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  • Refurbish/Develop

    Is now a bad time for my first flip?

    Hi all,

    I am a newbie and just had an offer accepted on a house. I plan to refurnish it and sell. I will likely finish the refurb in March 2018 and put it back on the market.

    However, I have heard numerous experts mention there is likely to be a dip in the market in 2019 during Brexit.

    I know no one has a crystal ball, but do you think it is a bad time to try to do a flip right now?

    FYI

    Purchase Cost: 74,000      Refurb cost: 8,000   Done up value based on comparables: 96,000

    Any advice would be appreciated.

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    Hi Baker

    Without evening thinking about Brexit, those numbers are very tight my friend. How do you propose adding value spending only 8K? (Appreciate you may have purchased BMV)

    8k could quite easily become 15k

    Don't forget SDLT and other purchase related costs.

    Are you confident 96000 is achievable and is the area in demand for FTB. (You may be purchasing a rental. Though I am seeking investors purchase at asking with no refinance option)

    Then there is tax, though if this is the first and only one this FY, you should be okay with the CG allowance. (Though there are wiser men/women on PT than I)

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    Assuming this is your second property - what net profit do you calculate if you sell at £96k asking price?

    After you deducy buying fees to include 3%

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    to include 3% SD surcharge etc/sale fees around £4k.

    Nil net profit if best sale offer is £90k

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    I’d hold off, cash in your pocket now might give you more of an advantage in 2019. I’m not sure previous prices will reflect where prices are going early next year.

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    Hi David and welcome.

    I do think it is a challenging time to sell.  The media is awash with the lengthening time properties are lingering on the market, how many sales are falling through, how many new properties are being added to the market, how prices are being dropped to attract buyers ...

    Brexit seems to have put most potential property buyers into a kind of "stasis" or limbo where they won't make a move until things become clearer.

    Additionally, due to the short time frame of your refurb, when you sell, as it it less than six months of ownership, your market will be limited to cash buyers of those buyers who are using a lender who will accept a property that has been owned for less than six months. 

    This may affect your ability to achieve the full market value, and you will have to educate potential buyers about your length of ownership.  There are a handful of lenders who will lend on such a property, but your potential buyer may well already have finance lined up with a lender who won't.  That will mean that they won't be able to proceed with the purchase of your property.

    Additionally, due to the short length of ownership, the buyer's lender's valuer may also not recognise the new market value after refurbishment.  It would therefore be prudent to document your refurb as much as possible and keep copies of all bills and invoices.  It would also be a good idea to document the refurb in photographs.

    So, to summarise, you may struggle to sell or your property may remain on the market for a long time.  With the fairly slim margins you have in a best case scenario, these might be slimmer by the time you get a sale completed.

    It makes sense to have a "Plan B" and that would be to rent the property out until the market recovers.

    Sorry I cannot be the bearer of better news but that is my view and its better to understand the worst case scenario, as anything above that will be a bonus!

    Good luck and let us know how you get on. 

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    If we're heading towards a No Deal Brexit that may happen at the end of March 2019 I can't imagine anyone doing anything until the dust has settled.

    As Vanessa has said, if you're going to buy be prepared to rent. Margins do look tight though. What happens if there's a problem needing extra £ to deal with?

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    Thankyou to everyone for your replies. I really appreciate that people have taken the time to comment.

    I understand what you have all said about the margins being tight. I knew this wasn't the best deal, but it appears to be an easy starter project as the house is not too 'wrecked'.

    I will look into having this as a BTL rather than a flip as rental demand in the area is good. 

    Thankyou!


     



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    What are the realistic rental figures, BTL mortgage costs etc for the property?

    You seem pretty desperate to buy this property which appears average at best which is worrying! There's thousands of properties for sale out there like this one  so what makes this special?

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    A friend of mine is in the flipping game and he has finished trying to do it

    his main reasons are stamp duty and council tax

    he has a two bed flat on the market and he has reduced the price since June and he has paid £700 in council tax

    he purchased for 55k and he can’t sell it for 70k his stamp duty bill was £1650 and his counil tax is £700 so his tax bill on the. Project so far is £2300 and it’s  going  up by £28 a week he is going to make buttons when he sells it

    your project just dosent add up with the new rules

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.


    Hi

    Good thread - checking in to see what the latest is on this project?

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