Why renovation can both be a passion and a job
Hi it’s Scott from Scott Partners and today we have Bernadette Janson from the School of Renovating. In this interview, Bernadette discusses how your own home can be your biggest asset when you think of renovating which would make sense if you’ll take advantage of that and maximize it.
SCOTT: Hi everyone, and welcome to the Small Business Heroes show, the show that’s everything about small business. Today I’m talking with Bernadette Janson from The School of Renovating.
Bernadette did her first renovation at 13 years old, living on a farm in Central Victoria, where her surroundings did not meet her expectations. She set about making over her bedroom, as you do. It was an empowering experience, and really hammered home the power of renovating: how you can transform your surroundings and how you feel about your life with a bit of inspiration, some elbow grease, and a splash of paint.
A decade later, renovating kept her sane while staying at home caring for her four children. That’s right, four! She’s one of those crazy women who need to have a project on the boil. She grew by getting more daring and ticking off her renovation bucket list items, such as renovating an investment property, heritage listings, development work, subdivisions – and she was just getting started.
Fast forward a few more years and the chicks have all flown the nest, and her renovating focus is on living a fulfilling and satisfying life. She’s honored to be able to do this while presenting The School of Renovating.
Bernadette Janson, welcome to the Small Business Heroes show.
BERNADETTE: Thank you so much, Scott. That’s an awesome introduction.
SCOTT: An awesome thing that you’re doing, taking old and disheveled buildings or things that have become a bit unloved and making them into something that someone can love again.
BERNADETTE: Yeah. It’s fantastic.
SCOTT: Tell us a little bit about The School of Renovating, about what you do, about the magic that you give.
BERNADETTE: Basically, as you mentioned before, I have been over the last few years pretty much renovating full-time. I love renovating, but being on a building site with traders all the time was a bit lonely. So I started just working with my friends and getting them to where they wanted to be with their properties, and that sowed the seed for actually putting together The School of Renovating.
Now I’ve got the best of both worlds. I work on my own renovations, but I also work with other people, helping them have better lives through renovating.
SCOTT: I’ve got not one little handy bone in my body, unfortunately. I do try. Is renovating something that you really have to be born with the skill to do?
BERNADETTE: Actually, absolutely not. To be honest with you, when Steven, my husband, and I first started renovating many years ago, he had a background in building – and still dose – and we used to do it his way. When you approach renovating as a builder, we certainly didn’t make the types of profits we’re making now, and we’re not hands-on at all. Certainly I control the project from whoa to go, but I don’t do any DIY. I actually think it’s an advantage to not be able to do it yourself, because it forces you to make sure that you buy the right property and you have enough money in the project to pay for trades to do the work.
SCOTT: Right. Is The Block an educational program for renovators at all, Bernadette, or is it something that’s throwing everyone off the scent?
BERNADETTE: In essence, The Block is renovating, but like anything to do with television, it’s about the drama and what sells the show, to be honest. If I ran my projects like The Block, then I would be very poor.
SCOTT: Unless you had a film crew following you everywhere.
BERNADETTE: Yeah. Doing things room by room, it’s just not cost-effective to do it that way. You really need to get the economies of scale and break your work down into trades rather than into areas. And you need to be organized; the more organized you are, the more cost-efficient you can be.
SCOTT: Fantastic. For our small business audience members out there listening or watching or reading this, how can they go about renovating if that’s really their passion?
BERNADETTE: What I say to everyone who’s thinking about renovating is the first place to look is your own home. Because for most people, the family home is the biggest asset that they own, and it really makes sense to take advantage of that and maximize it. A lot of our students come in and the first thing they do is they renovate their own home. Now, when you’re doing renovations – and you know as an accountant – with an investment property, at the end of the year there are some things that you can depreciate much faster than the others. Cosmetic things depreciate a lot quicker. The more structural things are a lot slower.
But the reality is that when you make a functional change to a house, like you add a bedroom or add a living area, that actually stays with the property forever. Whereas when you are just doing cosmetic changes, the minute you finish it, it starts to deteriorate and date, so there will be a time when you actually have to come back and do it again. So when you’re thinking about adding value particularly to the family home, think about the structure of it and what you need to do to actually add value that’s going to stay with the home forever. Do you get what I mean?
BERNADETTE: So I would recommend really getting the best out of your own home first, and then you can draw on that equity to be able to do other projects.
SCOTT: Do people fall in love with renovating? Or is it something you do once and think “Oh my God, never again”?
BERNADETTE: If you haven’t managed it well, it will be a nightmare and you probably will say that. But yeah, they do. It doesn’t seem to matter really how bad it is when you’re in there doing it; the whole idea, there’s something really empowering about taking something that’s rundown and drab and ugly and turning it into something really beautiful. It’s an incredible high.
The other thing I would say about renovating is the buying, renovating, and selling – the flipping – is what everyone wants to do, and that is what I’ve done for a long time, but I would really strongly recommend, unless you need that cash flow, that you don’t do that. For lots of reasons, but the main thing is that it’s just a glorified job. Because there comes a point in time where you won’t be able to be out or won’t want to be onsite all the time, and if your income depends on you doing the work, then you’ve got a job. So what I would say to your people is to think about renovating investment properties. If you can, buy and renovate to get the return up, but then if you can manage to hold them, then you have the capital growth as well, and then you’re building a portfolio for long term – I don’t think income is ever completely passive, but more passive income.
SCOTT: That’s great advice. Building wealth in the long term should be what it’s all about. So you can actually make money out of renovating?
BERNADETTE: Yeah, absolutely. That’s what we’re all about. Do you want to hear about a couple of my projects at the moment?
BERNADETTE: Up until recently, I have done a lot of flipping, and now I only flip if I’ve got a reason to. Because I have sold way too much. At the moment I’m doing projects with our kids. We all want to give our kids a good start in life, and particularly if you’re living in Melbourne or Sydney, then getting started with their first time can be quite challenging. So what we’ve done is our children have good serviceability, they’ve got good jobs, so they’ve gone off and got loans, and we’ve partnered up with them.
I should step back a step and just talk about how I fund my renos. How I fund them is I set up a line of credit on another property. It can be the family home, it can be any property – a property that’s got equity in it. I use that for everything that’s not covered by an investment loan. So I’ll get an investment loan to buy the property, and then I’ll use that for the deposit, the holding costs, the reno, and everything I need to pay until it’s ready to sell or revalue. I call it the bucket.
So when I do projects with my kids, I’ve said “Go and get preapproved for as much as you can,” and they’ve gone off and done that. So we go and buy a property using their serviceability and my equity, put it together, do the reno, sell it, and we split the profit.
I’m just finishing one with my daughter at the moment, and that’s actually turned out to be a bit of a windfall. We took a bit of time getting it through to renovate, and in that period, in 7 months, it’s gone up quite a lot. Initially I was forecasting $100,000 profit; I’m now looking at closer to $200,000.
BERNADETTE: But all things being equal, we would’ve made $100,000 profit. That’s fifty grand each. It’s a 4 week reno, and Bob’s your uncle.
SCOTT: That’s beautiful. Bernadette, we’re running out of time, and I just wanted to quickly ask you about Airbnb, because it’s a strategy that I’ve heard you talk about, and it just fascinates me. Can you just briefly tell us about that?
BERNADETTE: Airbnb has really revolutionized my experience of renovating with a lot of my renovators because it takes the element of risk out of renovating apartments. Everyone knows you’ve got to get approval, and it can take time, so we set it up for Airbnb, and the returns are phenomenal. They’re not quite as good as they used to be – obviously they’re diminishing a bit, but they are phenomenal.
For example, I recently not that long ago renovated a little studio, and I decided to put it on Airbnb for the 4 week period after it was sold. I listed it on Saturday night just before the auction on a Monday night, and I had it full within 24 hours. And this little apartment which owed me $400,000 by the time I’d finished renovating was returning $850 a week.
SCOTT: Wow. Do the math, that’s awesome.
BERNADETTE: I know. I was very sorry I sold it. But anyhow, I’ve had three or four projects all on Airbnb at various stages. I’ve got a development site, I’m waiting for approval, so I’ve got that on Airbnb. Much better returns than long-term rental. And I’ve set it up so I don’t manage it, I don’t clean, I don’t manage the bookings. I’ve got that all outsourced so that it’s quite easy to manage. I would really strongly recommend anyone thinking about short-term rental that they really look at that.
Just one more thing: this is a shameless plug. We are actually doing training on Airbnb. The reason we’re doing it is because there are lots of people hosting on Airbnb, but out of all hosts on Airbnb, 1% of the hosts are making 20% of the profit. What that means is a good host is making $250 for every $1 that an okay host is making. So there is a lot to be gained by doing it well. So that’s that.
SCOTT: Bernadette, how can people that are watching, listening, reading this show get in touch with you, find out about the Airbnb course and anything else about The School of Renovating – how can they get in touch with you?
BERNADETTE: All you need to do is come to our website, which is www.theschoolofrenovating.com.
SCOTT: Which is down below.
BERNADETTE: And you can just go to the contact page and send me an email, tell me what you’re interested in, and I will let you know the best way for us to help you with that. Or you can just look around at all the stuff that’s on the site and educate yourself.
SCOTT: Fantastic. Thank you so much for talking with our small business heroes today, Bernadette. I’m your host, Scott Trevethan. I’m from Scott Partners and Go Global Bookkeeping, a bookkeeping service that supports you for as little as $20 an hour. Great bookkeeping value for you.
Thank you so much for coming on the show today, Bernadette. It’ s been an absolute pleasure to hear about renovating and learn about how to rejuvenate something that was a little bit tired and is now something useful again.
I’m your host, Scott Trevethan, and you’ve been listening to the Small Business Heroes show.
BERNADETTE: Thank you so much, Scott.