Any market is a good market to carry out a renovation but Jane Slack-Smith warns against being complacent about how you do it, the type of property and the lack of detailed planning. Hear how it can go terribly wrong or rewardingly brilliant.
Kevin: With affordability nowadays a key issue, we’re finding more and more people are preferring to stay where they are and renovate or look for renovation to give them some really good cash return in an investment property. But is that the correct strategy? Is this the time to be doing it? That’s a great question to ask Jane Slack-Smith, who joins me.
Jane: Hi. How are you going, Kevin?
Kevin: Good. Good question that one, isn’t it?
Jane: It is actually, because I guess the thing about renovation is it’s been a strategy that I’ve used through a number of different cycles, but when things change, it makes you step back and reassess the strategy that you may be committed to or look at new strategies. So, I still think renovation is a strategy that can be used.
Kevin: Has the market changed a lot to make you step back and question whether renovation is right, Jane?
Jane: Absolutely. A lot of people who renovate, like I did originally – bought a property, renovated it, used the equity that I had created to go and buy the next property and the next property and the next property. I only started with $45,000 and created a very large multimillion dollar portfolio, never putting my own cash in again after that very first property.
That accessing equity was a key to the strategy. And what we’ve seen, April/May 2017, there have been a lot of changes in the lending sector where accessing that equity is not as easy as it used to be, so it could bring up that question.
Kevin: Are there some things you can do in a renovation to give you better bang for buck? In other words, give you a better return?
Jane: Absolutely. And I think that’s why renovation is still very relevant now. You can do it for two reasons. You can do it for an equity gain and get that bang for the buck that is creating more value – the perceived value is higher than what it’s cost you. But there’s also the absolute benefit you’re going to get by pushing the rent up.
So, when you’re looking at what renters want as well as the equity gain, you’re looking at simple things like painting. You’re looking at the prime public areas, like the front of the property and street appeal, and then the kitchen.
There are things that you can do. You don’t need to pull out an entire kitchen and start from scratch. You could go and maybe improve the bench tops or the fixtures and fittings, and just painting alone can just do so much to a property value.
Kevin: Well, if renovation sounds like the key thing for you, I’m going to recommend that you use the button on the right-hand side on the home page at Real Estate Talk. It’ll take you to a webinar that’s absolutely free of charges. It’s coming up on the 25th of this month, at 8:00 actually. All the information is there; just click on the button. Jane is going to host that.
You’re going to take us into some out-of-the-box strategies this time, Jane?
Jane: Yes. Look, I still think that renovation is the key strategy but we do need to think differently. So, there’s things that I want to cover in there, four key strategies that people can take away to improve their portfolio, not just in 2017 but beyond that.
Simple things like collaboration. Maybe you can’t borrow anymore by yourself, but borrowing with someone else. Now, I read an interesting statistic recently, and that was in China, 70% of young adults actually own their home. But China has one of the top ten most expensive real estate markets in world, so how can they do this and why?
And really, it’s come down to the fact that by the end of this decade, there are going to be 30 million more single men than women. The families are collaborating and going “How can we make our boy look better on the market? Well, he must have a home.”
Although it’s not relevant here, we can look at that and take some learning and go “Well, maybe it’s time families pitch in together.” We have things like parental guarantees, but maybe bringing the inheritance forward or maybe buying in a self-managed super fund, maybe buying with your friends in a tenancy in common, or maybe even buying in a crowd-funded platform.
That’s just one of the four strategies that we’re going to explore in full. But it fundamentally comes down to the fact that there are some strategies you can apply to buy a property but still, renovation is the thing that’s going to add the value.
So, when the banks do come back into the norm and start letting you access equity more and you can service that, you have that available to use. But in the meantime, you’re pushing your rents up in your rental properties and minimizing the effect on your hip pocket every month.
Kevin: Yes. I love that idea about being able to help people get into property, because let’s face it; you can’t renovate a property you don’t own. And if renovation is going to be your end goal, you have to get the property first.
I love that idea of getting the family or collaborating with other people to get a property. It’s a great way to start, isn’t it?
Jane: Absolutely. I look at some of my students and their friends buying together or couples buying together three-bedroom houses and they’ve move from the rental accommodation, renting with friends, to buying with friends.
If you can structure that kind of agreement well so that you both get an equity gain, you’re still living with your mates but you’re actually on that property letter. A lot of people miss that kind of step because they’ve seen what their parents have done and that’s the only lesson they know.
Kevin: Okay. The four key out-of-the-box strategies, we have heard about one of them. That’s going to be coming up in a webinar on May 25 at 8:00. Lock into it. Book your place. Places, I imagine, will be limited. Jane?
Jane: Yes. They will be. First in will be on it.
Kevin: And of course, as I said earlier, if you think this could be the answer for you, then spend some time with Jane on this webinar. It’s absolutely free. It’ll come back for you in spades.
Hey, Jane, thank you for joining us today. I love what you’re doing with this webinar because I think getting more people, especially young people, into property and helping them build wealth through renovation is just fabulous. Thank you very much for your time.
Jane: Absolute pleasure.
Kevin: Okay. I’ll mention once again: webinar, May 25. Use the link on the home page at Real Estate Talk. Click there, book your seat now. You will not regret it.
Jane Slack-Smith from Your Property Success. Thanks for your time.
Jane: It’s a pleasure, Kevin.
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