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ABC's & 123's of Renovation Management?

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  • #16
    In short

    1: Know what you are doing with the property before you buy ie buy and hold, flick, own home etc
    2: Make sure your structures are all setup to accomodate the above
    3: Have a budget and stick to it
    4: Get your tradies in, give them a list detailing exactly what they have to do
    5: Make sure you have written quotes for the works they have quoted for
    6: Give them a start date and a finish date and make sure they understand the finish date is the deadline
    7: Go through their lists and tick off at the end of the day what they have done and what they have left to do, ready for the next day
    8: Be on site if you can to make sure no one is slacking and things run smoothly
    9: Be nice, be polite (you are allowed to smile) but be tough if you have to
    10: If your tradies have done a good job, remember to pay them straight away - they will always do work for you if you don't make them wait for their money.

    11: Be in a situation where you just have to click your fingers to get some action - its an amazing feeling!!!

    Shazza

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    • #17
      Originally posted by dasphinxter View Post
      Hi Paul,

      Is this the same for property where there is no improvements to be done eg brand new building. Whats stopping you from changing your intention after you have settled into an LAQC if things change?

      There must be instances or a time where you can safely liquidate properties in your LAQC with out 'tainting' the entity. Do you have to pay IRD anything over and beyond depreciation 'claw back' on that sale?

      Regards
      Alex
      Alex it all depends on your original intent on purchase. So if you are buying brand new and then onselling for a profit, yes this is taxable. If however you have a portfolio of buy and holds and you sell one of them so that you can purchase something else then this isn't taxable.

      Now the tricky part is you have to prove what your intent on purchase was, and certainly a pattern of buying properties then changing your mind and selling them for profit would raise eyebrows with the IRD...

      Cheers
      David
      New to property investing? See: Best PropertyTalk Threads for New and Old Investors And/Or:Propertytalk Wiki

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      • #18
        All of the above plus try to get fixed price quotes from your tradies, especially builders and labourers who have an uncanny ability to do very little when on an hourly rate. On the larger jobs consider giving them bonuses if they complete on time, (i.e., an incentive to turn up every day and finish by the agreed date). On a reno I'm doing at the moment that is similar to the one you're undertaking (thankfully almost finished!) I'm paying the painter $50 extra each full day his mate turns up to help him as the sooner they get it finished the sooner I can get it listed and sold and hopefully save some holding costs.

        Also, get yourself a trade account, even if only a trade cash account, at somewhere like Bunnings. Although there is no or little discount on some items, on other things you can make significant savings, for example almost half price on some light fittings, etc.

        B

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        • #19
          Perception is 9/10ths reality. When someone says I'm putting in high quality fittings I think emotion and making money are getting mixed up.
          Renovating is a business. Businesses are about profits. Profit is money.
          How can I/you make the most amount of money in the easiest way, in the quickest time.
          Quality does not equal profit. profit is determined by meeting the markets needs.
          In my experience there is often as much profit in selling a house as is, as there is in renovating. The thing is so far as renting a place that rule can change.

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          • #20
            Originally posted by Monid View Post
            Alex it all depends on your original intent on purchase. So if you are buying brand new and then onselling for a profit, yes this is taxable. If however you have a portfolio of buy and holds and you sell one of them so that you can purchase something else then this isn't taxable.

            Now the tricky part is you have to prove what your intent on purchase was, and certainly a pattern of buying properties then changing your mind and selling them for profit would raise eyebrows with the IRD...

            Cheers
            David

            Thanks David,

            There is a reason im asking this.

            I have secured an AKL CBD apartment off the plans back in 2006 when there were next to no doom and gloom signs and i was just starting out in PI (I have since realised that this is probably not the best next investment for my portfolio, because once completed mid 08 there is a high chance it wont realise the purchase price let alone any instant equity on settlemet.) Having said that its in a good location, 2bdr 60sq + deck, no carpark but very close to queen st (i have since learnt the importance of carparks and if buying in the CBD to buy in the secondary market not off the plans too unpridectable)

            I am exploring avenues to get out safely if possible but worst case senareo i just have to settle on it which i have bugeted for. It is a buy and hold but only till it reaches price paid or close to it (as im assuming it wont strait away) so i can put it back into better property with more land like i was doing to start with.

            Why did i even get into this market you may ask, well i actually thought i may want to live in it at some point. An aqantince introduced me to the idea as she had good results from buying apartments off the plans realising a gain on settlement but started earlier in the boom.
            However now having read the other thread about the IRD alert major shareholders living in their investments it doesn't make sence to miss out claiming on those losses.

            So, if and when i settle is the apartment best in an LAQC (prof accounting advise was to start a new LAQC for apartment and move existing LAQC into trust, as overall the company is cashflow positive) or start a trading trust and keep it there and till market has changed or improved. Basically i want to reduce or midigate any possible loss so i can reinvest elsewhere.
            Ive also been told others in a similar situation are just taking the loss on settlement and then reinvesting back in the suburbs straight away but not sure if you can make that loss back very well in this market now.

            Any thoughts/comments welcomed
            Alex.

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            • #21
              One thought is that moving a property from a company into a trust once it becomes CF+ may be seen as tax avoidance.

              Paul.

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              • #22
                Originally posted by toby View Post
                Perception is 9/10ths reality. When someone says I'm putting in high quality fittings I think emotion and making money are getting mixed up.
                Renovating is a business. Businesses are about profits. Profit is money.
                How can I/you make the most amount of money in the easiest way, in the quickest time.
                Quality does not equal profit. profit is determined by meeting the markets needs.
                In my experience there is often as much profit in selling a house as is, as there is in renovating. The thing is so far as renting a place that rule can change.
                I totally agree here with Toby, with my first trade it was hard not to be emotional and the temptation to put good quality fittings vs adequate ones was always a struggle. In the end we made a profit but I learnt that we could have spent less and had the same result as the buyer loved their animals and I think the deciding factor for them was the size of the section/location. (740sqm)

                I now look to do less and create more bang for buck. It is great to go through the process though, make your mistakes and hopefully take something away from the experience.

                All the best.

                FH

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                • #23
                  Originally posted by monid
                  Alex it all depends on your original intent on purchase. So if you are buying brand new and then onselling for a profit, yes this is taxable. If however you have a portfolio of buy and holds and you sell one of them so that you can purchase something else then this isn't taxable.
                  Best to say "may not be taxable", IMHO.

                  If you do buy for a buy & hold portfolio and then, for some reason, decide to sell later, then evidence of a change in circumstances would back up a claim not to have purchased with the intent of selling.

                  For example, an unsolicited 'could not refuse' offer, or the property turning out to have leaky building issues etc. Simply 'going up in value enough to make it worth selling' probably isn't going to be good enough.

                  Historically, the IRD has only investigated people with a pattern of buying and selling, but they may now be taking a closer look at any transactions, given their new $14m budget.

                  Originally posted by harcoh
                  As far as tax, My philosophy is this ' If taxes need to paid then I have earned a profit'. I am learning and open for suggestions (legal) regarding Tax on a sale of property.
                  Not necessarily - it could mean that you are badly advised, and end up not claiming GST on purchase (because it may be a 'buy and hold'), but getting charged it on sale. Typically Buy-Do-up-sell traders are GST registered (otherwise its even harder to make a profit!), but putting a Buy and Hold property in to a GST registered entitiy and claiming GST on purchase/reno is a sure way to appear on the IRD's radar.

                  I suggest that you consult with a suitably qualified structures specialist as a top priority.

                  cube
                  DFTBA

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                  • #24
                    Cube, I wouldn't say I'm badly advised, I'm just a conservative greenhorn w/ maverick philosophy. Or maybe a Maverick greenhorn w/ a Conservative Philosophy. Whatever the case my Adviser and I ponder all (legal) GST possibilities and responsibilities. With a small portfolio of buy and hold properties, this is my first big do up. Again, With my situation I don't plan to sell once finished but I will consider all possibilities and opportunities.

                    It's great how off track we go from the initial questions and it's all good. All your thoughts are inspiring and educational. Keep it up.

                    Great Web Site!

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                    • #25
                      Priorities

                      Sorry to diverge back to the original question but my priorities for my renovation job were:

                      1. Get a valuation and after renovation valuation (the difference is the budget). This avoids the capital gain clouding things. You shouldn't pay any extra to get an ARV at the same time as you get a valuation.

                      2. Get the whole project mapped by an architect and get them to source a quote from a builder for doing all the work (cost me about $2K). Then you can decide what you need to do yourself to save money. You might be able to get a builder to quote directly, but be careful.

                      3. Re-pile (mine didn't need it) then re-roof if needed (rewire/replumb/reline as you go). Only need this step if some of the building isn't up to spec.

                      4. Do all the other stuff on the comprehensive building report that could cause more damage if not fixed (e.g. holes in exterior walls).

                      5. If living in it - Master Bedroom first, then Bathroom, Lounge, Kitchen, spare rooms, exterior, then garden. However might pay to plant a few hebes/lavender at the start so they have a chance to grow.

                      In terms of gain. My feeling is that if you can change the layout from something awful to something desirable, then you could really grow it provided you bought cheaply because of the old layout. For example I put in a new bathroom between the bedrooms and the old bathroom next to the kitchen will be become part of an open plan kitchen dining opening onto the sunny 1/4 acre. Before the bathroom blocked the sun and view from the kitchen.

                      When I had my first house a triple garage seemed to add about $10K to a property so not alot to gain there except being easier to sell.

                      I bought to keep am now I am going to have to sell due to career moves (so the gas hot water/high pressure went out the window). If you stick to budget you should be Ok regardless. I did my bathroom (completely new - including walls) for $12K and it looks a million dollars - mainly because I found some old floorboards and did some tiling myself. Because my house isn't in a city I'm spending the money on the things I take with me when I move out, not the fittings. It's easy to get sucked in to the quality trap, but you will be surprised how good things can look with a plain, hard wearing finish and nice furnishings. Go for the wool carpet though - in landlord-friendly colour.

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                      • #26
                        Originally posted by Eridani View Post
                        Sorry to diverge back to the original question but my priorities for my renovation job were:......
                        Don't be sorry! Just tell them to pull their heads in and keep to the topic!

                        Sounds good what you're doing!

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