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  • Refurbish/Develop

    Please critique my proposed cash strategy

    Hi everyone,

    I am considering purchasing a property with scope to spend a bit of money in and flip to make a profit and potentially repeat again. I have done alot of looking into this, but I just wanted to air my opinion on my strategy and get some views from people that are actually in the game. So here's my situation:

    We own two properties out right, one of which my wife and I rent out, both properties are mortgage free, I also own and run a small business which generates me a out 1k per month clear.

    With my circumstances, I currently have about 240k in an unit trust investment of which obviously fluctuates but grows year in steadily.

    I was thinking of buying a property of let's say 90k but buy it outright, depending on condition etc and work needed (nothing structural) and then sell it on. Minus initial buying fees, fees to do it up etc and selling fees, I would then have the profit left over, with only having to pay for small utilities and council tax whilst renovating and selling etc.

    As a gauge I'm guessing if I went say buying a property for a bit more In worse condition i would probably have a bit more scope to make more profit but obviously have higher costs too.

    I'm looking at this as I was considering instead purchasing a couple of small flates say 90k each outright and renting them out, but this seemed like another option to help grow the pot.

    Think I have probably too many ideas in my head to be fair, but I know people keep saying  borrow as much as possible and so on, but I'm in the position where I owe nobody nothing and I like it. I can see what to borrow, so I can get as much property for the least amount of my cash, but I just feel my idea is the safest but obviously not the most profitable.

    Thanks for taking the time to read this. All feedback and advice welcome.

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    I agree with your thinking. Leverage is great in principal, using other people’s money, etc, but sometimes that interest can rack up quite quickly. If you calculate what you are losing on having that cash in your own account, it’s probably not that much. You are also saving on valuation and arrangement fees, and possibly early repayment fees when you sell.

    buying to rent and buying to flip are obviously two different animals. My view is if I can make the equivalent of 10 - 15 years worth of rental income in a 6-12 month period, without tenant problems, voids etc, I would prefer to.

    of course the refurb route can have problems of its own, and the tax situation adds in a further complication.

    All in all my journey has gone from long term landlord, to short term developer, to selling up gradually and sticking it into safe ish stocks, getting an uncomplicated dividend income, and if the growth isn’t there, the the gradual erosion of capital.

    I am in my 60s now and reckon that I can last until I’m a hundred and forty eight, after that I’m in trouble.

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    I'm in the position where I owe nobody nothing and I like it

    You're also in the position where you can do what you want, within the law, and you don't need permission from a lender. That can be a great advantage.

    I can't say whether it is better to buy and renovate to sell or rent. Only you will know your attitude to risk and effort but there are still viable properties available.


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    Hello David Westow, Thank you for sharing your property strategy with us at property tribes? here is my solution for David Westow, find a( bmv ) below market value property and take a builder friend with you, assess the all building work needed?

    (*Moderator note:  Rest of comment removed as breach of our Terms and Conditions*).

    Swan - please refrain from making commercial propositions to this community.

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    Hi David,

    I believe your idea is slightly flawed.

    Let's liken your refurb project to buying a cow and fattening it up.

    If you sell, you are slaughtering the cow.  In the current market conditions, there is no guarantee that you will sell for what you need to turn a reasonable profit.

    However, if you buy the cow for cash, fatten it up (refurb), and then take out a BTL mortgage to redeem the cash, you then get to keep the cow without killing it off.  The net cashflow from the rent is like milking the cow and continuing to earn money from it.

    In your position, I would use my cash buyer status to the max. to get a deep discount, force the appreciation of the property through refurbishment, then take out a BTL mortgage to redeem my cash.  Let the property out and earn income.

    Rinse and repeat.

    Before too long, you will end up with a herd of cows that you can milk month on month for rental income.  In a few years time, those cows will have fattened up further (built up equity) and then you can re-finance them again if you desire to buy more cows.

    Buying to sell is a job, margins are slimming due to market conditions and 3% stamp duty surcharge, and cash flow is like a roller-coaster.

    Buying to hold is a much better option imho, and cash flow is much more consistent.  It is also the true way to wealth as you are building an asset base that is producing income as well as potentially benefitting from capital growth over the long term.

    See -

    Buy to let vs. Buy to sell - trying to compare an apple to an orange.

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    this is a fair strategy however one is 

    • taking on more liability / mortgage debt
    • exposed to interest rate rises due to market uncertainity
    • PRA rules for borrowing (once the strategy gets going).
    • taking on the hassle of managing tenants. 
    • exposed to S24 implications

    So I am not sure the buy to rent model is as clear cut as it once was.....

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    Valid points - I provide clarification:

    *  Limit LTV to 60%.  This will mean leaving some cash in the deal.

    *  Take out fixed rate mortgages

    *  PRA just means that LTVs will likely be lower, but will not impact borrowing at 60% LTV.

    *  Get a fully managed service or even consider a "guaranteed rent service" like the market-leading one offered by Northwood.

    *  Only if higher rate tax payer, and exposure reduced by not over-leveraging.

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    All of those "safeguards" attract an additional cost, if the numbers work then great.

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    There is a fundamental flaw with leveraging, whether its cows or property, the government can change the rules.

    I remember the introduction of the milk quotas in the 80s and farmers spreading the surplus milk on the fields whilst trying to find a way to avoid bankruptcy. We now have landlords selling due to S24, again to avoid bankruptcy.

    Its not difficult to associate leveraging with homelessness. S24 has the worst effect on highly leveraged sole trader landlords. S24 is a cause of homelessness. Therefore there is a direct correlation between leveraging and homelessness.

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    How is S24 the cause of homelessness?  Can you direct me to a link to verify that or if you personally know someone who has been made homeless due to S24?

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    "Section 24 is increasingly responsible for the growing homeless problem in the UK."

    https://www.propertytribes.com/what-caus...33000.html

    and here

    https://www.propertytribes.com/tenant-ta...30828.html

    and probably a few others if I keep searching...

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