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Been an observer for far too long and decided to join in on the fun.
I'm disposing a commercial property with a flat above, which has been consistently been giving me a yield of 15%. Problem is, the leaseholder of the commercial element, is in difficulty and I really don't want to find another one, so off it goes to the auction...
This leaves me with the handsome sum of £250k+ in a couple of months time. The target is to turn this into an income of £4500/month, and to try and do it QUICK!
The idea is to relocate to sunnier climes with the family once this is achieved.
My day job allows for a lot of flexibility and I can pretty much commit myself full time to this venture. I'm particularly interested in refurbing and flipping, and BTL. We're based in south Birmingham and want to stick to Birmingham as its an area I'm confident with.
If you had the same budget to achieve the same objective, what would your strategy be?
If you want to refurb and flip normal houses/flats, you will have to make very sure of price at which costs, because it is very difficult to find properties that you do up and make a profit on the moment - unless you own a building company, for example.
With that much cash, if you can also borrow money, you may be able to do some medium sized simple developments but that's not the passive strategy you're looking for.
I'd probably suggeat buying 4 HMOs at around 180-200k each (so using up about 200k for deposits; you'll need the rest to cover SDLT and fees/expenses). This may in the right area give you around 800-1000 each in cash.
Thanks for the input Rassie,
sourcing properties to add value to has been proving difficult, I've just viewed one with fire damage and I'm in the process of pricing it up now.
HMO's seem like a lot of management, might be difficult given the idea is to migrate once £4500k/ month is achieved.
You should be able to find someone who would be willing to do full management for an HMO for around 15% commission. But you need to check whether they know how to deal with the relevant type of property, management and your clients (tenants).
Interesting topic here, why is it that makes it very difficult to find profitable flipping opportunities?
Because it is very difficult to find properties at a purchase price where there is still (worthwhile) profit after you have added in:
- acquisition costs (fees, SDLT etc),
- holding costs (eg bridging finance interest)
- selling costs (agents, solicitors, etc)
- refurbishment costs.
I am finding lots of opportunities to buy at say 80 where comps are worth, say 110 but the house needs a refurb that will cost 20k to get it to value at 110k. Not worth the risk, stress and effort of even a small development for 10k.
Exactly the same in my area, the only way its worth doing at the moment , is to move into it as soon as you can, sell your last home, then look for next and keep going (property ladder style). Which is not a route i want to to follow.
What is the problem with sticking with the shop and finding a new tenant?
You say you are getting 15% of £250k so over £3,100 a month with no mortgage low costs and presumably a much easier quarterly commercial rent payment fixed for a long number of years
The shop I purchased for £125k so it's 15% of that.
Its a secondary retail area with not much footfall and other shops in the same parade not able to find tenants... For years now.
Hi Mo,What an interesting conundrum!I see you are located in Birmingham, which is obviously a bit of a property hotspot.What about using your £250K to buy a lettings franchise?Build up the business and then start managing your own properties.When critical mass has been reached, employ a lettings manager and retire to the sun!Also see - How to go big in property?
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
Sounds interesting. I'm not sure how saturated that market is around this way, or how long it would take for me to arrive at a hands off position.
The only not so creative idea I can come up with is to flip and build a portfolio alongside.
If I put a time frame of say, a year, for this "MISSION" would that change your suggestion or would your just think I'm down right barmy?!