RENOVATING

FOR PROFIT
HOW TO MAKE A 6 FIGURE INCOME FROM PROPERTY RENOVATIONS ANYONE CAN DO IT!

ABOUT US
Cherie Barber & Stephen Tolle are full-time professional renovators. Both threw in their full-time jobs, half way through their first renovation project, which saw them earn more money on the weekends renovating, than their full-time positions. In the first year of their renovating career, Cherie and Stephen bought, renovated and sold 6 houses with a combined value of AU $6.3 Million with no stable income and little money behind them. Having gained a net 1st year profit of AU $1.15 Million, this phenomenal result was the catalyst for a career change to full-time renovation & property investment. The tremendous success achieved by this couple is attributed to very specific disciplines and strategies used for all renovation projects. Their projects generally adopt the buy, renovate, sell strategy however certain properties are retained that fulfil their criteria for a buy, renovate, rent strategy. Having developed their own unique due diligence system, they are masters at knowing property values, have a keen eye and willingness to tackle those renovations that others put in the too hard basket and are skilled at adding maximum value at the least cost possible. Theyve broken sales records in their area and say the key to doing this is by identifying market needs and delivering a product to satisfy that demand. Cherie and Stephens combined passion for property has seen them regularly featured in Australian wide media including numerous national and suburban newspapers, countless property investment & renovation magazines, internet and talk show programs. Theyve appeared as regular TV renovators for Channel Sevens Today Tonight program and are widely acclaimed as Australias Renovation King and Queen. Unrivalled in what they do, Cherie and Stephen are Australias top renovators, continuously averaging a staggering $300,000 to $400,000 profit on each property they touch. With each property taking just 3 to 5 months to complete, they firmly prove that lucrative profits can be made if you know how to do it right. In the last 8 years, theyve completed 35 renovation projects and transacted over $48 Million in property. Adopting the theory that its better to be a master of one, rather than a jack of all trades, their sole investment strategy is property. They are self described average Joes and say anyone can do it!

INTRODUCTION
Are you keen to turn old into gold? Searching for that diamond in the rough that will send you on your way to financial freedom? Do you start frothing at the mouth when agents knock up those Renovate or Detonate signs? If this sounds like you, welcome to the wonderful world of renovating! Weve all seen the TV renovating shows that make it look so easy. Properties are transformed in a blink of an eyelid with no apparent fuss or effort. Now for the reality. The truth is that to renovate and do it successfully, youll need expert property knowledge and a systematic approach to ensure you bring home a lucrative profit at the end of it all. After all, PROFIT is the name in the renovating game. Anyone can renovate but not everyone knows how to make BIG PROFITS from it. Inexperienced renovators underestimate their costs and overestimate their selling price. Time blows out and costs spiral out of control,

leaving nothing more than a battered ego and huge loss at the end of it all. So why is it that so many renovations are doomed before they even begin? Quite simply, its nothing more than a lack of knowledge on all of the critical steps involved in the renovation process. Like anything, renovating is a business. A lack of strategy, planning or failing to undertake all steps in the renovation process will spell diaster, big diaster. Renovations need to be done quickly and efficiently and with insight into what buyers or renters want. This will be the key between a huge profit or loss on your project. This chapter therefore explains the different types of renovation projects you can undertake, the systematic approach you need to follow in the renovation process, along with key strategies that will put you a step ahead of others who dont take the time to educate themselves with such powerful knowledge. The strategies weve listed are just a small sample of the hundreds that we have. They are tried, tested and used on a daily basis in all our projects to find, buy and renovate properties for huge profits. As such, this chapter focuses on the purchase and transformation of unrenovated properties with the intention of reselling them for a profit, a great strategy for people with no cash or minimal equity behind them. Our first renovation was 95% cosmetic with a touch of structural work. From there we moved rapidly into full blown major renovations with increasing amounts of structural work, often involving part demolition of the property. If youre seriously considering renovating as your wealth creation vehicle, determine where your comfort level lies in respect to the type of renovation you do and the amount of work youll undertake in each project. Typically, the more work to be done to a property, the larger profit up for grabs. And if the thought of alterations and additions causes you to lose anything more than 10 minutes sleep, start with cosmetic renovations and slowly transition yourself into more challenging projects as your skill, experience and confidence develops. So what sort of person does a professional renovator need to be? Definitely someone who is not happy to sit back and wait for things to happen. Renovators want results NOW, not in 1, 2, 5 or 10 years time waiting for capital growth or their development deals to pay off. Renovators take action, many of them rolling up their sleeves, getting amongst the rumble and doing large portions of the work themselves. Often coined Sweat Equity, renovation is the fastest way to get quick cash flow. And once your equity starts to build after every successful renovation, you can step back a little, project manage and let other people do the sweating for you. Renovation is and always will be, one of the safest and most reliable property strategies you can use. It offers investors the ability to add value, regardless of whether the market is rising or falling. More importantly, renovation is one of the easiest ways for you to get started in property. You dont need to be a builder or tradesman to make huge wins. All you need is the knowledge and commitment to follow our step by step renovation process. Youll soon discover its not as hard as you first thought. Anyone can do it, you just need to be shown how. For us, renovating is in our veins. Were one of the few people that can truly say we love what we do and it doesnt feel like work. Achieving huge PROFITS is real and achievable, you just need to have the skills, faith and motivation to get out there and make it happen. Throw any procrastination you may have in the mini skip bin! Remember also, that the more time and effort you invest in your own education, the greater your results and profits will be. So wait are you waiting for? Hold on and fasten your seatbelts for your about to take the renovation rollercoaster ride. No doubt youll have many ups, lots of downs and heaps of twists along the way. Youll feel so exhilarated at the end of it all, that youll want to jump back on that ride again. So go on, leap in, its not all bad!

Cherie & Steve

THE RENOVATION LINGO

Renovation is a broad word so before we get into any further detail, lets clarify some basic renovation terminology used today. THERE ARE 2 PRIMARY CATEGORIES OF RENOVATIONS: 1. Cosmetic Renovations; and 2. Structural Renovations. Cosmetic Renovations are improvements made to a structurally sound property that give it a new makeover or facelift. Just like us, properties too become old and tired looking with age, so at some stage, work needs to be done to give them new found appeal. This is done through simple cosmetic enhancements that ideally add more in perceived value than actual cost. The most common methods of cosmetic improvements are painting, replacing carpets, tiling, polishing floorboards, fixing or replacing blinds, updating kitchens and bathrooms, landscaping and any other general repair designed to fix and portray a clean, modern appearance. All are relatively inexpensive changes delivering high impact at minimal skill level. As a general rule, cosmetic renovations should account for no more than 15% of the purchase price of the property. Structural Renovations are improvements aimed to either preserve the integrity of the property or to reconfigure and add space to a property to maximize its overall use and efficiency. Rarely is an old house so derelict that it has to be completely demolished. Many structural renovations include part demolition of the property with approval for new alterations and additions. Unlike most cosmetic makeovers, structural renovations need council approval and permits to carry out the work and generally require licensed trades people. As structural renovations can be major changes to a property, there is no industry average as to what you should and shouldnt spend. Its simply a case of analyzing each property on an individual basis and assessing your return on investment versus the amount of work to be performed. COSMETIC RENOVATIONS vs STRUCTURAL RENOVATIONS Doesnt require council approval. Low level skill required. Minimal expense. Short Time Frames (<2 Months) Part Time Role Small Trade Teams Required. Small Profits. Potential for Smaller Losses. Any property that is completely demolished or starting from scratch is defined as new construction and does not fit in the realm of renovation. Does require council approval. Medium to high level of skill required. Minimal to major expense. Longer Time Frames (2-6 Months) Full Time Role Large Project Teams Required. Huge Profits. Potential for Huge Losses.

 THERE ARE 2 TYPES OF RENOVATORS: 1. Owner Occupier Renovators; and 2. Professional Renovators. Owner Occupier Renovators focus purely on improving the home they currently live in. Unstirred by the thought and realities of living in mess and mayhem for a period of time, owner occupier renovators focus on one thing what THEY want. They set about to transform their property with a wish list of needs to accommodate the comfortability of those residing in their home. They commonly take a long term view to the property and decisions are based on emotion and what personally appeals to them. While theyre likely to have a renovation budget, its not uncommon place for their budgets to blow out simply because they splurge on items they just have to have. Juggling their full time jobs, their 3 month reno magically takes 10 months to complete, they almost get divorced in the process and end up with something entirely different than what they first planned. Its not their fault, its just inexperience and a different renovation mindset. While not all owner occupier renovators are total tragics, its this group that is likely to amuse us all with their tales of tradesmen traumatising them and how they unexplainably went from mild mannered people into uncontrollable maniacs within a short space of time. Professional Renovators on the other hand, are concerned with just one thing. Make no mistake, its all about PROFIT. Theyll be the ones shouting Show Me The Money faster than your sparkie whos just zapped himself with 240 Volts of electricity. Professional renovators are savvy, business smart people who analyse and consider the implications and merits of every decision they make in the renovating process. They have intimate knowledge of the market and know what buyers want, sometimes when buyers dont know themselves. They are well organised, thorough and dont change their mind, 30 times over, on what colour tiles they should put on the floor. Professional renovators have the buy and add value mentality etched more in their brains than the stone on your front doorstep. For them, lost time is lost money. As each deal is done, they increase their knowledge of construction and understand the importance of having a good trade team behind them. Professional renovators never get emotional about property. As the last ones to be paid in the deal, they get huge delight seeing their bank balance notch up a few levels come settlement day.

WHY RENOVATE?
Like so many people, youve already made the decision to start renovating. Fantastic! Its important to know what youre going to do with the property BEFORE you buy. Which strategy you adopt is also likely to be determined by how much cash and cash flow you have. The 3 strategies below have differing attributes and will require a different execution approach. The key is to have a clear vision right from the start. STRATEGY 1: Buy, Renovate, Reside. STRATEGY 2: Buy, Renovate, Rent. STRATEGY 3: Buy, Renovate, Sell. The Buy, Renovate, Reside strategy deals with the owner occupier renovators weve described above who renovate their primary place of residence. This is a huge proportion of the renovation real estate market. Owner occupier renovators are entitled to 1 Owner Builder Permit every 5 years through the Department of Fair Trading. Its a great way to get a start in property if you short on the green stuff and dont mind putting in some sweat equity. The key advantages are that your costs are kept to a minimum and whatever profit you make, is totally tax free, provided the home has been used as your primary place of residence. In a world where we are taxed on everything, this is one of the rare things in life that is truly tax free. And while this all sounds great, you just need to face the reality. Unless you have a relationship more rock solid than the Caesar stone bench top youve been dreaming off, be careful and realistic about the challenges of your family living together in a construction zone. Like it or not, renovating can be the quickest way to divorce.

After years of flying off the handle, numerous break-ups, us traumatising tradesmen (for a change) and a few narrow misses to the head with the closest tool in reach, weve finally mastered a strategy where we can diligently and peacefully renovate together. The Buy, Renovate, Rent strategy targets investors who renovate their properties for the purposes of attracting a rental tenant. This type of renovation does add value but normally doesnt maximise the full potential of the property. More so, properties are held to increase equity through longer term capital growth. The ultimate goal of the property owner is to emotionally attract tenants, get the highest rental revenue possible and have minimal to no future maintenance issues that detract from their rental return. Cosmetic renovations are more favourable here. Renovations focus on tenant needs, practicality, long term durability of fixtures and fittings and an appropriate level of style and quality to match the rental income of the property. Leave the wow factor for properties that you intend to buy, renovate and sell. Renovators in this category need to be diligent in keeping costs low to avoid overcapitalising on the property versus the rental return theyll receive. The Buy, Renovate, Sell strategy deals with professional renovators who buy property, add substantial value to it and sell with the intention of generating a profit within short timeframes. Sometimes referred to as traders, the buy, renovate and sell strategy is all about demand and supply. Identifying short supply in the market and buying a property that can be transformed to satisfy that demand. Properties too need to strike an emotional chord with buyers so its important renovators in this category understand their buyers psychology. This is the key to making HUGE profits in property renovations. The Buy, Renovate and Sell strategy is our area of expertise and the remainder of this chapter largely focuses on this. Saying that, many of the strategies we share with you in this chapter, easily apply to the other 2 strategies mentioned.

THE A,B,C OF RENOVATING

We all know that one of the quickest ways to make money in real estate is to buy a property that no-one wants (ie: the dump), magically transform it, put it back on the market and hopefully have buyers competing to buy it. Although the plan is simple, its easier said than done. In essence, there are 3 key elements in the Buy, Renovate, Sell formula:

Know The True Value of A Property When Buying doesnt always translate to buying the property for less than its worth or the vendors asking price. In some instances, you can afford to pay more for the property than its current market value, if the property can turn an increased profit from a different or higher / better use. The key here is not to have tunnel vision when assessing properties. Confidentially know what can be done with the property and how you are able to fully maximise its potential, without being detrimental to others. Once you know this, you can determine what the property is worth. Property developers commonly assess property values in this regard. Renovate for the Least Cost Possible To Achieve The Desired Result Renovations do not always have to be done on the cheap. What is important is that the quality of the renovation, reflect the value of the property being re-sold. A luxury home in a swishy suburb will fail to sell if you paint the kitchen cupboard doors or put cheap fixtures and fittings in. Recognise that different properties, at different price points, require different renovation strategies. Sell at the Highest Price Possible in order to maximise your profits. Give consideration to the time of the year you go to market. For example, December is a great time to buy property but never to sell property. Ensure you have a great selling agent working for you and always professionally present your property. Doing this creates an illusion that emotional buyers get lured into.

OUR 8 STEP RENOVATION BIBLE

So this is it, the nuts and bolts of what it takes to be a professional renovator. Our process is designed to guide you through the 3 key renovation elements listed above. Though its time consuming, you must religiously follow each and every step in our 8 step renovation process. Miss one and you open yourself up to a huge amount of risk. Many other property experts reduce the number of steps in their renovation theory. We take the opposite approach. We pride ourselves on being thorough, so the more detail we have, the less chance of us missing an oversight that could potentially cost us thousands. Were an honest couple so will happily admit that for the first few years, we winged our way through renovating, getting ripped off in the process by many, paying way too much for goods and materials, accepting poor behaviour and workmanship from tradies, undertaking tasks that added no value, the list drags on and on. Did I forget to mention, almost killing each other too, each and every day. Despite making great profits up until that point, one day we decided to get serious about our renovation processes and so we set out to consciously document and refine them to perfection. Having done that, we feel that anyone who has this knowledge will have a serious advantage over others who dont learn how to renovate right. Like it, hate it, debate if you want. The reality is our process is tried, tested and proven. Its no fluke that we make hundreds of thousands of profit on ALL our renovation projects in relatively short time frames. Use this process religiously; it is solely what has made us rich. You will notice that the first 5 steps of our process focus on the buying characteristics of the property. Considering this, its fair to say that 63% of the renovators work is done (5 out of 8 steps) before you even roll up your sleeves to get down and dirty. So many people get caught up in the actual renovation work, that they lose sight of whats really important and where their skills are best utilised. Learn to be a good project manager and let tradesman do what they do best. What takes them 15 minutes to do on your site, took them 4 years in study to learn so give them some credit and focus your efforts on where it will make the difference.

OUR 8 STEP RENOVATION PROCESS

There are hundreds of strategies, methods and tricks of the trade within our 8 step renovation process. Far too many to detail at length in just one chapter. So considering that, weve handpicked just 3 of the 8 renovation steps (Steps 5, 6 & 7) and will depart key knowledge to you with workable strategies. These strategies are what we use, each and every day in our own renovation projects to make unbelievable profits. They are realistic, achievable and can be implemented today with success, on your own accord.

STEP 5: ACQUIRE THE PROPERTY

So youve finally found the perfect dump, leaking potential faster than the plumbing pipe thats sprung a leak within it. There are 2 steps you need tackle to secure the property. The first is to organise your finance. The 2nd is to negotiate on the actual purchase of the property. ORGANISING YOUR FINANCE Is it better to organise your finance before you start looking or find the deal first and work out how to fund it? That comes down to personal choice. We adopt the latter, citing that its more difficult to come across great renovation deals than it is to get finance. So we dont restrict ourselves, within reason. Our most profitable deal ever, was done on a property that was way out of our price league. Still we found a way to

finance it, through other people, and happily walked away with a $750,000 profit. Happy days. The reality is, if you are hungry to win the renovation race and really want to do the deal, you find ways to fund it. The most common question we get asked, where do you get all your money from? Smart renovators use other peoples money. We have made all of our money using the banks money. The key to getting finance is to think creatively and put as much effort into obtaining a mortgage, as you do looking for a property. Not all banks are created equal. Never take what the first bank tells you as being representative across all banks. Some lenders are more flexible than others so getting a loan may be difficult with one bank but easier through another. Renovators today have huge choices in where to obtain money from. There are traditional banks, non- traditional lenders, deposit bond companies, mezzanine funders, solicitors funds, the list goes on. If you dont know what all of these are, you need to improve your knowledge on finance. Put time aside to educate yourself on finance suppliers and what their product offerings are. Loan applications are generally assessed on 4 merits: 1. Income your income amount and the stability of it; 2. Serviceability your ability to repay the debt; and 3. Loan To Value Ratio - the value of the property less the amount being financed, expressed as a %. The lower your LVR, the higher chance of a loan approval. 4. Your Credit History your ability to manage your money and your financial performance to date. If you fall short on one of the above criteria, put your creative hat on and think of an alternative solution. For example, you may have some equity behind you but your income is too low to service the loan. In this situation, we would turn to a no / low documentation loan, a loan that does not require substantiation of your income. Your ability to think outside the square, can mean the difference between an approval or a rejection. And what about funds needed to do the actual renovation? Here are some of the obvious sources of funding that people overlook: 1. Take out a personal loan. 2. Utilise credit cards with 55 interest free periods (great for cosmetic renovations). 3. Get a line of credit against the property by having the property revalued as you move through the renovation. 4. Borrow from family and friends incentivise them with the prospect of a higher interest rate or small % of your renovation profit. 5. Find an investment partner think time poor professionals who have no time to spend their cash. Motivate them with a % of your profit.

STRATEGY 1: 5 WAYS TO INCREASE YOUR CHANCES OF GETTING A RENOVATION LOAN

1. Develop Good Business Relationships with Senior Bank Managers not mobile lenders, not the banks customer service staff, senior lending managers or branch managers. Work hard at developing these relationships. Share your short and long term intentions with them from a renovating / financial perspective. Impress them with your property knowledge so they see you as a property expert, someone who knows what they are doing. Let them know you spend a great deal of time researching your property purchases so there is minimal risk to the bank. Meet with them every 3 months to assess your changing financial position. Your banker is a crucial member of your project team. Let them know youre serious and you hope for a long term mutually rewarding business relationship together. Prepare A Bank Proposal - Put time and effort in preparing a bank proposal. 99% of people who need a mortgage never consider doing this. Savvy renovators spend time, prior to their bank meeting, preparing a finance presentation with critical information on the property and its financial viability. Your bank proposal should include: a) Overview of the property; b) Agents sales brochure & floor plan; c) Your financial feasibility; d) Details of how you will add value to the property; e) A projected cash flow analysis; f) Copies of your personal identification; g) Bank statements, etc. h) Graphs with projected rental incomes for the next 20 years (if retaining the property); i) Capital growth projections for the next 20 30 years (if retaining the property); You will spend a bit of time preparing the bank proposal but do it right and finance should be easier to obtain. The bank proposal not only looks professional but shows youve done your homework, helping to remove any doubt of being a risk to the bank. Spread Your Loans Amongst Different Banks some banks restrict your borrowing capacity when you have too many properties. If your wanting to do multiple renovations at a time, spread your loans around a couple of banks (hence the need to have relationships with more than just 1 banker). The saying dont put all your eggs in one basket applies with banks and getting finance. Protect Your Credit Reference File With Vigilance this is a list of the last 7 years of your finance history, including defaults that banks view prior to giving you a loan. Your aim is to have a clean record and the fewer transactions, the better. Only proceed with the application for loans that have a 99.9% chance of being approved. Never purchase consumer goods on interest free terms as it hits your CR file. Always pay bills on time and never get to default status. If you cant pay your $120.00 mobile phone bill on time, how are you going to pay a mortgage? The smallest things like this can be the reason why you get the big reject stamp from your bank. Dress Professionally image counts. Never wear casual clothes, regardless of how well the banker knows you. Always wear a good suit and look your best from top to toe, even after your loan is approved. Like it or not, people judge people by their appearance. When borrowing money, look like you can afford to repay the loan.

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NEGOTIATING THE PURCHASE How you negotiate on a property depends on how it is being sold. If a great renovator comes on the market and its being sold via public auction, your ability to negotiate on this property may be limited. Firstly, great renovators dont come along every day. So when they do, they create a great deal of interest. Nine out of ten times, vendors wont negotiate prior to auction and if they do, theyll have unrealistic price expectations. Agents know this and so they go to auction where bidders are placed under pressure to bid against each other, till the last person stands. And beware, if you are bidding against emotional owner occupier renovators, forget it. Theyll always pay more than a professional renovator, simply because their fighting emotion, take a long term view on the property and have probably underestimated their renovation costs. Weve missed out on so many opportunities because weve forced to compete in an arena of people who have no idea what they are doing. So, if you have to compete at a public auction, you may get it but its likely youll pay full price or more for the property.

The best way to acquire your dumps are via off market transactions or properties that are for sale. Either of these methods will give you good ground to negotiate on your terms. Off Market transactions are simply properties that are available for purchase that havent yet been publicly advertised. Your neighbour might mention to you in conversation that shes thinking of selling. If shes got a dump, scale the fence quicker than an Olympic hurdler. If you agree on a price and buy that property, youve done an off market deal. Off Market transactions are fantastic. Vendors normally have an idea what their property is worth but dont get caught up in the hysteria associated with the interest their unrenovated dump generates. They are therefore realistic. What they like better is the prospect of not having to pay agents commission or marketing costs. In our area, agents & advertising costs account for $30,000 on average. Huge money vendors get to keep in their pocket. Dumps being sold via for sale are great properties where professional renovators have lots of leverage to negotiate against. In real estate, the early bird gets the worm. Weve bought great dumps where we were the only people to inspect them. If you know potential when you see it, act with speed to secure the property before others have the chance to inspect it. So now comes the fun part, negotiating on the property. As a professional renovator you have 2 main objectives: 1) Source the property at the right price; and 2) Have your terms of sale accepted. Smart renovators dont negotiate just on price. There are other lucrative elements that can be negotiated as part of the deal. These are referred to as your terms of sale or your conditions. The fewer conditions in your offer, the more chance of having your offer accepted. Make sure, the conditions you do ask for, are going to work to your advantage, considerably. Negotiation is an art form so it pays to present an offer that arouses the sellers attention. Making a ridiculous offer up front will do nothing more than insult or offend the seller. Once off side, youll struggle to win credibility and get them back on your side. Hence the need for good thought and preparation in submitting your offer.

STRATEGY 2: SMART RENOVATION NEGOTIATION TECHNIQUES

Renovators who understand the importance of the time/money relationship, structure their conditions to increase their profit. Your offer needs to make the agent and seller aware that the property clearly has potential but because of the amount of work and time involved to bring it up to condition, your offer has been reflected accordingly. These are the common conditions used by professional renovators. 1. Extended Settlement 42 days is standard but long settlement is achievable. Dont be afraid to ask for a settlement period that covers any waiting periods you may occur (eg: development approval). Lost time costs you money so try to offset these costs through extended settlement conditions . We got 8 months extended settlement on one of our deals saving us 8 months of loan repayments and free capital growth in the process. Early Access permission to get in and renovate the property before you own it. A favourite for cosmetic renovators. If you time it right, you can have the property renovated and back on the market by the time you need to settle. The property will have a higher value so may wipe out the need for you to have a deposit. If the vendors solicitor is remotely good at their job, theyll request a workers compensation insurance policy to cover the vendor against any injuries that may occur whilst youre on site. A whole host of benefits are generated from this negotiation strategy. Subject to Pre-DA or DA Approval in some instances, you can get vendors to agree that settlement is pending pre-development approval or better still, full development approval. Great for structural renovators who want to have some assurity that their development plans will be approved, thus reducing risk. 5% Deposit most vendors will happily accept a 5% deposit versus the normal 10%. You just need to ask for it. Saves you a small amount on interest costs which adds to your project profit. Subject to Finance its likely that your finance is already approved but by requesting this condition, youll have some extra time up your sleeve to sign the contract, which underpins your extended settlement date from there. Subject to Building & Pest Inspection another avenue to negotiate price away, especially if you know really expensive tradesmen. Your aim is to get as many terms accepted as possible. During negotiation, some of these will be eaten away, and that is fine but ultimately you want to arrive at a point where you are both happy to move to the contract of sale. If you cant get any conditions accepted, you have no option but to reduce your price or walk away from the deal. Simple as that, never get emotional.

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STEP 6: CREATE A HIGHER & BETTER USE

How do you go about unlocking hidden potential? Its simple really. If youve done your homework up until this point, youll already know what type of properties in your area, are in demand. All you need to do is buy a dump which can be transformed to fulfil that demand. If you cant do this, your property will merely go in the same pile of average houses, sitting on the market, desperately waiting for offers. Our chosen area is dominated by 2 to 3 bedroom semi/terrace style homes with a younger affluent demographic in the 25 to 45 age range. Most residents move into the area in their late twenties and buy one one of those properties. They love the area and dont want to leave. When they get married and start having families, they suddenly need a bigger family home (4 or 5 bedrooms) within the same area. This is how you make it big in renovatingsimply by knowing want the market is doing and delivering the product to meet their needs. Its no different to any other business really. ADDING VALUE THROUGH COSMETIC RENOVATIONS Cosmetic renovations still need to address the issue of supply and demand in your area. There is no point buying and renovating a 2 bedroom home, if all other homes in your area are typically 4 bedroom. Youre at an immediate disadvantage. Always keep the underlying focus on demand.

Most cosmetic renovations dont need local development approval. The key to adding value in cosmetic renovations is to lift the condition and quality of the property to at least average or better level of other higher priced homes in your area. When doing cosmetic renovations, think creatively about how you can create the illusion of value. There are some renovating tricks you can implement, that will increase the value of the property, without the need for more complex structural works. Analyse the Internal Floor Plan - can you get an extra bedroom in by reducing the size of another room? - can you reduce a larger area into 2 smaller areas by adding in a gyprock wall? - can you get whatever the property is missing, into the space somehow? - can you add a small home office into an unused corner of a larger room? - can you open up rooms to make them seem larger and more appealing? - can you add features in that help define rooms better? - can you get more natural light into the property through items such as skylights? Analyse the External Footprint - - - - - - - - - - - can you easily install a carport? can existing carports be cosmetically rejuvenated to become enclosed? can outdoor entertaining areas be easily created? can an outdoor kitchen / BBQ area be easily installed? can fencing be installed to define boundaries and provide security? can pathways be added in critical points where needed? can planting be added to give a pleasing appearance? can outdoor storage areas be included? can the exterior of the house be freshened up ? can anything be done with the roof to make it look new? can any features be added in that strike an emotional chord with buyers?
The photo below illustrates how a property can have substantial value added to it through simple cosmetic enhancements paint, render, new roof sheets, tiling, plants and a new picket fence.

With cosmetic renovations, always be thinking, how can I create perceived value at the least possible cost? There are exhaustive lists of ways and tricks of the trade on how you can keep your renovation costs low. Our 2 day workshops go into this, in thorough detail, on a room by room basis. In the meantime, heres our top 10 ways to keep your cosmetic renovation within budget: 1. Do as much of the work yourself. 2. Negotiate and renegotiate on everything.

 3. Bulk orders mean bulk discounts find suppliers who can supply everything 4. Open trade accounts with key suppliers you get further discounts off trade price. 5. Simplify your design so you use more of one item versus multiples of smaller items eg: tiles. 6. Get suppliers to compete against each other to keep prices low. 7. Buy materials and goods from auction sites. 8. Look for good quality 2nd hand or seconds materials. 9. Buy cheaper imitations of more expensive items. 10. Enlist the help of family & friends to keep labour costs low. Remember! Add more in perceived value than actual cost. Youre reducing your PROFIT if you spend $ 5,000 on new carpet that only adds $2,500 in value. Spend $2,500 ripping up and polishing the floorboards instead, you may add $5,000 value to the property. See how one decision results in a profit, the other a loss. By planning ahead before you start your renovation, youll eliminate costly errors of poor judgement, during the physical renovation. With cosmetic renos, things that cant be seen, tend to not add value. There are exceptions of course. Ducted air conditioning adds value, so does the structural integrity of the house. If you skimp in this regard, youll never sell your property so know when to spend money on hidden things that wont be detrimental to the value of the property. Internally, always aim to give your cosmetic renovation, a designer look at the least possible cost, regardless of the value of the property. Use items that look expensive but dont cost the earth. Today, there are lots of fake clones on luxury items, all designed to give your cosmetic renovation that extra bit of bling. Tiles are a great example. Real travertine tiles cost $150m2 on average. Fake travertine tiles, virtually identical, cost $40m2. A great example of how you can get a champagne look on a beer budget. With cosmetic renovations, its best to invest your money into the 2 rooms of the property that add the biggest value, kitchens and bathrooms. Kitchens sell houses so make sure these rooms are perfect from top to toe. Its the easiest way to lure emotional buyers in. The main aim with bathrooms is to make them look bigger, brighter and cleaner. Add features and decorative elements into the property that notch up the wow factor. As a cosmetic renovator, you always need to keep your underlying focus on the numbers. Spending too much on your reno means youve overcapitalising. Constantly remind yourself, PROFIT is the sole reason why youre spending your weekends painting and not sipping daiquiris by the pool with your friends. ADDING VALUE THROUGH STRUCTURAL RENOVATIONS Make no mistake, structural renovations are intense. Of course it depends on what degree you go to, but generally the more work that needs to be done, the more profit daggling over your head. It goes both ways though, not knowing what you are doing with structural renovations can cause you to burn money faster than Victoria Beckham on a shopping spree.

Unlike cosmetic renovations, structural renos give you the ability to substantially change, reconfigure and add new space onto an existing property. Buying underutilised dumps and maximising their value, allows to you to create incredible gains between the price you buy the property for and its resale price. The tricky and skilful part is being able to control your costs so you pull a profit at the end of it all. Structural renovations require local council development approval. There are different categories of development, some giving you approval in as quick as 10 days. Each council is different but as a general rule, 3 months is normal lead time for DA approval. Intelligent renovators do their homework on their local councils too. In areas where there are tight heritage controls and conservation zones, its not uncommon for structural renovators to be waiting up to a year for their development approval to come through. Structural renovations provide the perfect opportunity to match properties to suit the needs of the market. Below is an example of a before and after layout on one of our structural renovations: BEFORE AFTER 4 Bedroom Home, 2 Bathrooms, Home Office, Internal Laundry, Open Plan Living

2 Bedroom Home, Small Rooms, No Laundry

E X A M PLE O N LY

E X A M PLE O N LY Real Floor Plan To Be Created.

Real Floor Plan To Be Created.

The more structural renovations you do, the easier it becomes at spotting potential. Weve got to the point now where we can walk into a property and within minutes, visualise the end product. It makes it easy for our architect to develop our DA submission. The process for getting the property approved for a higher and better use is generally as follows:

Service provided by most councils to gain feedback on likelihood of approval or rejection of your preliminary design plan. Savvy renovators submit offers, subject to Pre-DA approval.

The process of substantially changing, reconfiguring or adding new space to an existing property.

Formal lodgement of your development submission into council.

Consent to proceed with development application.

Consent from council to start renovation / construction works.

Yes, structural renovations do require more complex construction work. All property owners are entitled to 1 owner builder permit every 5 years through the Dept of Fair Trading. You dont need to have detailed construction knowledge but it does help. If youre not confident in handling the construction aspect, negotiate a deal with a builder to take the property to lock up stage or through to total completion. Alternatively if youre keen to learn, hire an experienced project manager who can guide you through the owner builder construction process. People always assume that you need to be a builder or tradesman to be successful at structural renovations. This is not the case. In many instances, we make substantially more profit than builders simply because we understand the fundamentals of the property market more. There are an incredible amount of ways you can add significant value to a property through structural renovations. Heres our strategy that works for us, in our chosen area. It focuses purely on matching our renovated property on the buyer demographic and their specific needs.

 DESIGN TO ADD VALUE Always design with the end buyer in mind, not to your taste. That way, youve got a stronger chance of maximising the value of your property. Know what styles of homes pull the highest prices. In one part of Sydney, federation homes far outstrip the price of contemporary homes. Savvy renovators know what buyers want so decorate in an appropriate style to suit the market. Always aim to appeal to the majority of the market rather than the minority. Choose neutral colours with simple clean lines to make the most of the space. Resist the urge to paint rooms different colours. You want your renovated property to look like it has thought put into it and an integrated look throughout. Select materials that are timeless and wont date. Ones that add value, not detract from it.
STRATEGY 3: CHERIE & STEVES FORMULA FOR ADDING SIGNIFICANT VALUE TO A PROPERTY
1. Buy a 2 or 3 bedroom dump and convert to a 4 or 5 bedroom luxury family home. 2. BIG KITCHEN - Rework the layout to accommodate a large galley style kitchen. 3. BIG BATHROOM - Rework the layout so the main bathroom becomes the size of a bedroom. 4. Rework layout to accommodate open plan living. 5. Rework layout to feature 4 key zones: sleeping, service, entertaining & work zones. 6. Always keep the external style in keeping with the surrounding neighbourhood. 7. Style the internal space into modern, contemporary, designer living. 8. Use materials that look luxurious but dont cost the earth. 9. Renovate the property to a level where it makes a positive contribution to the streetscape. 10. Add wow features to lure emotional buyers in. 11. Get in and out of the deal as quickly as possible, time is money. 12. Never get emotional about the property.

STEP 7: THE RENOVATION PROCESS

So youve purchased the property and nows the time to start the transformation. Got no clue where to start? Looking for some tricks of the trade? Take comfort that youre already a significant way through the renovation process, even though you havent yet lifted a hammer. You see, so many people get caught up in the physical renovation, that they overlook the fact that most of the skill and hard work is really in the buying phase (Steps 1-5). The good news is that you dont need to be a builder or a tradesman to successfully profit from renovations. As a professional renovator, your job is to PROJECT MANAGE, and preferably not do any of the work yourself. Successful renovators know that their time is important and utilise themselves undertaking tasks that add value. Of course there are exceptions to the rule, if youre starting out in your very first cosmetic renovation, then its likely youll be undertaking all of the work yourself, simply for no other reason than to earn sweat

equity. Many cosmetic renovators, continue to do as much of the work themselves, project after project. Cosmetic renovations typically generate lower profits than major structural renovations. So in theory, doing all or some of the work yourself, especially in tasks which require very little skill, can be added profit in your back pocket. While thats very admirable, it makes you question if cosmetic renovators are utilising their time in the most effective manner possible? You see, in our experience, our time is not best spent, painting the walls. Not only does it start to feel like a chore from the 2nd project onwards, but it severely restricts our ability to do what we are supposed to be doing, project managing our renovation and everyone else on our work site. The reality is, is that we are on our renovation sites everyday, Monday to Friday, 7am to 3pm, yes, tradesman hours. So that makes us very hands on, but not too hands on to the point where we are digging trenches or up to our arms in concrete. We are on site for one reason, to effectively project manage and co-ordinate our project team so things happen when they should happen, in the right sequence of events. More than anything, our time on site is used more effectively on the phone, sourcing any tradesmen we dont have, negotiating and driving hard bargains with suppliers and organising timely delivery of our materials. Being on site, also means youre there to trouble shoot any problems that pop up in the renovation process so decisions can be made immediately and work can continue to progress without any delays. This is your job as a professional renovator, to project manage, not manage the work yourself.

EFFECTIVE PROJECT MANAGEMENT

How well you go about transforming your derelict dump into a magical piece of art, really comes down to your ability to be an effective project manager. Renovators who have their projects under control, focus on 3 key elements: 1) Quality Control; 2) Time Control; 3) Cost Control. QUALITY CONTROL Poor quality shows. When it comes to the structural integrity of your property, never compromise on quality. Most buyers today undertake building and pest inspections so if poor quality doesnt get you now, it will get you later. And later is too late for you to fix it. The truth is that you get good tradespeople, bad tradespeople and really bad tradespeople. The really bad tradespeople are usually the ones available to do the job. Your project management role is to weed out the good from the bad and ensure the tasks are done to quality and building code standards. You dont need to associate yourself with all the complexities of where flashing is to be positioned or how the architraves are attached to the walls. Youre employing your experts, your tradespeople to do that for you. Often mistaken as a docile bunch, tradies study for 4 years to learn the skills you dont have. Give them some professional credit that they know what their doing and wont screw it up. The key thing for you though, as the renovator in charge, is to weed out the good from the bad. Bad tradesman will cause you grief, lots of it. Youll end blowing a fuse faster than the paint drying on your walls. But there is good news. Quality control can be managed by understanding the scope and scale of the task you want performed. Be clear about what you want done, the quality level you expect and the end-result you are after. TIME CONTROL when it comes to renovating, time is of the essence. Successful renovators get in and out of the deal as quickly as possible. Serious renovators know what the project is costing them on a daily basis. Our properties have an average holding cost of $230.00 a day. Every day that slowly ticks by without substantial work on site, is $230.00 less profit in the deal. If our renovation timeline blows out by 2 weeks, its simple, weve lost $3,220 in profit by not controlling the time factor. Time is money, lost money that you cant get back. It can wipe out your profit, in its entirely. Furthermore not controlling time, can lead to more

disastrous implications, the timing of when your completed project hits the market. If the market has changed and shifted downwards, theres only one word, trouble. Then theres the time of year that your property hits the market. If you want to get rock bottom price for your property, sell it in December when people are more interested in Christmas presents and taking summer holidays. If you understand the implications of time, youll understand what the true costs are of a time blow-out on your project. Professional renovators are also in better positions to negotiate penalties with suppliers and tradesmen who dont deliver on time. Make them aware upfront of time control implications so that everyone stays on track and your project progresses to plan. COST CONTROL - It's easy to lose track of costs, especially if unforeseen problems arise during the renovation. All too often, youre so focused on controlling the time factor, that you resolve problems in the quickest manner possible but dont consider the real cost implications. Its therefore important that before you start your renovation with a copy of your detailed budget, always close at hand. Typically known as your financial feasibility and in an ideal world, this is done in Step 4 (Analysing The Potential) not at the beginning of Step 7 (The Renovation Process). You see, you should always know what the project is going to cost you BEFORE you buy. When it comes to costs, never rely on your gut instinct. Youll be wrong. Plan and monitor where every cent goes, to protect your little lump of gold at the end of it all. Guard costs closely. Constantly remind yourself that every dollar saved, is an extra dollar earned.

THE ACTION PLAN

How can you effectively project manage if you dont have a plan of attack? There are many good software programs available today that help you manage any sort of project more effectively. It doesnt need to be complicated. What is important is to get the renovating process right, in the correct sequential order so that trades people come in at the right time and key tasks link together in order to keep your project moving forward. A renovation project plan is a listing of the typical steps and subsequent timing of those in the construction process. Is it better to renovate one room at a time or bring trades in, one step at a time? If you didnt have a renovation project plan and had no idea of construction, youd be hard pressed to answer this. Your project plan provides answers on what you need to do, when you need to do it and what materials you need to have on site in order to be able to complete those tasks. It gives you the ability to make good project management decisions. When renovating, you always need to be thinking in advance. And its this planning, that will keep your costs on track by not having to call tradies out at the last minute or doing rework. What will give you more delight than the money in your bank account at the end of it all, is the fact that you only really need to do a renovation project plan, in detail once. For every subsequent project, you simply modify as needed. Put a day aside to formulate your plan. If the thought of that overwhelms you, buy one or get someone knowledgeable in construction to do one for you. Either way, your action plan is one of those things that is not negotiable. Plan to the smallest detail so youre ready to rock and roll come settlement day.

THE KEY ELEMENTS TO MANAGING YOUR RENOVATION 1. Have A Renovation Project Plan listing critical steps & timing. 2. Project Manage vs. Manage The Work Yourself. 3. Establish Your Supply Chain. 4. Establish A Good Trade Team. 5. Negotiate Hard with Tradespeople. 6. Time is Money Mentality.

DEALING WITH TRADIES

Trades people are an interesting bunch. Quite simply, youll love them or loath them. If youre going to lose the plot and blow a fuse at any time during your renovation, you can bet that one of your tradies has something to do with it. So how do you manage the relationship to meet both of your expectations? Seek to understand the needs of your tradie and you shall have no problems: Trades people want clear communication and direction of what you want done. They dont want to waste time on site, listening to your stories of what you cooked for dinner last Saturday night. Brief them clearly and with purpose. If you have a particular vision of how you want something to look, collect photos or images that help them to visualise it. The more defined your communication, the less chance of error. Be clear on your time constraints and what days you need them on site. Ask for their agreeance to this and make them aware of penalties caused by delays. If tradespeople are clearly communicated this, they will in most circumstances, adhere to your requirements. Understand that tradies want to get in and get out as quickly as possible. Time is money to them too. Believe it or not, tradies like it when you ask for their opinion. They too want to feel valued and have a purpose so if youre not sure of anything in the sequence of the renovation process, ask them. Its free advice that can eliminate errors and save you money. Tradies want to be treated with respect. Unfortunately many uneducated people view tradies as a lower life form, docile idiots whove had to resort to physical work because they dont have the intellectual means to do anything else. Oh my god, how wrong these people are. Trades people study at length to become skilled in their respective areas. Not only is it physical work but often mentally challenging. We always treat our tradesmen with respect and take extra care to know that their skills are appreciated. Friendliness and acknowledgement goes a long way. Always tell them theyve done a great job, if they truly have. Pay On Time the constant bain of tradies is the subject of money. Will they get paid? If your trades person turns up on time, does a good job and do everything youve asked without any hassle, then do the right thing by them and pay them immediately. Tradies love working for us simply because we pay them right at the end of the job. No chasing money or hearing excuses that the cheque is in the mail.

When dealing with trades people, ensure they are licenced and carry their own insurance policies. Dont be

tempted to use anyone who doesnt carry insurance. What may save you initially could cost you thousands later via law suits if an injury occurs. Dont risk it, ever. Negotiating labour costs can be fun with tradies. We negotiate everything and drive hard bargains with our tradespeople in return for them being our preferred tradesperson and getting all of our work. The reality is if they like you, theyll want to work for you and with negotiate on price. If they dont like you, theyll be less willing to negotiate. Of course, your ability to negotiate will also depend on how much work they have to keep them going. Sometimes little things can make the world of difference. We allocate a portion of our budget to supply whatever trades are working on site each day, with morning tea and coffee. Its a little gesture that goes a long way. Weve often been told that people love working for us, simply because of the free food & coffee.
STRATEGY 4: 5 BULLET PROOF WAYS TO FIND GOOD TRADESPEOPLE
Drive around to other building sites in your area and get details from tradies working on site. Record phone numbers from tradesmans utes and trucks driving around. Ask other tradesman if they know other good tradesmen. Visit building industry websites (think MBA, HIA etc) who have registered tradies listed. Ask for known referrals from people you trust.

There are thousands of tips we could share with you to handle the renovation process. Here are a few of the more pertinent points: Cosmetic renovations do not require any building permits. Structural renovations do require development approval from your local council. Works can be done under an owner builder permit, a builder can be engaged or you can hire an experienced project manage to supervise works for you. Always keep a strong focus with safety on your project. The harsh reality is that you can be sued if an accident happens during the process of renovation. Insurance policies are available to safeguard you against such events. Think Construction Liability insurance, workers compensation insurance and so on. Invest the money. You dont want to lose everything you have worked hard for, simply because the painter fell off his ladder and broke his back. Though all tradespeople should have their own insurance, the liability can sometimes come back on the renovator in charge, if you are deemed to be negligent in your occupational health and safety duties. If youre just starting out in renovations and want to tackle most of the work yourself, be careful that any work you undertake meets building code regulations. Never attempt to undertake work which requires licenced tradespeople by law, eg: plumbing and electrical works. Its the quickest way for your project to go up in a puff of smoke. Maintain a renovation diary use it to record details of tradesmen coming and going, contact details, prices quoted, what stages of work are up to, expenses incurred, issues on site and any other key bits of information you need to record.

Get in the habit of updating your expense log (the actual column in your financial feasibility) every day. Youll be amazed at how fast money rolls out your door and how quickly youve forgotten what youve paid out. You want to be in a position at the end, to work out what profit you actually made, right down to the last cent. If you want a free holiday to get over your reno, get in the habit of charging anything and everything to your credit card. Goods, materials and even some trades can be paid with a credit card. Do your homework on which banks have the best credit card reward programs. We get two free round the world tickets at the end of every renovation, simply by charging everything to our cards. It doesnt take long to rack up the points when renovating.

STRATEGY 5: TOP 5 WAYS TO GET 10 30% OFF GOODS & MATERIALS

One of your main aims as a professional renovator is to renovate your property at the least cost possible. Get into the mindset that if youre paying retail price for anything, youre paying too much. When you pay retail price, youve made less profit. Tell your suppliers that you are a professional renovator and dont be afraid to ask for trade price. Dont ever tell them youre renovating your own home. If you do, youll pay retail price. TIP 1 BULK QUANTITIES MEAN BULK SAVINGS If doing a single renovation, make a complete list of all the materials and goods youll need to purchase for that property. Type up a Quotation Request, listing the items you need and email it out to as many suppliers as you can. Suppliers love bulk orders and will give you a greater discount in order to win all of your business. If your doing multiple renovations at a time, even better. TIP 2 FORCE SUPPLIERS TO BE COMPETITIVE Take your quotes to other suppliers. Avoid showing them where possible but ask if they can do a better price than what you already have. th th Nine out of ten times, you can get your buy price lower again. We filter our quotes in this manner. By the time we get to the 5 or 6 supplier, we have absolute rock bottom price. When suppliers start saying no, you know youve got a pretty good deal on our goods and materials. In return for their tighter profit margins, we make them our preferred supplier and reward them with continuous business. TIP 3 SIMPLIFY YOUR DESIGN TO OBTAIN COST SAVINGS By thinking carefully about the design of your renovation up front, you can save yourself substantial money. Ever heard of the phrase Less is More or Keep it Simple. Think carefully about the materials you need. Do you really need different tiles in each bathroom? Do you need different tiles for the floor and wall or could you use 1 tile for both the floor and wall? The more you need of one material, the greater chance of getting a big discount based on quantity. If you order small quantities of different tiles, youll likely to pay retail price. TIP 4 THINK OUTSIDE THE SQUARE WHEN ORDERING MATERIALS If you need to buy a large quantity of materials for your project, its worth taking a quick flight overseas to countries such as China, 2 Thailand or similar to pick up materials at a fraction of the cost. We had 3 renovations on the go and had a requirement for 1200m of tiles 2 2 across the 3 projects. A quick flight overseas enabled us to buy these tiles for a landed cost of $40.00m as opposed to $140.00m here in Australia. Instead of paying $168,000 for these tiles, we paid just $48,000, a whopping saving of $120,000 with the plane fare costing just $2,000. In doing this, you need to be savvy in which suppliers you deal with. Only deal with reputable companies and ideally hang around to see the goods get put into the shipping container. The key here is to constantly ask yourself, how can I get this item cheaper? TIP 5 ALWAYS ASK FOR TRADE PRICE Always, ask for trade price. The fact that you are not a licenced tradespeople is totally irrelevant. Youre a professional renovator in the construction industry. That gives you instant qualification to receive trade pricing. Expect to receive at least 5 to 10% off the retail price, without the blink of an eyelid.

Lastly, its worth getting your hands dirty on your first couple of renovation projects. Not only will it give you a new found appreciation for tradesmen but it will give you a key understanding of the whole renovation process from start to finish. That knowledge will enable you to refine your own processes and perfect them

accordingly. More effective processes lead to better project management, ultimately resulting in increased profits. CONCLUSION Renovating can be draining. It does take considerable time and effort however the results and subsequent wealth you can build are life changing. Renovating has provided us with choices. The choice to work if we want to, to do whatever we want, whenever we want. The choice to be involved in something we really love versus having to be somewhere we dont want to be. There are so many benefits to renovating that youll never truly understand them, until you do it and go through the process yourself. For us, there is nothing more fulfilling than standing on the street in front of our completed project, in awe of the amazing transformation thats just taken place. Taking an unwanted, derelict dump and creating a beautiful home for a happy family to enjoy for years to come. Its a level of personal satisfaction and sense of good deed that cant be described. And as a renovator, always seek to renovate houses that positively enhance the area youre renovating in. Dont negatively impact the lives of others in favour of greed. Be proud of your projects and do the right thing by all involved. Others will have more respect for you and will be keen to be involved again. So, to recap, our renovating success has come down to our precise ability to: 1) Know What Types of Homes Are In Short Supply; 2) Acquire Properties That Can Satisfy That Market Need; 3) Renovate The Property Beyond Buyers Emotional Expectations. Truly, anyone can be successful in property renovations. You dont need to be super intelligent or great on the tools. All you need is the right know-how, a solid plan of attack, personal commitment and action on your part. For further tips and free strategies, register at www.renovatingforprofit.com.au Make sure you celebrate your successes and reward yourself appropriately. The only sweating youll be doing from now on, is on the beach in the Caribbean. Most importantly, just get out there and give it a go, building wealth is easier than you think. Good luck, may the force, trade force that is, be with you!