seen it all, done it all. So when it comes to dealing with real estate agents and I really know what goes on inside their head. So basically what we do, it’s called seller’s advocacy. And it’s basically, it sounds like, is someone who has an intimate knowledge of the buying and selling process. So they know the process inside out. It’s usually an ex real estate agent or it may not be. But obviously that’s the best way to go having a real estate background. We work exclusively for the seller. So we don’t have any interactions directly with the buyers. We engage the agents to do that. They take care of that.
We take a more holistic approach to the sale prices than, let’s say, a real estate agent would. So we start right at the beginning from helping prepare the property for sale. So that could be by way of buying renovations. It could be repairs and maintenance. It could be property styling, that type of thing. So we give advice around doing that. We also establish a realistic price estimate for the property, because when you’re interviewing agents, the agents are obviously going to tell you the highest price. That may not always be achievable.
Sometimes it can be very difficult to know who to trust. It can be unless you know your marketing side out. That’s why you really need to do your research. So that’s where we come in. We establish a real estate market estimate for the properties. We help you choose the right real estate agent. We take care of that whole interview process for them. And then we look at which sale method is better for you. Should it be auction or private treaty? What’s gonna get you the best results? And then we basically work with the agent throughout the whole process to achieve the highest price for you. So we keep the agent focused, we keep them honest, we keep the whole process transparent, and we take off a lot of stress from the seller.
Kathryn Fantov: We also I mean, people often say to me, “So how do you differ from real estate agents?” I kind of touched on it a little bit. So a real estate agent will in a transaction, they typically deal with a buyer and seller in the same negotiation. Sometimes that can be a conflict of interest. Whereas a seller’s advocate, we only deal with the seller. So there’s never a conflict. By having us there it actually leaves the agent free to do what they should be focusing on. And that is the marketing and dealing with the buyers.
Bernadette: Yeah. So I just want to dig in a little bit deeper. One of the things that I certainly see happen a lot, and I’m sure you would have seen this all the time. The seller’s expectations are quite high. And the buyers obviously they want to get it for the lowest price. And so an agent in his conversation with the seller will often, quote sort of the highest possible price he can within the law in order to get the listing because listings are bread and butter for them. Is that correct?
Kathryn Fantov: Correct.
Bernadette: And often then they spend the campaign trying to marry the two sets of expectations up. And often that can be quite a devastating experience for the seller. So I’m guessing that’s part of your by getting a realistic value, you sort of negate that process.
Kathryn Fantov: Definitely. Exactly. Because although we are working with the agent we are completely independent of them. So we have no benefit in telling the seller that I’ve inflated the price. We’re all about telling them the truth because we want to make the process as streamlined and as efficient as possible. But if you go and over inflate their expectations from the beginning and let’s say in the first week, they get a great offer. But of course, it’s lower than the initial expectation and then knock it back. And then 3 weeks later, they end up selling low or even longer than that they end up selling for less than that offer. That happens all the time because their expectations are set up here. And until they go through that, agents call it a conditioning process where they for the next few weeks, they just keep knocking them down in their expectation. “Oh, the market’s changed in the last two weeks.” It’s just unbelievable some of the things that they can say and having us there is we’re basically an extra layer of security for the seller and also add a little bit more control to the process. So having someone there that knows exactly what they’re doing to guide them and give them honest advice really, really helps.
Bernadette: Yeah, I agree with that. So the other thing that I have seen happen, and I think this is also another case for you. So I’m just a walking ad for you, Kathryn, just saying. One of the things that can really kill a sale is pitching the guide too high. And that’s something I see quite a bit with renovators. They’re very attached, and they feel that if their guide is too low that they’re never going to get the best price for the property and that just kills their opportunity for getting the best price. Would you agree with that?
Kathryn Fantov: Most definitely. I mean, I presume that most of the times they’re guided by the agent insofar as the price range. And that’s when I’m doing my interviews. That’s a question that I always ask. I delve quite deeply into the pricing strategy. I’d like to see how they plan to what price trends are going to be quoting to people, how are they going to back up that price range? Because a lot of agents just quote a price range, but they’ve got nothing, no comparable sales or anything to back it up. And these are all things that they need. I like to make the prices as easy as possible for buyers and as transparent as possible.
So if you’re going to be just quoting silly prices, even if it’s too high or if it’s too low, you’re causing on both sides. So you’ve really got to be in the middle. But unfortunately, the way the market has been trained over the years is that everybody will still add 10% whatever the agent quote everyone will still add 10%. So it’s hard to even if you are honest about your price range. People will add 10%. Buyers will say “Oh, that’s too too much for me”. It’s a really fine line.
Bernadette: Yeah, exactly. One of the things. So over the years, I’ve always felt that the early offers are usually the best. And it was only recently that I really figured out why. And I think it’s because the early offers come from people who have been in the market and searching for a long time. And so when they come in and make an offer, often sellers will think, “Oh, well, I’ve got that one. So the better offers will come in.” But often that’s not the case. And it’s a really unfortunate situation because often you could be turning down the best offer you’re going to get. And then, months later, take something that’s much, much lower.
Kathryn Fantov: That’s right. You just have to know how to manage that process and to manage the buyers. I mean, I normally tell my clients that I like to have at least 2 sets of open houses like 2 weekends before we will make a decision on, let’s say we get an offer in the first week. I’ll still say, look, we do still want one more open house and just keep them there. Once you get a good number of people through and as long as the agent does their job well and they do the the follow up calls and they ask the questions “Well, okay, if you’re not interested in the property, but what do you think the properties worth? Just out of interest?” And to get that type of feedback, too. Because that’s important. A lot of our agents don’t do that. And I always ask my agents because I want that in our report that they give give us every week because it’s even though they’re not interested, they’re the ones who are going to give you the most realistic and honest feedback.
Bernadette: Exactly. And that feedback is critical. Like we’ve moved furniture based on feedback. Like the feedback is “Oh, the living room is too small.” So I look at it, “Too much furniture. Get all the furniture out.” So that is critical because you can adjust the results along the way if you know what the objections are.
Kathryn Fantov: Yeah.
Bernadette: Now I know one of the things that will be running through the heads of people listening to this is well “I’ve got to play the agent 2% or whatever of the sale price by engaging a seller’s advocate. It’s going to increase the cost of the sale.” Do you mind sharing how you structure the fees?
Kathryn Fantov: The interesting thing about the services, it actually doesn’t cost the seller anything extra. And that’s because we take a small percentage of the agents fee upon settlement. It’s quite common in the industry. It’s not as a referral fee, or an introduction fee. And if you know much about any of the websites out there, like rate my agent, open agent, those websites, they actually charge the agent 20% of their fee if someone that they send to them like an email address only. Signs up with them and they charge them 20%.
For what we do, we’re actually doing half of the agent’s job. Then we’re just charging a little bit more than that. So the agency used to disrupt us, I suppose, in the real estate industry, because it’s an area where people say this is a lot of money to be made. I guess a lot of opportunity. And the agents at first, they sort of see us as a little bit of competition because we take away the control that they can have over the seller. But once they work with us and they see how much easier it is for them because it leaves them free to do what they do best. And that’s as I said before, dealing with the buyers and the open houses and they actually love the process.
So it’s really a service that it’s kind of changed the way people sell property because it adds that extra layer of security and it doesn’t actually cost to sell it anymore. I wouldn’t say to use someone like us who they can trust 100% to guide them through the whole process. That’s kind of the question.
Bernadette: Yes. Well, that was a bit of a leading question. I have to admit it. I think and particularly for someone who is feeling quite nervous about the whole transaction. It’s a brilliant service. And the other place where I can see value for us is in areas where you don’t normally operate. I had a sale last year in a property that we renovated in Queensland. And I did the research on the agents and I had figured out that I had the best agent for the price bracket that we’re in and when it came to setting the guide he wanted to, I said to him, “I do not want I’m not overly ambitious about what we get for this. I want to pitch the guide at a fair price. I don’t want to have high expectations.” And so but I’m going to have to be guided by you because I don’t know the area at all. Because I bought her through a buyers agent and he pitched the price at $20K more than what we had in our feasibility. And we went 2 weeks without oh, I think we had people through. But and it just didn’t make sense. And I went back to him and said to him, “You’ve got to lower the guide. It’s ridiculous.” And I said, “Why did you do that in the first place?” And he said, “Oh, sometimes we fluke.” I really should have had a seller’s advocate there.
Kathryn Fantov: I mean, it’s the largest asset that people will ever sell. And just to rely on what one person says. It’s pretty crazy.
Bernadette: It is. Yes. It’s very difficult. So do you have any examples of people that you’ve worked with that have had particularly tricky issues?
Kathryn Fantov: Well, I wouldn’t say tricky, but I find it. We get a lot of people come to us that. They don’t like dealing with agents or they want to spend some money on the home, but they don’t know where they should spend it. So we had one client come to us and he said, “Look, I’ve interviewed 3 agents. He said I wanted their advice on what to do to the house. I’m prepared to spend about $10K or $20K and all that they could say was, “Well, just clean up, de-clutter. Let’s get the house on the market as soon as possible.” So he just felt like he couldn’t trust them. So he came to us and we had a look through.
And basically I saw that there was potential to add a fourth bedroom. So the home that she purposely built it for themselves. So the whole upstate’s area was a master retreat and it was 3 bedrooms. So we actually split up, I drew up the plan myself. We split up the whole top floor and added an extra bedroom up there. So they still had their walk-in wardrobe. I mean, the place was massive. So that opened it up to a whole different market. Just to give you an idea of the difference that made or the other thing we did was the driveway was dirt. So we just got them to gravel that up and put some pebbles and things. So they spent about $21K. And the agents that came through initially quoted around $800K that they could get around $800K for the property. After we did the works. We actually sold it for $920.
Kathryn Fantov: So they saved, they spent $21K they made an extra $100K plus we saved them about $5K in negotiating the sales commission and the marketing. So that was a pretty excellent result.
Bernadette: That’s brilliant. Well done. And so you can still negotiate the commission, even though you’re taking a referral fee?
Kathryn Fantov: Yes. So that’s the other question I get a lot is do you add your fee on top of as a commission? Definitely not. We always make sure that our clients are paying a competitive selling fee for that location. All areas in Sydney are different. They’ll charge differently. So we understand what the going rate is in the area and we make sure that we’re not over charging the client so the agent gets less fee. But they’re doing less work.
Bernadette: Yes. And you’re bringing them the listing in effect?
Kathryn Fantov: And I’m bringing them a listing on a silver platter because it’s already presenting beautifully. It’s already styled. It’s already renovated. Everything’s already done. And what I say to them, and this is kind of like a dream for them is, “Well, I’m going to make a decision in 2 days time and you’ll have this listing by next Monday” so when you put it like that, they’ll do anything. And I always leave the negotiation of the fee until we’ve decided on which agent. So I never base my decision on what they say they can get for the property for obvious reasons or how much commission I charge because I know those two things. One is variable and the other one we can negotiate.
Bernadette: Yes. Excellent. Okay so now another question that I’ve been asking everyone at the moment is what’s your take on the market at the moment? So we’re just coming out of the Covid lockdown, and there’s a lot of differing opinions about what’s going to happen. I’m curious to know your thoughts.
Kathryn Fantov: Well, wouldn’t it be good to have a crystal ball? I don’t believe the doomsday is going to drop, 20%, 30%, because the property market is always people who need property. They always need somewhere to live. There’s always people in circumstances that perhaps may force them to sell. So there’s always going to be a turnover of property. And I think the fact that interest rates are so low is what’s holding up the market. The other thing I think is holding it up at the moment is the banks forcing of repayments that’s helping as well. I’m actually going to be doing an interview myself tomorrow, actually, with a mortgage broker just to get his gauge on how he sees that’s going to look when that dries up. And what will actually happen. What the banks are going to do? So I guess it all depends on that and what’s going to happen. I think that I’m going to be looking to buy soon. I’m keeping my eye on the market at the moment. And I think as soon as they announce that the stamp duty is abolished, I’m hoping that they’re going to do that.
Bernadette: That’s when they tell you that the tooth fairy is real. I’d be surprised. But I guess stranger things have happened.
Kathryn Fantov: Yeah. Well, I think it would definitely be a big boost to the market. And I think that people are waiting for the outcome of that. But all parts of Sydney are different. And I think that’s probably why you might have differing views on what’s actually happening now, because some areas have a lot of supply. Some have limited. Some are a seller’s market. Some are a buyer’s market. It’s really, really hard to tell. But I guess if you’re buying to renovate the usual supply and demand. So if you’re buying in an area that has a good differential between renovated and un renovated properties and you can pick it up for a good price because of what’s happening at the moment, you can add exceptional equity straight away to the property.
Bernadette: Exactly. Yeah. Actually, I was having a chat with my agent yesterday and he said that they have got there are record pre approvals in well their mortgage brokers are telling them. So there’s a lot of people getting pre-approved. I’m guessing that they’re doing that to try and get in before things go pear shaped. And he also said that I’ve got a lot of people on their rent roll, that retirees that have an investment property and are living with diminished income because they’ve had to reduce the rent and would like to put their property on the market, but have to live without the rent to do it. So it will be, I think that’s probably investors is probably going to be where there is going to be a little bit of movement and more stock on coming on the market.
Kathryn Fantov: Yeah, most definitely.
Bernadette: Yeah. Okay. So if anyone wants to contact you, is there a particular area you work in?
Kathryn Fantov: Yeah, I’m focusing in the Eastern suburbs. Sutherland Shire in a ways. St George.
Bernadette: Awesome. So if anyone wants to get in contact with you. How do they do that?
Kathryn Fantov: So you can go online at innovativeproperty.net.au or kathryn@ innovative property.net.au or my number, 0411522233.
Bernadette: Beautiful. OK, so those details will also be in our show notes. So if you’re needing if you couldn’t get them down, then you can go to the show notes and there’ll be a link there. So is there anything you want to add Kathryn?
Kathryn Fantov: I guess the types people that use use us as sellers advocate and ask me that. Are people who are time poor, who don’t have a lot of experience with buying and selling, as you said before, have said I have a bad experience with real estate agents. Trust is an issue. But we’re also doing a lot of work with deceased estates and family law. People who are getting divorced when there’s multiple parties involved we find that we act like a mediator and we help with the communication. We help to sort of keep it unified and keep everyone on the same page. So they’re usually the types of clients that we’re working with.
Bernadette: That’s amazing. To be honest with you, the deceased estate that’s definitely an area of need. I’m sure they all are. But when you’ve got more than one party making a decision, life can get very complicated. Can’t it?
Kathryn Fantov: It sure can. Among family that sometimes it can cause issues.
Bernadette: Yeah. Okay. Well, thanks for sharing your expertise with us. I think a lot of listeners will have found this very enlightening. And that’s it for today. So thank you, everyone, for listening. And I’ll see you next week.
Kathryn Fantov: Thanks, Bernadette.
Bernadette: Thank you, Kathryn.