Jane Slack-Smith says strategically renovating your properties can de-risk and fast-track your wealth creation.
For the mining engineer turned property expert, a priority when creating wealth is risk assessment. And renovating, if done correctly, is a strategy that can de-risk your property and see you reap many rewards.
Through this process Jane has built a multi-million-dollar property portfolio and written the book on it: Your Property Success with Renovation.
Why renovating is key to actively creating property equity
“There are three ways to make money when you buy property. One of them is making money by creating equity out of thin air, for example through renovation. It could be adding a granny flat, it could be subdividing. It’s about adding equity whilst you have the property and you make it to a higher, better use,” Jane told Bushy Martin on the Get Invested podcast.
Property renovation for risk mitigation
Jane explained that renovations are also a great way to minimise the risks associated with issues that arise from a property purchase.
“The reason I got into renovation was two things. First of all, I really didn’t want to stuff up and lose my money. And so I was like, how can I de-risk this? And so then I kind of got into renovations. The strategy was, well, what if I buy in the wrong area and it doesn’t have the capital growth? And what if I can’t negotiate below what the property’s really worth and make money when I buy? So that was the my first kind of like, ok, if I can add instant equity and improve the rent ability, the property, and create money out of thin air, let’s do that,” she said.
Renovate to accelerate capital gain
Renovations can also fast-track the increase in property values.
“The second reason really was I was just impatient. I’m like let’s do it. Once I’m in and I’ve done the research, I’m all in. So I’m not going to wait around for five years for the property to go up by 100k. If I can throw in 50k and have it go up by a couple hundred grand, happy days. Let’s get on to the next one. Because I honestly believe it’s time in the market, not timing the market,” she said.
Research before renovation
But successfully renovating is no walk in the park. Jane revealed that investors can best avoid the risks of renovating by conducting thorough research and understanding where exactly to spend their money.
“One of the biggest mistakes investors make is when people go in with half the knowledge. And I say that when people buy in the wrong locations or they find this great location and they’re like, ‘oh I can’t afford a house, so I’m going to buy a unit’. And it’s the same with renovations. They go, ‘I know you can make money on renovations, so I just have to find a dog and make it beautiful’. And they get these dogs and they make them beautiful, ‘but why didn’t I make any money?'” said.
Bushy added: “there is a fine art in renovation because a lot of people do it for the first time, get carried away spending money in the wrong places or spending too much money without really focussing back on where it’s going to get them and what additional equity can they create?”
Property renovation takes time
Renovating can also be a time-consuming task, and Jane urged investors to value their own time and only renovate if it’s worth the effort.
“There’s very few properties I look at where I can’t improve them, but there’s also very few properties that you can actually make a profit on renovating. So for me, it was always about strategic renovations, and the absolute thing that will make you money in any renovation is making sure that you’re in a suburb that has pricing disparity that allows you to make money,” Jane said.
“This means that if you buy at $700k an unrenovated property, and it’s going to cost you $50k to do the renovation and you’ve got all the other costs like holding costs etc., you should be looking at properties worth at least $850k that are in that same market that are renovated that are selling. Because if you buy at 700k, you renovate to 750k and the renovated properties are also selling at 750k, then you’ve just wasted your time, energy and the opportunity cost of being on something that could get you further ahead,” Jane said.
The trap of DIY renovations
Jane recommended that investors stay efficient by hiring professional help instead of engaging in DIY renovations. This is because while DIY jobs may appear to save on costs, in the long run it can take away from other opportunities to grow your wealth.
“I had a property where we did the painting. And so we were getting up at 7am every morning, painting for an hour at night, doing two hours after work on the weekends, so 12 – 15 hours to paint my three story property. And it took us about three months. And then I got this opportunity to move with work to New South Wales … so we were like let’s move, we’ve got a month, so we got a professional painter in that did it in four days. So that was worth so much more. That could have got me into my next deal quicker. It could have allowed us to do so much more,” Jane explained.
Bushy further elaborated on these insights, saying that investors ‘shouldn’t have a second job when investing’.
“Get good people around you and and do your homework and manage your managers to make sure that they’re cost effective. But as you say, a professional will get in and out of an exercise in a fraction of the time. And if your energy is put into what you’re good at, but also keeping them honest and making sure they’re on track, then that’s probably a smarter way to go,” he said.
“We hear many stories about people who buy properties and they get their mates to try and get things done at night and on weekends and then wonder why it doesn’t work out. So there’s some really good learnings in all of that.”
Listen to the full interview here.
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