Maybe I shouldn’t give up so easily?

by Readers Question

9:01 AM, 13th January 2016
About 3 years ago

Maybe I shouldn’t give up so easily?

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Maybe I shouldn’t give up so easily?

I have 4 BTL’s and have decided against buying any more, but I have a niggling feeling that I shouldn’t give up so easily on property. There are people out there making a living using many different strategies, so I am thinking of trying something different – buying refurbishing and selling.dont

Nothing too ambitious to start with, kitchen/bathroom/cosmetic refurbs, maybe 1 or 2 a year (I’m also conscious about being classified as a property trader by HMRC.)

I’m based in London and have some borrowed cash I could use to allow me to buy a flat or house up to about £75k – £105k in value and allow £30k for legals, stamp duty (grrrr!) other costs and the actual refurbishment.

I guess this puts me around the midlands location wise in terms of what I could buy for that kind of money.

Does anyone have any thoughts?

Actually, my biggest fear after the property not selling as quickly or for as much as I anticipate is builders. If I knew a reliable one I would have started doing refurbs many years ago. How do I minimise risks – they are often terrible at planning their schedule and therefore causing delays, before even taking quality of workmanship into account.

Refurbing has been something I have wanted to attempt for a very long time, but I want to get it right.

Many thanks

Trying Hard



Comments

Michael Jones

11:03 AM, 13th January 2016
About 3 years ago

Your instinct is taking you the way of professionals to buy , refurbish then remortgage ( all with a view to leaving a little of your own money in the investment ). Keep the momentum , but remember to top up the cash with a flip ( buy - renovate - sell ) now and again. Cash is King !

Adrian Jones

11:38 AM, 13th January 2016
About 3 years ago

As Michael says your instinct is taking you the way of professionals....

So, you've never done this before, are competing with professionals with experience and local knowledge, you don't know a reliable builder and will be managing from a distance.

Add to this your concerns about selling the property quickly and at the right price.

Would you feel confident about going down this route?

Don't understand why you've borrowed money (paying interest) before deciding on a plan, but is there any scope to develop your exisiting properties to increase capital value and rental income?

Chris Byways

14:54 PM, 13th January 2016
About 3 years ago

So is there anything wrong with the 'instincts'. Isn't it helping GOs policy? But many on HutH home under the hammer are not professionals. I would be very wary of doing it at a distance, and finding builders you trust is vital but not easy. Perhaps they could benefit in the profit, they have a investment Angel 'Dragon'.

Do let us know how you get on. Many others are thinking the same way,

Buy cheap, improve, then sell at a profit or rent IF more viable.

If you get builders in and turn the same £100,000 over three times a year rather than once, the ROCE is three times greater.

Daniel 54

15:03 PM, 13th January 2016
About 3 years ago

Bear in mind you would likely be regarded by HMRC as running a property development buisness,in which case profits are taxed as income

Michael Jones

15:26 PM, 13th January 2016
About 3 years ago

Convert instinct into strategy knowing that HMRC ( Income Tax ) are only interested in you as a Landlord ( Private individual or as Ltd Company earning a net rental income ).

If you decide to flip / sell the property ( i.e. no tenancy to manage ) then the Capital Gains Tax ( Surplus on disposal ) guys are after you. Don't be afraid of living in the completed property yourself for 6 months, to avoid the tax man. ( then sell as your private home , tax free ). Have you noticed the habits of builders in your area ?

You may wish to consider putting one flip into your landlord business to increase your annual expenditures and reduce your tax burden.

Run all as two businesses: 1st. landlord entity renting then 2nd. buy / sell ( flip ) as a limited company. Landlord business may need to be a limited company before April 2017 ( or you will be limited to tax relief at basic rate of Income Tax only, but that's a different discussion).

There is merit in focussing on your own patch but don't be afraid of doing what you feel is right outside of your area , the power of the joint venture.

Your network in your networth !

Adrian Jones

16:07 PM, 13th January 2016
About 3 years ago

Reply to the comment left by "Chris Byways" at "13/01/2016 - 14:54":

Hi Chris,

I'm a little sceptical about that auction programme. I've watched it for years and can't recall anyone making a loss.

Still that wouldn't make for good viewing, would it?

Bricks n Mortar

16:19 PM, 13th January 2016
About 3 years ago

Thanks all.
As Chris mentions, taking on any more debt now is going to line GO's pockets, so I was thinking to buy, refurb and sell. Letting would only be an emergency measure if it was really needed.
I could form a company for the properties that I flip, although I'm not sure whether doing this once or twice a year warrants this. It may be time to speak to an accountant to weigh up the pros and cons of doing this.
Does anyone have any tips about finding and getting the best from builders? A small profit share is a really interesting idea. It could be a good motivator to complete works on time and to a decent standard.

Michael Jones

16:28 PM, 13th January 2016
About 3 years ago

Builders do joint ventures too ( consider their time and money in for a 50 50 deal ). The risk is shared so if it means a new roof , its a 50 50 cost.

The network is your networth !

Chris Byways

18:55 PM, 13th January 2016
About 3 years ago

Reply to the comment left by "Adrian Jones" at "13/01/2016 - 16:07":

No, making a loss would not be good TV, I think I once saw a couple of shows where they did not have the finance in place, she lost out considerably, and the other he re-bought the same property for LESS. I doubt they are balanced, or anywhere near.

Few people would have the balls to go on tv and say "yea I made a loss, here is how I did it". The presenters are still attending these auctions. They don't film the before condition, "let's see what happened at the auction" until after the auction and they get the punters signed up.

The decision to rent/flip (like MPs) will surely be influenced by market conditions, and whether you want to take the risks of doing another, can afford to buy again, the time to do up or manage a rental, the yield from the rental, some can give excellent returns, others so small that selling and repeating should give a better return on capital employed.

Think how many unemployed tenants you could offer gainful employment to ..........

Rex Rostron

19:37 PM, 13th January 2016
About 3 years ago

Let the experts do it for you. There are opportunities to invest in other people`s projects for a variety of return options. Some of which are fixed returns, which can be quite short term or longer term share of profit.
I know of a few that have been successful over the years and offer a good way to make money whilst you can get doing other things.

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