Deanne Kelly: Renovating with a parachute

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Two and a half years ago, Deanne Kelly found herself living a double life. She was spending her days working as a pharmaceutical sales rep, visiting medical practices across Sydney, but at night and on weekends she revealed a different side.

While friends and co-workers would return home to their families, Deanne would spend her free time toiling away on a gruelling two-month renovation project.

Save some kitchen and bathroom jobs, she was doing all the work herself, which meant juggling different projects at once. She couldn’t do tiling on week nights, it would wake the neighbours. Carpets were for weekends. The painting she did late into the night, just before returning home and melting into bed.

“It was exhausting,” she says. “I don’t know how I did it, or if I will ever do that level of work again. It was my first venture into property and I think I learnt a lot of lessons from it.”

One of them was how to make a killer profit. Deanne may have walked away from her renovation project with aching limbs and swollen joints, but she also walked away $80,000 richer. The stiffness has healed, but the money has grown and she now has a firm foothold into property investing.

It’s a huge achievement for the 30-year-old, Kirrawee resident who says she only got into property investing to make “lumps of cash and retire at 40”.

She is now in a situation where, after doing another successful renovation project last year, she is moving into development and is planning strata titling on a block of units.

“I think the key to a successful renovation project is finding a property that is priced much lower than the market,” she says. “If you can find that, you’re one up already. After that, you’ve got to know the area you’re buying into and what renovated properties will sell for.”

Walking up to the plate

Deanne says that part of the success of her project was finding a property going for a bargain. She had been looking to invest in Miranda, a suburb 24km south of the Sydney CBD, and had stumbled upon a three bedroom unit going for $285,000, roughly $45,000 below the market.

“If you looked at the other units in the area, it would have been very difficult to go below $330,000, and that’s why buying the property at $285,000 was a great price. The unit had a good layout and the structure was sound. All it needed was a facelift.”

Deanne recalls the unit having a tired, grotty look about it. The kitchen had been wrecked by flood damage and was adorned in 1970s style decor: bright green wood panel cabinets and dull brown floors. The bathroom tiles had separated from the floors and walls and the rest of the house had the same penchant as the kitchen for 1970s fashions. The only thing missing was a shag carpet.

Unswayed by the work required, Deanne put down a 20% deposit and bought the house. She did minor renovation work on the kitchen and bathroom and then moved in. It was only after six months of living there that she turned her attention to giving the property a full renovation.

Taking a swing

“I moved out of the property just before doing the full scale renovations. Considering all the projects going on, staying there would have been a nightmare by itself. There was a lot going on, but I was doing it all myself. I am quite handy, so a lot of the jobs I could do, though it wasn’t easy.”

The first port of call was to change the layout of the bathroom and install laundry facilities. New tiles were laid down and all the interior walls were painted with neutral colours. The old carpets in the bedrooms were ripped out and the floors in the rest of the house were replaced with glossy tiles.

In between all of this, Deanne had a home builder install new kitchen cabinets and bench tops, while a new oven replaced the old.  The kitchen was also adorned with reflective surfaces to enhance the light, making way for a roomier, more modern look.

The total bill for the refurbishments came to $22,000 and when the work was finished Deanne rented the unit out for $400 a week. This gave her a yield of 7.3%.

Because her strategy all along was to make quick money and remain untied to a mortgage over a long period, Deanne sold the property 10 months later. Only then did the full effect of the renovation show itself. While before she had bought under market, the renovation allowed her to sell above it: she settled for $387,000.

This meant that when factoring the total purchase and renovation costs in, she came out $80,000 better off. Forming part of this equation was the fact that by living in the property for six months she had no holding costs. She would have needed to pay rent somewhere else anyway. By renting the property out for a further 10 months, she was also positively geared, allowing her expenses to be minimalized.

Even factoring living costs as an expense and allowing for stamp duty and tax costs, Deanne estimates that she till walked away with $60,000 in pocket.

Onto second base

Having spent around two months renovating, the great lesson Deanne learned from her Miranda project was to try renovate as quickly as possible. This meant that going into her next purchase, Deanne wanted to do a quick flip. She’d do all her shopping for quotes and price estimating during her settlement period and aim to renovate in less than three weeks.

The suburb she chose was Cronulla, another area roughly 24km south of Sydney. The suburb is known for having a secluded beachside setting, while still being connected via Sydney’s Eastern Suburbs train line. Deanne figured that as investment spots went, it had safe written all over it.

She eventually found a two bedroom unit and, using the profit from her last renovation project, bought for $312,000. “I wouldn’t say the unit had anything seriously wrong with it. Structurally it was in good condition. Its only problem was that it hadn’t been updated since it was built. It needed a revamp.”

Over the settlement period, Deanne costed the entire project out. Choosing to contribute less of her own elbow grease this time around, she approached numerous tradespeople for quotes and diligently inspected building suppliers for the cheapest and best quality materials.

The day she finally settled she was ready. “We ripped the carpets up on day one and were instantly met with a surprise. There were floorboards underneath. I had originally planned to put in new carpets, but now all I needed to do was polish up the floorboards. It was a great find.”

Deanne also soon noticed the value of shopping around. “I was definitely a lot smarter second time around. The kitchen upgrades I had bought for the Miranda property had cost me about $8,000, but in Cronulla I was able to find good quality at $3,300.”

Like before, Deanne applied neutral colours to the walls. The existing pink and blue colour scheme in the bathroom was replaced with glossy white tiles on the walls and a matte, darker finish on the floors. The shower curtain was updated to a glass screen and Deanne used mirrors to give the bathroom a more open and spacy feel.

The total cost came to $14,000, with everything completed in two and half weeks. “I was due overseas for a holiday at the end of three weeks, so in some ways, that was a blessing in disguise. It gave me an added incentive to get the project finished on time. I was really impressed by how quickly it was done.”

With renovations complete, the house was put on the market. It was snapped up in no time and Deanne was able to hand the property over to its new owner in October last year, less than two months after buying the property herself.

She showed again that she had guessed the numbers right. It sold for $385,000 – a mark up of $59,000.

Going for home

With two successful projects under her belt, Deanne is now going into slightly more risky ventures. She wants to make her next project a renovation mixed in with a strata titling of multiple units. She’s also currently joined forces with two other investors for a subdivision and development project, which is yet to break ground.

If things take a turn for the worse in these upcoming plans, Deanne says that she might return to quick flip renovations because she is experienced now and believes it is a guaranteed way to make money – if you know what you are doing.

“To avoid spending too much money, make sure you’ve set a budget before you start, knowing the area and what your end price might be when the project is finished. Do all the planning before you settle.

“Shopping around is another great way to save. If you’re prepared to spend a lot of time searching, you can bring your costs down in a big way. To keep the investment safe, I also started with units. You don’t usually need a building report done, because if the condition of the rest of the building is good, you can be assured that there won’t be major structural problems with the property you buy.”

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