More Tips on Real Estate Renovations for Homes from API

Time to hold

Though they were more than happy with the outcome of the duplex project, Paul and Cindy have changed their overall property real estate strategy in the months since then. Rather than renovating real estate and selling, they plan to hold from now on. The duplex halves would be worth another $50,000 each already, Cindy notes.

“We have in the past when we’ve renovated real estate properties always on sold them but we’ve finally tweaked that that’s probably not such a great idea because of capital gains tax, stamp duty and the like, so we’ve decided to start keeping the ones that we renovate.”

The Hendersons have made their decision with the aim of living off extra borrowings against their home equity gains. Paul explains, “Rather than sell our assets for our money, we decided to keep the assets and do ourselves three favours; firstly, we get to keep an appreciating asset; secondly, we don’t get to pay capital gains tax on what we make; and thirdly, we relive ourselvces of the need to instantly find another dump to do up. We’ve literally got rid of three problems by adopting that strategy.”

Paul and Cindy are well on their way to building an impressive real estate portfolio. They own 15 properties and homes and are about to settle on their 16th, with a combined LVR of about 50 per cent. They’re keeping busy with a number of real estate projects currently under way, including a triplex development in Perth, a house construction on a block in Busselton and a house and land packages in Karratha and Perth, as well as their biggest renovation real estate property yet at upmarket Carine in Perth’s northern suburbs.

Paul and Cindy say their accountant has sanctioned their idea of living off increased borrowings. It’s a grand scheme for a couple who only got their start in the real estate property world in 2003, after a wealth-building course introduced them to real estate property investing. In 2004, Paul and Cindy sold their office supplies business and devoted themselves to the property real estate game. “It’s been hammer and tongs at the property empire ever since,” Paul says.

Renovating for charity

At the suggestion of a real estate property mentor, Paul and Cindy recently teamed up with other real estate investment students to renovate a property for charity, as a result ofa challenge to raise $42,000.

“We decided pretty much the only way we were going to raise such a large sum was from a house renovation,” Paul said.

Paul and Cindy bought the house through their trust – for $205,000 – and again managed to negotiate a long settlement with prior possession. The real estate investment gropu then went about giving this “dump” a facelift. Some of the other real estate members of the group were very handy, so few tradespeople were required. A number of the suppliers gave discounts in order to help the charitable causes. Just 14 weeks after the purchase, the house sold for $285,000, with the selling agent donating her time.

“That was a really great result,” Paul says. “there were about $30,000 costs so there was about $50,000 to $55,000 profit from that.” The profits were split between the WA Children’s Cancer and Leukemia Socity and the Hebron Orphanage of India that was damaged by the Boxing Day tsunami in 2004. All three groups were “over the Moon”, Paul says.

After their recent experiences, Paul says he and Cindy would be perfectly happy to invest with others again, adding “you just have to partner with someone you trust like you trust yourself.” I’m happy to do it but only under very strict guidelines because there’s so much scope for stuff to go wrong. You never quite see people’s nature as when money’s at stake,” Paul says.

That said, Paul and Cindy stress there were no problems during the duplex renovation. It just opened their eyes to possible risks.

“Imagine for one moment if we’d put $20,000 of costs into the real estate renovation and at that point something went wrong with the transfer of ownership such that the sale couldn’t go through,” Paul says. “How keen would the other people be to say, well okay, we were going to split the profits, now I understand that we have to divvy up the losses too. They might’ve said, no, we did the work, you did the finances and the finances this time have lost $20,000. Better luck next time but you’re not getting anyh of my money.”

API Interactive
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