In this episode he shares a case study featuring a client with a unique brief who was looking to buy in the Moreton Bay region. While this particular client differed from much of his usual clientele, as always Loo stopped at nothing to help them achieve their goal— and then some! He doles out some tips on making every last cent of your renovation count, so that when it’s your turn to get your hands dirty, you’ll know when to DIY and when to call in the experts. After all, $5,000 is just a drop in the bucket when you’re making over $300,000 in equity in one go!

Timestamps:
00:28 | A Specific Brief From A Unique Client
03:30 | Ready, Set, Go
06:44 | Needed: One Big Reno
10:17 | Hey Presto, One Reno
12:12 | Keep in Mind…
14:21 | Pick Your Battles
15:54 | Take the Pressure Off Yourself
18:07 | Weigh It Up— Is It Worth It?
21:40 | A Twist in the Tale

Resources and Links:

[00:11:46] We approached a couple of agents to potentially sell the property, and there were buyers waiting to pay $850,000 for it. So we paid low $500,000s for this house, and there were buyers waiting to pay $850,000 for this newly renovated property. And the lesson there, I think, is a couple of things. 

This is Property Investory where we talk to successful property investors to find out more about their stories, mindset and strategies.

 

I’m Tyrone Shum and in this episode of Invest Like A Pro we’re chatting with founder and director of House Finder, Simon Loo. In sharing this Brisbane-based case study, he reveals how he took this unusual client’s precise wish list, found the perfect property to match, and went above and beyond to help them generate $300,000 in equity in just one quick flip.

Tyrone Shum:   

Loo’s case studies continue to inspire and amaze with their miniscule purchase prices and jaw-dropping equity uplifts. He begins by sharing this particular client’s background, painting a picture of how he came across House Finder, his history, and explains what makes him stand out among his peers in Loo’s impressive case study portfolio.

Simon Loo:   

[00:00:28] This particular client came to me, it was an older gentleman, close to retirement age. So he had no intention of buying a house to buy and hold and build a portfolio and even leverage. He wanted something pretty specific. 

 

[00:00:51] [He] was a bit of an anomaly buyer in the sense that he was only going to be buying with cash. He had a lot of cash sitting in his bank, just doing nothing. He's got a few assets and shares and things like that that he's accumulated over the years. But his goal was purely to buy a house to take advantage of a booming market, and to flip it, and to make a profit. So that's basically the background of this particular buyer.

Tyrone Shum:   

[00:01:21] He sounds like a retiree who just perhaps maybe had a lot of time on his hands.

Simon Loo:   

[00:01:27] I think so. And an opportunist as well, I think, at the end of the day. He said to me that when you're reaching that kind of age you just want to make the most of the days when you actually do retire. Obviously, you need money to do that. So I think he was just trying to find ways with what he had to maximise that ability. And as a result, we picked up a deal which I'll get into.

Tyrone Shum:   

[00:01:57] That's awesome. So this semi-retired person, as you said, was a little bit older, had a bit of cash available, and he wanted to purchase something [for] potentially a flip or reno. So maybe the question is was there a particular area that he specified in his requirements? Or did you recommend something to him?

Simon Loo:   

[00:02:19] It was definitely mostly our recommendation. As part of what we do, when we are introducing a property to a client, we don't just send a link to Domain or realestate.com.au. We include quite a lot of research and information about the house itself, the suburb profile, the demographics, the vacancy rates, very important comparable sales. 

 

[00:02:43] So we research a lot of comparable sales. What's selling at the moment that's as identical to the house that we're looking at as possible. We run cash flow analysis, we do a lot of due diligence with the inspections and ensuring we know the condition of the house inside out. 

 

[00:03:03] When he realised that, I think he kind of entrusted us to help him find a property that he could flip. And notwithstanding any growth that could happen, but at the very least, when we bought it, we could have flipped it for a good profit. Even if there was no growth, assuming zero growth at the time. 

 

[00:03:30] So off we went. He had obviously a budget in mind [that] he didn't want to exceed and we could work within that. And we looked at options in Brisbane, across several council areas. From Logan to Redland Bay, and even in the sort of inner parts of Ipswich. In Moreton Bay as well, obviously.

 

[00:03:58] The property we ended up going for was a house in Moreton Bay, it was in a suburb called Griffin. Griffin's about 35 kilometres north of Brisbane, by the water, very nice feel to it, [a lot of] owner occupier[s], all that kind of stuff. 

  

[00:04:18] This particular property— and I emphasise this because he was a cash buyer.  And for maybe some of the new listeners out there, my focus has always been on distressed sellers, and off market sellers. And when you have a cash buyer that's ready to do a deal with no finance condition, maybe a very, very short settlement— the settlement in this particular case was only 20 days— it opens you up to a lot more opportunities in terms of securing extra ordinary deals. 

  

[00:05:01] I was introduced to this house. Immediately the agent, when he spoke to me about this particular property, was warning [me about] negative stuff. And the negative stuff was rundown. The person living in it had mental health issues. And also evidence would suggest drug related issues as well. So there was evidence in the house that he was either using drugs or even making drugs. 

  

[00:05:39] But anyway, irrespective of that, it was a situation where this particular seller didn't care really about... very much. As evidenced when you went through the house. The carpets were ripped up, there's all these weird paintings on the walls. Not paintings as in like, framed paintings, but actual paint that he painted himself. One of the bathroom toilets was entirely covered up with foam. Like, the actual toilet bowl, so you couldn't use it. 

Tyrone Shum:   

[00:06:28] You actually went to see that property yourself?

Simon Loo:   

[00:06:31] Sometimes I go see properties, but I've got a team on the ground.

Tyrone Shum:   

[00:06:40] Sounds like you're there. That's why I was like, wow, you must have seen... it would've been quite an eye opener.

Simon Loo:   

[00:06:44] When we do these inspections, it's usually about 100 pictures of everything. Like, you get walkthroughs and things like that. So it's quite thorough. There [were] a million things like that about this house that just screamed it needed a lot of work. 

  

[00:07:01] Obviously, my buyer being a flipper, we didn't care about any of this. All this stuff was coming out anyway. The walls were going to be repainted. The toilet bowl [would cost], you know, [a] couple of hundred bucks from Bunnings if we had to replace it. 

 

[00:07:17] So this particular seller just wanted cash. He was obviously... I don't know, we can make assumptions all day long. But given his particular situation, he needed cash quick[ly]. And it was clear that he was a drug user. 

  

[00:07:38] But anyway, we're at the right place at the right time. And we managed to pick this particular property up for the low $500,000s. This was only late last year. I don't want to use specifics, because I don't want to reveal too much about this particular house for my client's privacy. 

  

[00:07:57] But late last year, we picked up this house for the low $500,000s in a suburb called Griffin. It was a cash purchase and we could settle in 20 days. And we could only buy this house with cash. He wasn't interested in a finance condition. The seller wasn't interested [in] us doing a building and pest [inspection]. He obviously knew that the house was a bit weird, a bit wrecked. So anyway, we came along and bought [it]. 

 

[00:08:24] During the time that it was settling, that 20 days, we organised our trades. We work with a team of trades as well that we trust to go in and to do a quote. Once we got the quote sorted, it came to around about the $30,000 mark for the reno. And it was a quite substantial [reno]. 

 

[00:08:48] There [were] new floors, new carpets, the entire house to be repainted. It wasn't just a paint [job], it needed a lot of patchwork, a lot of scraping and all this kind of stuff because there was holes and stuff all over the walls. 

  

[00:09:00] There wasn't a kitchen reno, but we had to sand down the kitchen. A tip for you guys. Instead of replacing kitchen benchtops and cabinets, what you can do is you just sand them down and repaint them. And they come up literally as good as new. A lot of tiny little things that needed fixing in the bathroom and the outside of the houses and things like that as well.

Tyrone Shum:   

[00:09:23] Looks like it was a full cosmetic renovation. You wouldn't say it's a structural renovation because you didn't have to strip out any walls or anything like that. But cosmetically it just wasn't... livable, let's say.

Simon Loo:   

[00:09:35] Correct, 100%. And we did the reno, bearing in mind that it was kind of at that point where we're getting into the December period slash January period. So there was a bit of a month and a half of time where trades couldn't get in. We couldn't get it started. So unfortunately, it just had to go through that time. 

Tyrone Shum:   

[00:09:59] That's typical of any [trades]. Even in developments, most tradies knock off around mid December and don't get back until the end of January. So you kind of factor in at least January is a write off, and most people don't get back until February to really do any work. So, I understand that would have happened, unfortunately. 

Simon Loo:   

[00:10:17] We got started working early January, and it only took the trade two weeks. They had a team of many, many people that just [came] in and [did] everything at once.

Tyrone Shum:   

[00:10:32] So you helped manage this whole process? You purchased the property for the buyer, and also you came in and helped them with organising the trades. Well, you didn't have to necessarily be there, but you just helped.

Simon Loo:   

[00:10:44] Look, we definitely know where we can. We don't manage the project, per se, in this particular case, as well. But we introduce the tradies, we get the quotes, and we kind of put the two parties together. 

  

[00:10:58] And at some point, it's beneficial for the buyer to be in direct contact with the trades anyway. Because the communication is just going to come through me and I communicate to the buyer. And the buyer communicates through me and it's just unnecessary. 

  

[00:11:16] So once a quote's approved, then we kind of just leave it to them. If there's any questions or anything that you need help with, hit us up any time, we're happy to give you advice. But typically, at that point, we trust our trades enough to complete the reno efficiently and effectively. 

  

[00:11:46] We approached a couple of agents to potentially sell the property, and there were buyers waiting to pay $850,000 for it. So we paid low $500,000s for this house, and there were buyers waiting to pay $850,000 for this newly renovated property. And the lesson there, I think, is a couple of things. 

  

[00:12:12] Number one: Stick to buying good deals. Always stick to buying good deals. Buy in areas that [have] that pent up owner occupier demand, because these are the kinds of people that will pay $850,000 for a comfortable family home. 

  

[00:12:31] So when we did the reno, we had that in mind. We reno[vated] it to the point where it felt comfortable, clean, almost like a blank canvas for whoever bought it, whoever wanted to buy it and live in it to maybe add their own touches. And there was definitely money to be made. 

  

[00:12:52] One of the most important points, I think— and this goes with my own properties that even I reno is— don't sweat the small stuff. Don't overwhelm yourself with 'This quote might be too expensive', 'I can get that for $100 cheaper if I did that myself', or, 'If I got a quote elsewhere’, or, ‘If I coordinated everything'. 

  

[00:13:20] I'm not saying this to champion trades that are trying to rip you off. But for me, and for this particular buyer, what was way, way more important is trust. Our ability to trust a particular tradesperson to do the right thing and to do it effectively and to do everything holistically. 

  

[00:13:43] Not necessarily just every little itemised thing that was on the quote to do the renovation. Because anyone who's ever done a renovation, even a small one, will know that you can quote forever. But once you get into it, you'll uncover little things here and there that need a little touch up, that might need fixing, that might need screwing back in. 

[00:14:04] And these are little things that make a big difference. When you sell a house or when you rent a house, the appeal of it. People pick this stuff up. So you want something you want to have a person on the ground or a bunch of trades on the ground that you can trust that will complete that for you from start to finish. 

Coming up after the break, Loo crunches the numbers to determine what’s worth investing in at the end of the day…

[00:14:44] And because there was about $300,000 profit to be made, who really cares about $5,000 or $10,000 difference if it means peace of mind? 

The circumstances where you’re better off cutting your financial losses for the greater good…

[00:19:01] So sometimes it's that relationship, that mutual respect that yes, I'm trying to make $1. But at the same time, I understand that you're trying to make $1 as well. 

He reveals the frequent call he would receive, and used to dread most.

[00:19:55] There was a time in my investment career where I would get strung up every time I'd get the call. 

And that’s next. I’m Tyrone Shum and you’re listening to Property Investory.

Tyrone Shum:
When it comes to flipping a property in order to make as much profit as you can in as short a time as possible, Loo has the advice that will help you do just that, all while not cutting any corners.

Simon Loo:   

[00:14:21] By all means, this guy was not the cheapest. We could have shopped around and found people that were cheaper. But the value wasn't about saving $5,000 off $30,000. It was about get in, do the job, get out, no headaches, almost no need for our input on anything. 

  

[00:14:44] And because there was about $300,000 profit to be made, who really cares about $5,000 or $10,000 difference if it means peace of mind? If it means just mental ease of dealing with the whole project? 

  

[00:15:04] And we talked about this in the past episodes, that kind of mental ability will help you tackle the next project and tackle the one after that. And your ability to factor in the cost, it kind of works out the same at the end of the day. 

  

[00:15:22] So I guess that's, again, just maybe taking a step back and realising yes, if you were there physically, maybe you don't have to pay $100 to fix a GPO power point when you can buy a $5 one from Bunnings and pop it in yourself. 

  

[00:15:41] But sometimes it's not about that. It's about looking past that and accepting, 'Yes, this is the cost of it. But because I'm making so much money on the deal anyway, it doesn't even matter'. So that's a very important lesson to be learnt.

Tyrone Shum:   

[00:15:54] I totally agree. And it resonates with me, because I can share with everyone my story in a moment about something similar to that. Because also, too, it's time. Because if you find and nitpick at everything with a tradesperson, and you start haggling over certain thing, it will take a lot longer. 

[00:06:12] And ultimately, when it takes that much longer, you'll probably end up costing you more in the long run, than moving through a project that should have been only taking maybe two weeks, but it might take you six months. 

  

[00:16:22] I've heard plenty of stories like that, too. Sometimes you look back and you go, 'Man, I should have not done it myself'. I can tell you a story from a Rich Dad, Poor Dad [story] where he said, 'I thought I could go down to the hardware store, and fix up a broken tap that I had at home. And I've seen them do it in the hardware store, I've seen people do it on videos, it shouldn't be that hard'. 

  

[00:16:42] He tried that. After about two days, or actually two weeks or something like that, he said, he just gave up. He said, 'I called up in the end, paid a tradesperson. Even though I paid him $50 extra, he got it done within an hour and my headache was solved'. It's exactly that same thing. 

  

[00:16:55] And once you find that great tradesperson, then stick to them. Pay them on time, or if you can pay them early. Just to ensure that the work gets done very, very quickly. And they'll look after you. 

  

[00:17:07] And I experienced this when I had my renovation that I was doing down in Portland, which is a commercial property that I had. It took me literally six months to find the right tradesperson, because there was hardly any supply down there of any trades people and I just couldn't find one. 

 

[00:17:23] But when I did find that guy who did it, he literally said to me, 'This is how I think you should do it.  I'd recommend doing it this way'. And I said, 'Look, I trust your opinion on this, because you've been doing this yourself many, many years. Just go ahead and do it, quote me how much it is, and I'll just pay it'. And he did. 

  

[00:17:37] And when he did, the property manager, when they rented out, they said that he did such a great workmanship on it that I'm going to get him to do all my future properties as well too, because it just looks so good. Because instantly, the week after it got finished, it just rented out straight away. 

  

[00:17:51] And that makes a huge difference because it saved me the headache of having to worry for another two or three months to try and find someone else to do it. And even potentially me flying down to do it. And I just let someone handle it. So I can totally understand and say it's worthwhile to pay a little bit extra than to haggle over a few thousand dollars.

Simon Loo:   

[00:18:07] 100%. And I think coming to that point as well, it's not even for your mental ability, it's actually for the tradesperson's mental ability as well. Because negotiating with a tradesperson is like negotiating with a dentist. You might get a lower price, but it's going to be painful, right? 

  

[00:18:30] Because you might be able to drill the tradesperson down to a massive discount on the job that he quoted. But when he's there sanding away and painting away or doing this and that, he's gonna know that he gave you a massive discount. And he might cut a corner. If anything, even just out of pure anger, or remorse that he's doing this job for so cheap, maybe. 

 

[00:19:01] So sometimes it's that relationship, that mutual respect that yes, I'm trying to make $1. But at the same time, I understand that you're trying to make $1 as well. Let's not rip each other off. But if you look after me in the sense that I don't have to even think about this reno, you just do it. And you do it to your abilities that we know that you can do, everyone wins. 

  

[00:19:29] So I think it's a very, very important lesson because even in the world of property management, when you own properties, your standard rental properties and maintenance items come up, it sucks. Nobody likes money out of their pocket to pay for leaking taps or electricians or plumbers or this and that, little things that go wrong in the house, big things that go wrong with the house. 

  

[00:19:55] There was a time in my investment career where I would get strung up every time I'd get the call. And by the way, the more properties you own, the more you're going to get this call. You're going to get [a] call every week, almost, about one thing or another. 

  

[00:20:13] And over the years, especially once you've done a couple of tax returns and realised if you bought the right properties, your cash flow is actually quite healthy. And it just absorbs a lot of these costs to the point where it's just a drop in the ocean, you just realise it's not worth it. 

 

[00:20:29] Yeah, you know, a $99 call out fee sucks. Emergencies suck. Sunday burst water pipes, you know, just do it, pay it, move on. Mentally move on. And then at the end of it all, once you've made your money on the property, whether it's capital growth, or through passive income, you're going to realise if you did worry, none of that was worth it at the time. 

  

[00:20:54] In fact, getting frustrated and calling around different quotes and trying to organise access with this person to get into the house at that particular point in time. And maybe they didn't do a good job, so you had to get another guy to go out and try to do a warranty claim on the first job... It's just too much. What's the point [of saving] $50 [or] $100 bucks, maybe even a couple of hundred bucks?

  

[00:21:24] I understand a lot of people are on budgets, very strict budgets. But I'm talking from a point of if you bought the property right in the first place, as in you got the right deal, the right numbers, the right cash flow, you just absorb a lot of these costs anyway. So just bear that in mind.

Tyrone Shum:   

[00:21:40] Totally. So let's just jump back to the buyer. I'm curious, what has he done with the property since that valuation?

Simon Loo:   

[00:21:48] Well, interestingly, he's getting a little bit greedy. And he wants to sit on it for a couple of months. As we all know, Brisbane is booming, and there's no real sign of slowing down. In fact, our research suggests that it's going to be going for the next five to 10 years, in line with what Sydney and Melbourne has done. 

  

[00:22:08] If you look at the last major boom cycle of Brisbane, which was many, many years ago, Brisbane actually increased as interest rates were going up as well. So as you know, Tyrone, there's a lot of talk at the moment about interest rates going up in 2022 and that's how that's gonna affect property prices and things like that. There's a lot of predictions that property prices are going to go crashing down and all this kind of stuff.

Tyrone Shum:   

[00:22:36] That's what they said about COVID. Guess what happened?

Simon Loo:   

[00:22:39] That's what they said about COVID, that's what they said about Sydney back in 2011. All these amazing economists came out to predict the bubble in Sydney. But my personal belief— and we're kind of straying from the topic a bit— but my personal belief is that Brisbane is going to be even more popular when high interest rates affect the Sydney and Melbourne markets even more from an affordability standpoint, which will push population demand into Brisbane even further.

Tyrone Shum:   

[00:23:08] I think that's the case.

Simon Loo:   

[00:23:10] Even at three [or] four or 5% interest rates. The prospects to buy a house in Brisbane currently is still affordable. So I think a lot of people are going to use that as a draw card or an excuse to move up there. Hence creating more demand for properties. 

Tyrone Shum:   

[00:23:34] I totally agree with you on that side of things. Because yeah, it's already happening anyway. A lot of people who I've spoken to have just moved out of Sydney, because, one, due to COVID, they're working from home, there's no need to really be so close to the city. 

[00:23:48] And two, they're having a better lifestyle, because they can sell down the high mortgage that they used to have, and basically use those extra funds to be able to live and enjoy their life and whatever they want to choose to do. So it's definitely happening. But yeah, coming back to the buyer.

Simon Loo:   

[00:24:03] The buyer, in this particular case, he's just going to hold on to the property. I'm unsure if he wants to rent it out. From my last conversation with him, he's a little bit reluctant to rent it out, because he doesn't want excessive wear and tear on his fancy new reno. So he might even just leave it empty for a couple of months, see where the market goes. And sell it whenever he feels the time is right. 

 

[00:24:29] He's a client that doesn't necessarily need the cash immediately. As I mentioned, he's close to his retirement age. So he's got a bit of cash laying around. So yeah, it's just a good opportunity so far.

Tyrone Shum:   

[00:24:50] It's interesting, because you think about it. And, you know, I would like to know your opinion on this. Say for example, you've got a property valued at $850,000. He could walk to the bank and get a residential loan, say up to 80%, even sometimes 90%. 

[00:25:04] He could literally draw out, say, $680,000 [or] $690,000, even close to $700,000, which will cover the cost of all his investment that he put in at low $500,000s, and potentially use that to roll over into another flip that he wants to do concurrently.

Simon Loo:  

[00:25:19] We've had this conversation. Look, I can't relate. I can't empathise because I'm not at that age yet. But perhaps when you're at that age, and you're very established, maybe you've got a few properties or assets or [a] share portfolio that is doing its own thing for you already. Maybe there's no need to get in debt. Maybe there's no need to absolutely max your position, in terms of how much you can borrow. It could be just a case of him being bored. Maybe he wants to produce something with his money and just have a project so that he can mentally...

Tyrone Shum:   

[00:26:04] I can hear his brain ticking over.

Simon Loo:   

[00:26:08] Exactly! This client and I, we discussed his goals and the reasons. But I don't think he has any intention to load up on debt at this point in time anyway. 

Tyrone Shum:   

[00:26:24] I can understand. The headaches that you have to go through to go through and get the paperwork done anyway, getting a loan, it's always a headache.

Simon Loo:   

[00:26:32] To be completely honest with you as well, I don't think he'll qualify for a loan because I don't think he has a proper full time job. I think he's kind of semi-retired already. So it's a bit of an anomaly. 

Thank you to buyer’s agent Simon Loo, our guest on this special episode of Invest Like A Pro presented by House Finder. 

Also, for being a loyal listener of the podcast, I’ve asked Simon to offer a free 1 hour strategy session normally valued at $500 to help you put together an actionable property plan.

To get your free strategy session, simply visit housefinder.com.au and fill out the contact form, or call Simon directly on 0415 626 342 and quote “Property Investory”.