Our feature guest this week is Cherie Barber – the queen of renovations.
In this extended chat with Cherie, we hear about the mistake she made with her first property and how that lead her to become, as she says, an “accidental renovator”. Now, of course, Cherie is the best known and most respected renovation expert with a worldwide audience.
Kevin: Cherie, tell me, how did it all start for you? How did you get into property renovation?
Cherie: I bought my first property when I was 21. I was working as a customer service person. I had really just gotten my first job when I was about 19 or so. I set up a deposit for my first property. I bought it on a main road in Sydney purely because that was the only type of property that I could have bought. I bought a house for about $250,000 on a main road. It was an un-renovated house.
After I moved into that property, I realized what I had done in terms of buying in a very poor location. I went to bed each night with one eye shut and one eye open, thinking that some runaway truck was going to come smashing through my window. About a month after I moved in to that property I wanted to move out of that property. So I got in and did a quick cosmetic renovation. I did some basic things like: painting, picked up the old, grungy carpet and polished the floorboards. I tile painted in the kitchen. I painted some cabinetry. I did a basic refresh of the kitchen. I didn’t really do much to the bathroom because I had no money.
I cleaned up the entire gardens and made it look better than what it did when I bought it. I actually sold that property fairly quickly and made a $40,000 profit margin. My first project was an accidental renovation.
Kevin: When you say accidental, you obviously didn’t set out to turn that property over. Did you buy that with the purpose of wanting to live in it?
Cherie: Correct. It was my own principal place of residence. I bought it as a home to live in, but unfortunately, at that point in my life, I wasn’t educated enough about what a good property was and what a bad property was.
Kevin: When you bought that property, whose advice did you work on or did you just purely say, “Well, I want to buy a property” so you just went out and shopped for one?
Cherie: I didn’t have any advice whatsoever. I was uneducated, like most people. I bought the property on the basis that it was close to my work. It was about 715 meters down from my actual workplace. Looking back later in life, I’m probably thinking, “Why on earth would I have wanted to actually have been so close to work?” But I did it more for convenience. It was just a terrible property. It was on a six-lane highway.
Kevin: Why did you buy it to start with? Was it purely price driven?
Cherie: Price and convenience. I was a first-time buyer at 21. I didn’t have much money. In terms of saving my deposit, obviously it was a [02:51 inaudible] to start with. I actually bought the property with my boyfriend at the time. I worked a second job. I worked at 3:00am [?] during the day, which I started as a customer service assistant. In the evening, I worked at a club, [03:09 inaudible] Club. I worked sitting at the change desk. Sometimes I was working behind the bar. I just worked in the club. I was a bit of a gopher around the club at night. So I worked nights and worked during the day. That’s how I managed to pull my deposit together for my first property. It was really hard.
Kevin: So do you think your first renovation, even though you made a $40,000 profit, was down to more luck than skill? Or do you think the lessons you learned from that is what carried you through to today?
Cherie: I think it was a bit of both. Cosmetically, I didn’t know what I was doing back there. I just did some really basic changes. But the changes that I made actually made the property look a lot more spacious. Even ripping up the old, grungy carpet and polishing the floorboards made that property look so much fresher. The property was a lot more appealing to somebody to buy from when I bought it. I think that was one of the reasons why it sold so quickly. It did look better. But it was still at an affordable price point.
I bought it in the $200,000s. I can’t recall the exact price but I think I sold it in the high $200,000s or the low $300,000s back then. It wasn’t a radical price jump. In terms of the actual renovation, I spent less than $10,000 on it so it wasn’t a huge renovation. It was cosmetic spruce-ups here and there, as much as I could afford on a very low income back at that stage of my life.
Kevin: When you bought that property, had you intended to go into property renovation, or did that inspire you to do it then?
Cherie: It did. When I made that money, I said, “Oh, this is all right.” I think I was on about $40,000 or $50,000 a year in my full-time customer service job. When I had actually sold that property and walked away with $40,000 all said and done, I said, “Oh, that’s actually not a bad thing. I’ve actually made some good money there.” Definitely my first project was an accidental renovation and an accidental success.
Kevin: Where did you go from there? What was the next property?
Cherie: I went and bought a property reasonably straight away. I bought a property on a nice, quiet street. It’s what I call probably a third tier road. It wasn’t a highway. It wasn’t a secondary main road. But it was a thoroughfare road through a suburb. I typically think any property that has the word “road” in it means traffic of some sort, as opposed to“street, so I bought on a road. But it was only one lane in, one lane out. It was a road that a lot of cars used to cut between suburbs. It was definitely much quieter.
I had no issues with that property. It was set back from the street. So I went and bought another un-renovated property when I was around 21 or 22.That second property was a major cosmetic renovation for me, but it needed some structural work as well. I lived in that one for about seven or eight years. I renovated it while I was living in the property.
Kevin: Did you renovate that property, or did you renovate others while you were living there?
Cherie: No, I only renovated that one because that was a higher-value property. I went and bought that one for about $300,000 or $400,000. I was committed. I literally had no money. I had to work a lot of shifts on my second job to pay for that extra property. I did get myself into debt back then. I was literally fully mortgaged to the hilt, which is probably a better way of saying it. I had to work a second job in the evening to actually pay for the mortgage because I was on a very low wage back then. It was only $40,000 to $50,000 a year.
The mortgage repayments on that were quite hefty along with the fact that I was living in the property, so I had to work that second job. Any money I earned from my second job paid for the renovations. I did little bits and pieces as my finances could afford. I was very much one of those 20-year-olds who didn’t go to the party scene, who didn’t go clubbing. I was very much at home on the weekends renovating and trying to add value to the property, and the pursuit of getting one step ahead more so than my friends that were out clubbing and getting drunk every weekend.
Kevin: Let’s talk a little bit about those first two properties you purchased. It’s one thing to do the renovation, which you’re very, very good at in adding value. But you also have to buy well too. How important do you think it is to be a good negotiator when you’re looking for those kinds of properties? How long did it take you to learn that skill?
Cherie: Definitely being able to pay the right price for a property when you buy is so critical. I always say it doesn’t matter what award-winning renovation you do inside and externally. If you fail to buy a property in the right location, a location that has very few buyer objections, the property value will always be capped and you will struggle to sell at the price you hope to sell for.
I might as well have been blindfolded when I went and bought those first two properties. I just bought them on gut instinct which is what a lot of people do. Luckily, I was able to add value through the renovation that covered any mistakes that I did by doing the buying process.
Kevin: When you’re buying properties like that, I guess it’s important, too, to buy them at the right time in the market, so that the market can sometimes be very forgiving. In a market like this, do you think it’s even more critical that you don’t over pay?
Cherie: Absolutely. The worst thing you want to do is buy in a high market and sell in a low market. That’s the beauty of renovation. Typically, with quick cosmetic renovations, you’re transforming a property in six weeks or less. The market doesn’t radically change in six weeks. If you look at the whole process, from the time you settle on a contract to the time when you re-sell it, the whole process is typically about three to four months.
Thankfully the market for renovations doesn’t typically change that much within such a short period, in comparison to other property options like property development, where you might buy a site two years earlier, develop it, and go through the building process. You might be on-selling [?] those properties two to three years later. That’s when you can actually get into trouble because the market has radically changed. I’m a big advocate of renovating, because for me, it’s almost recession-proof.
Kevin: Would you say that renovation, therefore, is your strategy or are there other strands to your strategy as well?
Cherie: No, definitely property renovation. I’m a big believer that if you want to make money in property, then go and do a renovation. It is the most aggressive property strategy out of all strategies in terms of being the fastest strategy. It’s a strategy that doesn’t rely on capital growth. The underlying premise of renovating is all about manufacturing growth through the value adds that you make to a property in a rapid period of time. It’s why I’ve focused on that and that only.
I’m also a big believer in focusing on one thing and doing it well, rather than spreading your wings too far and being a jack of all trades. I say be a master of one. What has worked brilliantly for me, and a lot of other experts, financial experts would say, “It’s a risky strategy putting all your eggs in one basket.” But I do believe one reason why I’ve been so successful is because I focus on renovating. I became an expert at it. I knew everything about it. I’ve rarely made a mistake. It’s been my sole strategy and it’s worked for me. I think it’s because I’m so focused on it.
Kevin: Cherie, when you’re looking for a property to renovate, what are the key things that you look for?
Cherie: Cosmetically, it’s the age of the properties. The most ideal properties to target are what I call the “late Twentieth Century” properties. Those are properties typically circa 1960 to the year 2000. The properties in between the 60s, the 70s, and the 80sI call “sleepers”. They are perfect for cosmetic renovation. Even properties in the 1990s aren’t going to have enough scope of work to significantly uplift the value of the property. Age is definitely one thing. With those late Twentieth Century properties, you’ll find that they’re now cosmetically tired, but structurally, they’re still in good condition. They are beautiful ones to target.
Obviously the location of the properties. There are a lot of things that people should know about the types of properties they buy in relation to the location. For example, I say don’t ever buy an un-renovated property, an un-renovated residential house on a main road, because if you ever have to sell that property at the end, you’re going to struggle to find buyers on a main road. You greatly reduce your market and that’s a very risky thing at the end if have to sell.
So don’t buy on main roads. Don’t buy on secondary main roads. Don’t buy things like low-set houses, houses below street levels. Don’t buy property close to adverse development (i.e. you don’t want to buy a property too close to a school, a childcare center, or a hospital). I have a general rule of thumb: if you can see or hear any adverse development, the property is too close.
Kevin: I guess you would have learned those lessons from the first property you purchased.
Cherie: It was a brilliant lesson on my very first property where I went and bought a property with a major bar [?] objection which was a six-lane highway with noise impacts, traffic impacts, and potential impacts of runaway cars through my front bedroom window.
Kevin: What’s the most successful property purchase you’ve ever made?
Cherie: I think the most successful purchase I’ve ever made was a splitter block. It was actually a renovation and development site all in one. It was a water front property in Balmain. I went through the open for inspection. It was a Heritage listed house that had been passed in an auction. The vendor wanted $2.6 million. I think it got passed in an auction at $2.4 million, or somewhere around there. I came to through the property through [14:00 inaudible] auction. I immediately saw the potential for the block to be subdivided, and for the existing house to be renovated, but also saw the potential for the block to be subdivided and a new house built on the side of the land.
My problem was that it was my second year into being a professional renovator. I never thought I would be buying a $2.5 million dollar house in my lifetime, let alone my second year as a professional renovator. I found a deal, but my problem was I never had any money to fund the purchase.
So I put an offer in on the property. Before I put the offer in, I found a debt partner. I found somebody who was on a good income who could service the loan. I had thrown in my job at this stage so I had no serviceability from the bank’s perspective. I also had another renovation project on the go at the time, so I had no money to contribute to the project.
I approached a person. I said, “Look, I found this deal. It has this opportunity; X amount of money that I believe can be made from this deal. My problem is I don’t have any money to fund the project because my money is tied up. I don’t have a job so I can’t service the loan from the banks. Where you potentially come into the equation is that you can service the loan.” I required from him that he service the loan. We went on the mortgage together so I had shared liability and ownership of the property as well.
He actually funded the cost of getting the property developed [?] and approved through council. He paid all those costs. My agreement with him was that any cost that he outlaid during the project, they were all paid back to him at the end of the project. In return for him being the debt partner, I actually did all the work. I basically got the whole site approved through council. I did the DA [?] drawings. I worked with the various experts, the Heritage experts and the town planners to get that property development approved through council. I had to go to Land and Environment Court, so I handled that whole process as well. I knew I would have to do that prior to buying the site because it was Heritage. I factored all of those potential costs into the feasibility.
I got that property DA [?] approved. It was nothing more than a paper shuffle. I bought the property for $2.51 million. I got an extended settlement of five months so I managed to get a significant way through the process without incurring any holding costs on a high-value property. I took it through council. I took it to Land and Environment Court.
I sold that property about 14 months after I bought it for $3.75 million. I walked away with about $750,000 in profit which I obviously split with the other person. I didn’t contribute any of my own money. All I contributed was my intellectual property, knowledge, skill, and my time for nothing more than a paper shuffle. I do consider that one of my more successful projects. It’s definitely not the project that I’ve made the highest amount of profit from, but for me, it was probably the easiest and I still made great money from it.
Kevin: What you’re talking about, of course, is a joint venture. It sounds like a great way for someone who wants to get started in developing or renovating. What are some of the lessons you learned from that experience? If you don’t mind, I would also like you to tell me about the agreement you had with that person and how well documented that was.
Cherie: Absolutely. Before I embarked on that agreement, obviously I got the deal done. There was a joint venture agreement that was done by my lawyer. It basically set out the roles and responsibilities of each party. It was very clearly documented that the other person was the debt partner; that they would fund all of the holding cost of that property during the course of the actual project. All of those costs would be paid back to that person in full on settlement of the property. It stated what my role was. It was a very detailed, legal contract.
I always say it’s worth getting good legal advice and getting good water-tight legal contracts locked down because it can be one thing that’s misunderstood that can send projects off the rail. Be prepared to spend good money on legal contracts because they can save you a hell of a lot of money in legal disputes afterwards.
Kevin: Have you done another one since then?
Cherie: No. I did that one purely because it was very early on in my career. I had made such good money from renovating for the first two years of my full-time career that I didn’t need to do joint ventures with anybody else. What I say is joint ventures are fine when you’re starting out in property. I’m a bit of an advocate against them when you have built up enough money that can do deals by yourself. At the end of the day, you can control yourself as one person, but you can’t always control what other people do that you may have in a joint venture.
I’ve heard many stories where people have entered into joint ventures with other people and one party is gone off the rails where they’ve got a perfectly normal life one day and then they’re life is upturned the next by some sheer accident or some event.
I’ll give you a practical example. For example, let’s say you did a joint venture with a husband and wife and they split up. One day they’re together and the next day they split up. They suddenly hate each other and you’re tied into this joint venture. That’s where things can become unraveled, through no fault of your own, because of somebody else.
I always say try and have 100% control of your property projects. For that reason, I won’t do joint ventures with anybody else but myself, because I have enough money to do them by myself and not put myself at risk. But they are appropriate for when you are first starting out, building your equity.
Kevin: All the more reason too. If you’re going to go into joint ventures, you highlighted it. Make sure you talk to a solicitor. Get it documented well because a solicitor may be able to, through his or her own experience; be able to foreshadow some of the problems you may come up against.
Cherie: Exactly right. A lot of people jump into these development deals and they think they know everything. Then lots of little surprises catch them by surprise during the course of the project. This is where things can become unraveled.
Kevin: In the early stages when you were starting out, did you do networking with anyone? How did you gather enough information to know you wanted to do this, and how to do it really?
Cherie: Not really. I didn’t network with anybody because I was too busy up on a ladder painting most of my weeknights and weekends, and working my full-time job. I really learned hands-on. I made lots of mistakes. I got ripped off by tradees beyond belief. I didn’t know how to deal with them. I didn’t know how to manage them. I didn’t know how to buy my fixtures and fittings. Throughout the course of my 20s I probably made all the mistakes that normal, uneducated people make. It took me a few years. I became a professional renovator when I was 30. I started renovating when I was 21.
I renovated all my own homes, my two properties, during my 20s. I lived in those renovations, which I tell people to really try to avoid doing at all expenses. Not only because you feel like you live in a worksite and you go to work with dust and Gyprock stuff all over your clothes most days. It’s uncomfortable [21:40 inaudible] out boxes and shuffling from room to room. But also, it’s sending a wrong message to the trades people that are coming out to your home. If you’re living in your renovation site, it’s saying to tradees that you’re tight for money and you’re not a serious renovator.
When tradees know that you’re an owner/occupier/renovator, that’s when they’re more likely to extract more money from you because you’re not a serious trade person. No serious renovator lives in their renovation project. I like to advise people against doing that as well.
I became a full-time, professional renovator when I was 30. It really took me the first two to three years to really become very savvy at what I should and shouldn’t do in renovating. That’s purely because I had to learn the hard way. There was nobody around to teach me so I learned the hard way. That’s why I’m so passionate about educating others now, because they don’t need to make the same mistakes that I made.
Kevin: When you started out, did it require much of a change in mindset to become successful?
Cherie: No. I believe it happened by default because I had the passion within me. I was very motivated to create a better life through myself, and I knew that property renovation was the easiest way for me to do that with somebody who didn’t have a high level of education. The reality is I only went to year ten. I came from a very basic school, a very basic upbringing in Sydney’s West. We certainly weren’t on Poverty Street, but we weren’t rich either. We had a very basic existence and a very basic education.
For me, I felt renovating was within my skill level. It was the easiest thing for me to transition into very quickly. I was driven by the motivation to actually create a better life for myself financially. I just found renovation was the answer to that.
Kevin: Cherie, just thinking about growing up in the western suburbs of Sydney, who was your inspiration? Did you learn much from your parents about investing or was there someone from outside?
Cherie: No, absolutely not. I had no mentors in my life. Like I said, we had a very basic upbringing. My parents, while I love them dearly, aren’t very money smart, so they weren’t good role models for me financially. But what they did instill in me is a very hard work ethic. My dad was an incredibly hard worker. He worked seven days a week. He was an earth mover. As a little girl I quite often sat on the side of his tractor. I think that’s probably where my love of renovating probably started to form, then and there alone.
My mom worked for my dad in managing his earth moving business, in terms of making sure pays [?] were paid for, his two or three workers that he had. They definitely instilled in me, somewhere along the line, the ability to actually work hard. I truly believe that nobody gets rich without actually working hard these days, unless you become an overnight sensation through some freak accident. It’s very rare that you do become an overnight sensation, or overnight rich success story.
Kevin: Looking at someone like you who we see as the guru of renovations and obviously very successful at what you do, it’s easy for us to think that it was an overnight success. But listening to some of those stories, we know now that it’s not. It is a hard road, isn’t it? Therefore, you have to really stick at it and be motivated and enjoy what you do.
Cherie: I always say if you have passion for what you do, it doesn’t matter if you’re renovating, developing, baking cakes, a school teacher, or whatever. I know it sounds very cliché, but if you have passion it goes so much further in terms of driving you to a certain level of success because when you’re really passionate about something, what you do will not be a job. You’re naturally interested in it and you want to dedicate more time.
I think if you dedicate more time to something, you’re going to be a success at it no matter what. For me, renovating feels more like a hobby that I happen to earn fantastic money from.
Kevin: Do you have a mentor or coach now?
Cherie: I found that I had no single, profound mentor in my life. But what I’ve done is taken single pieces of words of wisdom collectively from many people that have helped shape me. I got really good advice from people about negotiating tips here or there. I’m somebody that likes to continuously educate and read things. I feel that today, even as a very experienced property person, even if I read a magazine and I pick up one new tip, it’s one new tip that’s going to make me smarter in my next project. You should always never stop learning.
These days I have a very busy life and I have various people that help me with aspects of my life – a life coach, a coach for exercise, health, and nutrition, and all that sort of stuff. Obviously the more money that you earn, the more that you can afford to hire these sorts of people. It’s all in the pursuit of trying to maintain a healthy work-life balance where you can still continue to succeed professionally, but also look after yourself personally.
Kevin: You said when you are successful, you’ve got to have these people around you. Do you think these coaches have contributed much to your success in recent times?
Cherie: I’d probably say no. I think the coaches help me keep things in check because it’s very easy the more successful that you get, the more your life becomes very unbalanced. I personally felt that over the last 12 to 18 months. More demands for me had been coming in as a public speaker. There more demands for me to appear on TV during intense renovations all over the country. I felt that I was losing control of my life. That, in itself, was making me a little sad about my life. Also, I’m a single mom as well. I have responsibilities for a little girl, so I was losing time with her that was upsetting me very much. I was starting to lose control.
You’ve got to be smart enough. I think any entrepreneur or any successful person will say making money is one thing but it’s not the be all and end all. Money is not real; it’s just an avenue to get you to where you want to be ultimately. There’s no point in making heaps of money if deep down you’re really unhappy inside, or the people that you love are not getting to spend time with you, or your missing out time growing up with your children, for example.
For me, I needed to seek the help of other people. I recognized where my skill sets are and where they aren’t. I can’t be an expert on all things to all people. That’s when it’s okay to bring in other people to help you still do what you want to do to fill yourself professionally, but also enable you to have a good personal life as well. It’s all about the [28:51 inaudible] of work-life balance. I still haven’t mastered it. I’m still not saying have a perfect life, but I’m in a better space than where I was 12 or 18 months ago.
Kevin: You make an important point and it resonates well with me. That is that a coach is not going to actually solve your problems. I think we all know what the solution is inside. They’ll probably direct you and herd you in the right direction.
Cherie: They do. They give you a reality check, because it’s very easy. They give you the discipline to say “No”. That’s what I’ve been doing now. Before I would say, “Yes, I’ll do this. Yes, I’ll do that. Yes,” because you want to please everybody. You want to try to make everybody happy. But saying yes to everybody actually makes you quite unhappy. It also has other business effects that aren’t all that advantageous either. I’ve actually started saying no to more things in the last 12 months.
It’s like that 80-20 rule. You can do a lot of stuff and be very busy, but what’s the big 20%? I’ve just been focusing on that. When I actually did less, my business has actually profited more. I’m happier. I think if I’m happier, then I present happier at a public level. All sorts of stuff has [30:06 inaudible] on benefits. The coaches and the mentors definitely give you that ability to see black and white, assess reality, and be more disciplined.
Kevin: I’ve heard many successful people say that they’ve actually made more money and had a happier life by knowing what to say no to. I guess that is really the message you’re giving there. Cherie, what do you think stops people from achieving the level of success that they desire?
Cherie: I think a few things. They don’t have passion for what they do. Again, it sounds very cliché but it is so important. There is nothing worse than trudging off to a job each day that you hate. Life is too short for that, so do something that you’re really passionate about. If you don’t have the finances to actually do that, then find a way. Put some goals in place. Most people don’t do goal setting. I always say that the first of January is a great time to actually set new goals and make New Year’s resolutions about what you want to do. What I do know is if you don’t do anything, nothing is going to change. We all come from different places, different education levels, different backgrounds, and different money levels, but nothing is going to change if you don’t put some plans in place to correct that.
Get education on your chosen profession. For example, if people are passionate about going and buying old dumps and getting in and renovating them, then it’s like any career. You need to have the right training. Yes, you can wing it, but the reality is you’re probably going to make a lot more mistakes and take twice as long as what it needed to if you actually invested some money and got the proper training to begin with. Definitely trying to read as much about what you want to do as possible. There are so many free seminars these days and $30 books that you can buy that can really give you a lot of insightful tips to eliminate any mistakes that you do make.
If money is your main problem in starting your new business or it’s stopping you from doing what you really want to do, then think outside the square. Think about things like debt partners, bringing other people into that fold that can potentially bring something that you don’t have. There are so many ways that you can do whatever you want to do these days.
I think people lack a lot of imagination. They have fear in themselves. They’re so scared to step outside their comfort zone that that fear actually stops them. I say, “What have you got to lose? Just do it. The worst that can happen is that people laugh at you or you lose money. So what? You can always start again.” Most of the worlds’ billionaires have gone bankrupt at some point, but they made their money back. I just say, “Have no fear.”
Kevin: Cherie it’s fantastic talking to you. Thank you for giving us so much of your valuable time.
Cherie: Thanks Kevin. You’re welcome.