Seminars – Renovation for Profit and Property Development

Intro

I have been to a lot of seminars about different ways of making money. I have also seen a lot of programs on the web.

I have written a Seminar Guide -A good seminar vs A scam & how to avoid getting ripped off on how the standard seminar works so you better evaluate whether a seminar you attend is good or dodgy (and whether you should sign up).

Starting with Property, in the next few articles I will explain some of the seminars and ways to make money.

Firstly I looked at property buying agencies, then overseas property focusing a lot on USA properties. Then I looked at cashflow positive properties - that might not cost anything to own after you get your tax refund.

Now lets have a look at creating wealth via property renovation OR property development. 

Renovation for profit & Property Development

(Please note I have not yet been to a renovation for profit seminar)

Renovation for Profit -What is it: How to buy a home, spend a small amount, do a quick renovation and sell it (or get revalued and buy the next one).

Positives:

  1. 1.       Quick way to build equity/cash –Renovating can be a great way to create equity. This means you can get into the home you want sooner.
  2. 2.       Home reno can have good tax advantages – Selling your home is often tax free. If so then the renovation profit is not taxed. Even if you are taxed on a capital gain – you can get a 50% discount for assets held more than 12 months – so this could half the tax you pay.

Negatives:

  1. 1.       Hard Work -Your profit may not be worth time spent –Property renovation (if you are doing it yourself) is hard yakka and takes up a lot of time. You might make a profit on your property sale that works out at $9 an hour for all the time spent working and organizing the renovation – hardly worth all the effort!
  2. 2.       You can make a loss –In renovations costs can increase dramatically (particularly if time taken increases). So you could be ‘in renovation stage’ for a lot longer than you think and lost rent, interest and other costs may eat up your profit.
  3. 3.       Your profit depends on selling price – your profit means selling your house for more than you paid. This means you have to find a buyer. Depending on market conditions you might not be able to find someone willing to pay what you think the property is worth.  You might have spent $10k on a home theatre but buyers aren’t prepared to increase the price offered.
  4. 4.       Can be seen as a business –If you regularly renovate for profit – it can be seen as a business and you are taxed as income (not as capital gains where you could perhaps get concessions like the 50% discount).

Rating & Comments: For those who know what they are doing – this can be a great way of excess cash.

For those who don’t – there can be costly learning experience.

Your Work: Med-High, Value of course: Medium, DIY – Medium, Cost: Medium

 

Property Development  -What is it: Buying property or land, subdividing, building or doing substantial renovations to make a good profit.

Positives:

  1. Making money – You can make a lot of money from successful property development. Similar to Monopoly – building houses and hotels make land more valuable. Creating more buildings (e.g. 6 apartments where there was 1 house) can be very profitable.

Negatives:

  1. 1.       Same as renovation for profit –  basically hard work, but more of it.
  2. 2.       Many balls in the air – you may be required to deal with: your bank, the council, architects, town planners, builders, tradies, real estate agents, lawyers and accountants (I’ve probably forgotten a few as well!).  Where any of these people hold up the project – cost you time which also may cost money (as you have to pay holding costs while you develop the property)
  3. 3.       Requires negotiation – Council has to approve building plans. You may find your proposed 6 apartments becomes 4.
  4. 4.       Can lose if don’t know the rules – As in above example your proposed 6 apartments can become 4, your time and costs and blow out and you can lose lots of money. Or worse be declared bankrupt if you have a property that can’t sell (i.e. half finished) and nobody will buy it but the costs are mounting up.

 

Rating & Comments: For those who know what they are doing – this can be a great way of excess cash.

For those who don’t – there can be costly learning experience. Many companies and individuals have become bankrupt from trying to develop property that didn’t work. You must be able to weigh up the risks and rewards adequately and have a strong team to help you in all aspects of the development.

Lets not kid ourselves – a medium property development could be similar to a full time job – even if you are hiring people to do all the work and only managing It yourself you could get 5 calls a day and have to make decisions as you go.

Your Work: High, Value of course: High, DIY – Low, Cost: High, Possible profit – High

Posted in Making Money, Property

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