Why this young investor shifted from ‘buy and hold’ to ‘renovate and flip’

“The strategy along the way does change. [Before], my strategy was to buy and hold, and I still want to buy and hold some properties, but in order to be able to reach that goal [of 22 properties] by 30 – I’ve got four more years to do that – I wanted to change my strategy to enable me to get to that goal certainly on time, but if not, sooner,” she tells Smart Property Investment.

Stephanie adds: “What I’m doing now is looking at renovating and flipping, and then also looking at international markets as well.”

Find out how the “renovate and flip” strategy is helping the young investor fast-track her progress in property investment, as well as the best renovation advices from Smart Property Investment’s Phil Tarrant and Vivienne Kelly: 

How did you start using the ‘Renovate and Flip’ strategy?

Stephanie Brennan: For me, I started with one of the properties that I own in Manly because I already had a lot of equity in that property, so it minimises my risk because it’s the one that I’m trialing first. I renovated that. It’s now in the market. We’ve got a couple of offers, but we’re waiting to take it to auction.

I’m also going and looking at a place in Bondi on the weekend which, hopefully, I’ll be successful to auction, and that will be one that’ll be a high-level renovation.

I did another renovation on a place that I’ve just moved into, which was the first property I’ve ever bought down in Manly Vale, and that was really good as well because it was something that I could sort of dip my toe in without doing a full scale renovation, like taking out walls. Now, I think I’m ready. I’ve done the two, done them pretty well, so now looking to get to that next level and start doing bigger scale things.

Do you have a team of professionals? How do you crunch the numbers?

Stephanie Brennan: I found a really good builder that’s really cost-effective, but does a really good job. We structured the fact that if there’s more capacity for him, then I can get a better deal because there’s simply more work. A lot of the ‘finding different vanities and pictures’ and things like that, I’m doing myself.

In terms of crunching the numbers, there’s a lot to actually consider even down to the little things, which are new taps, new handles, new light fittings. It’s the big things that you never miss. It’s just those little things – so working out exactly what is actually in the property and then doing all the costs.

Are you actually getting your hands dirty – rubbing back walls, getting paint on yourself, or anything like that?

Stephanie Brennan: I haven’t [yet] only because having a business, it’s hard to replace yourself out of that and spend the time renovating. It’s something that I would like to do, but I wanted to get familiar and watch what other people do and look at replicating it first. Fortunately, I found a builder that’s really cost-effective, so it’s, ‘What’s my time worth and what’s his time worth, and where is it best spent?’

Do you research the areas that you are renovating to make sure that you’re renovations fit with the demographic?

Stephanie Brennan: Definitely. When you’re renovating to move in, it’s a completely different renovation than if you’re renovating to resell or just keep it as an investment. I think that is really the mistake that people make. But when you’re looking at buying property at all, whether you’re renovating and flipping or you’re buying to hold, it’s really important to look at what’s the demographic of where you’re buying. For example, in Bondi near the beach, that’ll be fine for a one-bedroom, but something Upper North Shore it’s going to be better suited to a two-bedroom or more because the demographic is simply older. It’s really important to look at that whether you’re investing in any form.

What’s your advice for investors looking into using the ’renovate and flip’ strategy?

Phil Tarrant: You need to understand when you’re renovating an investment property why you’re renovating an investment property. Are you trying to increase the livability of the property? Absolutely, but why are you doing that? The reason why you’re spending money on it [is] because you want to try and manufacture some equity. So if the property’s worth $200,000 today and you can spend $20,000 on it and it becomes a $250,000 property, that’s a good reason to be renovating. Capital growth, but also an increasing yield. You need to make sure that any money that you spend on an investment property actually has a tangible return in immediate cash flow increases, but also a long-term capital value.

Vivienne Kelly: I think one of the really important things when investors are renovating is making sure that your new property or renovated property fits with the area. There’s no point in making a Mount Druitt apartment, then going to be out of the price range of people who live there.

Tune in to Stephanie Brennan’s episode in The Smart Property Investment Show to find out how millennials can overcome the challenges of getting onto the property ladder.