This forum is great! thanks for your advice in advance.

I am dealing with a seller who bought their property up north for £98000 in 2007. The seller is now saying they urgently need to sell their property because they need to increase their cash allotment.

The property is worth around £60,000, and the seller has a mortgage of 50,000. The seller has put in 5k worth of refurb works.

I looked on the land registry, and there have been 3 3 bedroom properties recently sold in the area area for £60,000. Therefore, I think this property is worth at least £60,000, since this Property has an additional small room.

in order to recycle my money in 6 months I need to get the property at a discount. But, since there is only 17% difference from £60000 (minimum property is worth) to £50000 - best case buying scenario for me (assuming seller was to sell at lowest possible price of £50000) I would still not have enough equity to get my money back after remortgaging 6 months down the line as I would be using 25% down payment for the initial mortgage and I'd have be paying seller's costs.

Please give your ideas about how to best turn a profit from this deal?

any takers please?

Hi Ruth
Is the deal that good? The fact that they need to achieve 50K on a 60K property would be a negative for me. Having said that 10K is 10K. The margins are tight though and if the difference between a workable deal and a non workable one is perhaps the buying / selling costs then it would be a no no for me. Do you have to get all your money back out. What if the valuer down values it on remortgage having seen the price you paid 6mths prior. Its had 5k of refurb work done so can you add any of your own value now? Did that 5K refurb bring it up from maybe 50 to 50k or from 55k - 60K.

Do you know the area well? You say `up north` which sounds as you dont live near to the property for sale. If your DD is just the land registry prices then they can be misleading. You need to view these other comparables to truly compare them. They may be all slightly better than yours in some way. You said others in the `area`sold for 60k But you can get one end of a street worth more than another for some reason let alone an area. eg a pub or takeaway could lower the value from a house 10 doors down. I walk up and down the streets at varying times to check on the comparables. Are they true like for like. . Sometimes I knock on their doors on spec offer them £20 to have a nose around whilst complementing them on their decor to keep them sweet. You sometimes see horrors but sometimes see gems inside which alter your view. Sometimes when I go in a comparable its all singing and dancing and I can see why they paid top whack for it. Sometimes its just an agent who has persuaded them to part with their cash.

I guess I would be looking more for a down beat property with no refurb work done already and where the vendor has lots of equity in so they are more inclined to take a hit. It may be a good deal but I would need some more convincing i`m afraid.

I assume you're buying to rent out Ruth? (as those figures dont work for a BTS).

2 questions;

(a) How much would it rent for?
(b) Would it rent as it is or does it need some work doing before you could achieve above figure?

You cant get your money out of equity that isnt there Ruth. If its only worth £60k and you are buying at £50k, the best you can hope for is to use one of the 80% lenders, giving you £48k after 6 months.

Seems you either accept your cash will be tied up until the value increases or you walk away and find a better deal

(12-10-2012 07:19 AM)pat_flatley Wrote:  I assume you're buying to rent out Ruth? (as those figures dont work for a BTS).

2 questions;

(a) How much would it rent for?
(b) Would it rent as it is or does it need some work doing before you could achieve above figure?

the rent is 550/month. the Property is newly refurbed, and would receive the £550 rental payment per month.

Thanks hun

Make sure you're not getting a bit carried away by "newly refurbed" Ruth as it would be an unusual situation for a vendor to refurb then sell BMV and £5k doesn't buy you very much if work is done to a good standard!

IF (thats a big if) it's a good standard and would let all day everyday, in an area you know well and within easy access, then to me it sounds like a snip and you should buy it. So if you can take the hit on deposit and costs you'll effectively make that back in rental profits over about 4 or 5 years (remember it's a long-term game).

You can't (usually) have your cake and eat it, so although recycling deposits is nice, to do so you'll generally have to spend some money anyway particularly on lower end properties (to uplift value).

Good luck with it and let us know how you get on.

If it's anywhere near Brum (where is "up north"?) and you get cold feet feel free to pm me

ps - pedantic maths but £60k is £50k + 20% (not 17%)

Will let you know how it goes hun.

I always thought that to calculate BMV it is necessary to divide the purchase price by the value of the property. So, in this case, it is: 50k/60k=17%). Please correct me if I'm wrong.

Ruth

(13-10-2012 09:06 AM)pat_flatley Wrote:  Make sure you're not getting a bit carried away by "newly refurbed" Ruth as it would be an unusual situation for a vendor to refurb then sell BMV and £5k doesn't buy you very much if work is done to a good standard!

IF (thats a big if) it's a good standard and would let all day everyday, in an area you know well and within easy access, then to me it sounds like a snip and you should buy it. So if you can take the hit on deposit and costs you'll effectively make that back in rental profits over about 4 or 5 years (remember it's a long-term game).

You can't (usually) have your cake and eat it, so although recycling deposits is nice, to do so you'll generally have to spend some money anyway particularly on lower end properties (to uplift value).

Good luck with it and let us know how you get on.

If it's anywhere near Brum (where is "up north"?) and you get cold feet feel free to pm me

ps - pedantic maths but £60k is £50k + 20% (not 17%)

(13-10-2012 10:35 AM)Ruth Alister Wrote:  I always thought that to calculate BMV it is necessary to divide the purchase price by the value of the property. So, in this case, it is: 50k/60k=17%). Please correct me if I'm wrong.

Yes you're quite right Ruth as a 16.7% "ish" discount on £60k would indeed be £50k (or looking at it from the other end as I was £50k + 20% = £60k).

Remember anyway that your £60k figure is it's purely hypothetical and as JC suggests a valuer in 6 months time is more likely to be drawn towards your purchase price, particularly in the current climate.


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