Have you always dreamed of quitting your day job and developing your skills to renovate for profit and become a professional renovator?
Are you wondering what it takes to make the leap from being a hobby renovator to achieving success in renovating for profit? In this article Bernadette Janson outlines the steps.
And first, why would anyone want to give up the security of a weekly paycheck?
The answer is often pretty simple. It can be boredom, to realize unfulfilled dreams or to move away from a toxic work environment. The other attractions to quitting your job so you can renovate for profit are the need to be more flexible to care for people we love without sacrificing income.
Renovating for profit is a very effective way to increase, or replace your income after quitting your job, without working full time and taking control of your income-earning capacity.
At The School Of Renovating we mentor women who often fall in love with renovating. Sometimes they don’t take decisive actions until later in life. They have a flair for creating beautiful spaces to live in but they stumble when it comes to bringing it all together and making it profitable. I believe women must look after themselves financially to avoid coming off second best when their partner dies or their relationship breaks down. We should all have the capacity to stand on our own two feet financially.
Renovating is fun!
It allows you to make money doing something you enjoy and still have the flexibility to have time for other things and people you love. It takes time to build up your renovating for profit business to the point when you can decide about quitting your job.
How fast you can gear up depends predominantly on
- Your access to finance
- Your time availability
- Your willingness to invest in a professional property buyer
The School Of Renovating Three Step System For Quitting Your Day Job And Renovating For Profit
I recommend using our three step system to set yourself up as a professional renovator, and put in the hard work so that you can walk away from your job knowing you will be making an incredible income from your passion.
Step #1: Set up your renovating framework
Your renovating framework is all the structures that support you in your renovating business. It includes your professional team – the brains behind the business. Your team should include:
- Property accountant
- Property lawyer to review the contracts on the properties you buy and to manage legal issues that arise when buying and selling properties.
- Financial broker to help you secure finance without your credit record being negatively affected.
- Buyer’s agent to help you source your properties.
The second leg of your framework is creating a legal entity – the entity under which you are going to operate. It may be a trust or a company. Your property accountant will be able to advise you on setting up the correct legal structure. It is not advisable to conduct your business under your personal name. Having a legal entity reduces the risks involved in running a business. It also reduces the amount of tax you will have to pay. Once you are making more than $37 000 you will pay a higher tax rate as an individual than you will as a legal entity.
The third pillar of your renovating business structure is your financial framework. I prefer to have an investment loan of 80% LVR, but you can get higher. I don’t because I don’t want to pay lender mortgage insurance, unless I absolutely have to. Aim to have between 30% and 50% of the value of the property in cash or equity. You need both of these financial elements in order to be able to complete your first project.
For example, if you are looking at a property for $800,000, you’re going to need a loan for $640,000, and you will need to have about $300,000 cash to be able to complete a substantial renovation.
The financial requirements are often the biggest stumbling block for people who want to get started in renovating for profit. If you don’t have the necessary cash available there are two ways you can work around it:
- Consider doing a joint venture and partnering with someone who may not be able to get a loan, but has the cash.
- Airbnb arbitrage: You rent properties and list them on Airbnb. You pay rent to the owner and you keep the difference between what the guests pay and the amount you have to pay for rent.
Step #2: Build your renovation muscle
Once your framework is in place, it is time to get stuck in and do your first renovation. It helps to have a system in place to ensure you make a profit. Over the last thirty years I have developed a system we call the $100k System, which follows a process called the cosmetic plus renovation. To really make money you need to do more than just paint the walls and redo the kitchen. Changing the floor plan takes your renovation up a level and makes it possible to maximise your profit.
There are three things to consider when setting up your systems. You will need:
- A system for managing your trades. It is important to build a good trade team. The better your trade team, the easier your work and the greater your profits.
- A system for managing your budget
- A system for doing the right renovations
Part of the process is making sure you have a solid strategy: buying the right properties in the right area and keeping an eye on what is happening in the market. The system doesn’t take long to learn and once you have your first project under your belt, something special happens: Your confidence starts to bloom. And then your capacity starts to grow.
Step #3: Scale up
Once you’ve got that process; you’ve got your professional team, and your trade team; you’ve got the system or the recipe to work from; and you’ve done two or three projects, then you are in a position to be able to think about scaling. It is important to keep your wealth-building going. It is what is going to hold you in good stead in your later years.
There are many ways you could scale your business such as:
- Micro-development projects where you buy a property with a house on it, subdivide and build another property or two on the land.
- Build up a portfolio of your own Airbnb properties.
- Multiple joint ventures.
Use Our Three Step System To Make A Living From Renovating
Set up your renovation business framework, build your renovating muscle and scale up your income to start making a profit from renovation. Depending on where you start and how much access you have to finance, the process can take anything from six months to two years. If you are committed it can happen quicker.
Once you have your first project under your belt, your confidence will start to grow and your business will go from strength to strength. Renovating is an extremely fun way to make a living. It is about designing your life around what you like to do.
If you want to meet up with a group of savvy renovators come over and join the She Renovates Facebook group. It is full of (mostly) women who are working hard to make their dreams a reality, making a great income through renovating for profit.
Flipping Property FAQ
What is meant by flipping property?
Flipping property is where you buy a property, renovate it and sell it as soon as the renovation is complete for a profit. Profits vary, but the minimum profit for a well-executed flip is 10% of the property value. However, profits can be much higher.
What are the risks of property flipping
The main risks of property flipping are market fluctuations, and budget and timeframe blowouts. For successful flipping, you need to be able to manage the various aspects of the renovation skillfully.
How do you flip a property?
To flip, you need to buy a property with sufficient potential for adding value on a tight budget. By managing the renovation process to completion, styling and selling, you can bank the profit.
Is it worth flipping houses in Australia?
Yes, flipping is an exciting strategy that enables you to renovate tired, run-down doer-uppers and sell for a profit. You can make a profit in many locations in Australia, but not all.
Is it worth renovating before selling?
It is always worth renovating before selling unless your property is a potential development site. The extent of the renovation will vary according to the property’s condition, your skill level and available funds.