The 2 Min Property Renovation Calculator

The 2 min Property Deal Crunch Calculator

Crunch your property deals faster and remove the emotion

As someone who loves a property renovation, I know how easy it can get caught up in the emotion of purchasing and how easy it is to over capitalise on a renovation (however, I am yet to overcapitalise).

This is why you need a sound process that allows you remove the emotion from the decision and let’s you focus solely on the numbers. Property is exactly that, a numbers game!

When dealing with a high volume of properties, like we do here at Property Principles, speed and accuracy are your friends. The deal lives or dies by the numbers. We ensure every clients purchase is going to be something that will add value to their portfolio.

Let me teach you how we do it here, so you can go out there and buy a stud and avoid a dud property.

Learn if your next property is going to be a stud or a dud

Accurate Number Crunching

Renovations require you to be accurate with your numbers and financial assumptions. The thing most in your control is the purchase price of the property, then things start to get a bit more based on assumptions, like what the renovation is going to cost you and what the end value is going to be. Down below, we will let you know the core questions you must ask yourself before you think about buying a property.

The 135% Rule

Rules, rules, rules.This is one you’re going to want to follow.

The way the 135% rule works is that the sales price of the renovated property must be at least 135% of the purchase price: Purchase Price x 135% = Sales Price

The 135% is broken down:

Purchase Price: 100%
Acquisition Costs: 5%
Renovation Costs: 10%
Holding Costs: 4%
Selling Costs: 4%
Your Min Profit: 12%
Total: 135%

If You don’t think it’s at all possible to sell the property at 135% x the purchase price, then it may be best to cross that property out and start looking at the next one.

How to use the 2 min renovation calculator

Once you have run the top section of the calculator, it’s time to have a deeper dive and ensure the accuracy of the numbers. Now remember, this calculator is a quick renovation calculator and that you will need to do more deeper dive into the property and metrics.

However, do look into the expenses more, factoring in the correct stamp duty (check out our stamp duty calculator here) for your situation and if you’re using a buyers agent to assist with the purchase (we know a good one – Here).

The next crucial decision, which should be made before you’re putting any numbers in a calculator: If you’re going to sell the property or if you’re going to hold it. There are considerable fees involved with selling a property, along with capital gains taxes, which all eat away at your take home cash, so it may look like a sensational deal on the calculator but do ensure you need factor in your individual situation and speak with your licensed professionals.

I prefer to hold my properties, which saves me the cost of selling and allows me to leverage the equity position I build as I add value to purchase more property.

How to Use the calculator:

Find the best price you can get the property for, enter that in the ‘Purchase Price’ section
Work out the end value of the property, enter in “Estimated End Value” – be diligent with your numbers here
Decided if you’re going to sell or not sell
Move the sliders to fit more to your situation, just make sure you stick within 130-140% range
Read the Total Profit number, are you happy with that?
If you are, move the deal to your next phase of due diligence and do more research

Renovation Calculator

Here is the 2 min Renovation Calculator below, test is out for yourself:

Core Questions you must ask on every deal!

It’s not over yet, we have some of the most important questions every investor needs to ask themselves when looking at the numbers:

Can you complete your desired renovation on (in the example above) $30,000?
Can the property be resold for minimum $405,000?

If the answers is no to any of these questions, then it’s back to the drawing board. It’s vitally important to know what the end resale value of the property will be, do not let emotion get in the way when pulling these numbers. It’s best for you to be keeping your eye on every single property that is sold, within your criteria and estimating what you think it will go for, then monitoring what it actually sells for.

Need help?

Congratulations, you have just crunched the numbers on your deal, there are many more stages of Due Diligence that you need to go through to ensure you have a successful property on your hands.

Don’t know where to start? Check out our Property Plan
Looking to buy that next investment grade Property? Check out our Property Purchase

This is what we do day in and day out here at Property Principles, you can book a call with us with the button below and we’d be happy to run through what you’re looking to do and if we can help you in anyway.

This information is general in nature and does not take into account your personal financial situation. It is for educational purposes only, and does not constitute formal financial advice. You should always seek personal financial advice that is tailored to your specific needs. All calculations are based on averages and are not 100% accurate. The assumptions made in this calculator are not suited to a person’s individual circumstances.

About Joe

I am the Director of Property Principles Buyers Agency, a Qualified Real Estate Buyers Agent, Property Investor and I co run Aus Property Investor, a 12,000+ people Community.

Join in the conversation at Aus Property Investors Facebook Community

Testimonials

"We were so pleased with our experience with Joe at Property Principles. He was such a wealth of knowledge and information, super professional and completely invaluable to us in our property investment journey. We purchased our second IP right in the middle of a global health pandemic and recession, talk about tough conditions! We are so grateful for everything you did for us, we can't thank you enough Joe!"

"Joe and his team are amazing to deal with, can’t recommend them highly enough. I have known Joe for a while now through the community and knew that his knowledge and negotiations skills were great, and that they would help me find my property. I reached out with a plan and a tight time frame to purchase in, not only did they deliver in finding me a great property but they managed the whole process from start to finish."

"We’d like thank Joe, Kat & the team for all their help securing this property for us. Not only did they make the entire process much easier but they were always there with help and advice. Through the buying and renovating process they were awesome to deal with and not only found a property to add value to, we also bought it well under market value, allowing us to build equity to continue growing our portfolio."