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  • Refurbish/Develop

    Starting out in flipping

    Hello Property Guru

    I'm an experienced landlord and I'm interested in starting out in property flipping, but not sure how to start the journey.  I hope people can share their experiences with me.  Here I have some questions in mind:

    1. How did you find your first flipping project?  I am sure by just browsing rightmove or zoopla won't give any great help.  Or should I use sourcing agent?

    2. Once I have decided the location, should I use a local builder?  if so, how can I find them given I am not living in the area?  as I don't think the google approach is wise.

    3. I know this is a very broad question but can you please recommend me any good locations for starting out flipping (at least can reduce my search area)?  I live in London and I don't mind to travel to somewhere remote

    4. Apart from mortgage broker, solicitor and builder, what other professions do I need when starting out a flipping project?

    Thanks in advance.

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    how much can you put into a property purchase+refurb+fees

    what return are you loking for

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    My RULES FOR FLIPPING

    Good evening

    Over my 40 years in the property business, I bought and sold many many properties. The key to flipping as it’s now called is to buy the property assuming that you will have to develop it out yourself .  That way you won’t be tempted into buying a property just to try and flip. In my experience, whenever I’ve done that I haven’t done very well -  the ones I’ve been successful at are  ones where it was good enough for me to buy and develop anyway . 

     So my three unbreakable rules still apply that I work to but I also add a 4th One ! 

    If you can’t do ALL the following you should definitely question whether you should be buying the property in the first place

    1. Having bought it to be able to sell it on immediately at a profit in other words FLIP it 

    2.  You should be able to refurbish it and sell it at a good profit 

    3. You should be able to refurbish it let it and refinance it and get the majority of your cash out ready for the next deal

    4. If you can’t FLIP it for 50% of the net profit you’re going to make by developing it, you should retain and develop it. 

     Remember if you don’t already realise deals are very hard to find, never give them away for a small profit if you can make a large one ! 
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    Trouble with flipping is most mortgage lenders won't lend until the seller has owned it for over 6 months. So that leaves you with cash buyers.
    Remember if you already own a property you'll have to pay the extrav3% SDLT, so factor that into costs.
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    My first rule of flipping is not to call it flipping - it's buy/refurbish/sell.  Apologies for being pedantic, but "flipping" is used by the "wealth creation" industry to make is sound as simple as possible, whereas its a serious business.  In the current market conditions with the 3% stamp duty, the margins are slim.  I know a friend who was doing several projects a month, but he's now moved to "buy and hold" as the margins became too slim for his liking.

    Buy to sell is mainly a cash/bridging activity as lenders do not like BTL mortgages being used for anything other than buying a property, renting it out, and holding it long term.  Bridging is an expensive form of lending, which is why you must complete your project in a timely manner, otherwise the monthly bridging loan interest will start to eat into your profit margin.

    If you use BTL mortgages for this activity, you may find that you get blacklisted by the lenders by being added to the infamous "Hunter" List and then you would be unable to access further finance.

    Assuming you are a cash buyer, here are my answers to your questions:

    1.  See - Top 10 Property Tribes resources to learn how to find property deals

    2.  Use a local builder and put them on a fixed rate budget/contract.  View some of their previous projects before appointing them to make sure they work to a high standard.  Perhaps offer them a percentage of the profit to incentivise them to keep to schedule and feel like they are "invested" in what you are doing?  Be clear on your timescales from day one and make sure the builder sticks to them.

    See - Top 12 Property Tribes refurbishment resources for developers

    3.  How long is a piece of string?  Start searching on your home postcode  on rightmove and extend the range outwards until properties start to appear that you can afford.

    4.  Project Manager, cleaners, landscape gardeners, estate agent.

    You should also have a "Plan B" if you cannot sell your project for a profit as you will have to redeem the bridging loan some way or another.

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    Interesting topic.
    I’m just in the process of buying a 3 bed house in Essex requiring full refurb, kitchen, bathroom, wiring, boiler, plaster etc. 

    £145k purchase (inc stamp and buyers fee)
    £30K refurb
    £5K contingency 
    Total: £180K

    Re sale £220K (could be more, not much less)

    Potential pre tax profit £40k? 

    My second option: which I will try initially is putting it into an auction straight after purchase with a view of achieving £170k (pre tax £25k profit)

    Buying the property cash

    Would welcome your thoughts and challenges on this example?
    Thanks 



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    If it goes through same auction or any auction really, most buyers will have seen or be able to easily find out what you paid for it and will think it’s a lemon and won’t touch it.
    40k profit sounds good I always make sure can remortgage and rent as back up plan and be willing to leave money in it
    Buyers will have to wait 6 month to get full access to mortgage available, that’s why when do a refurb we tend to be in no hurry and account for 12 months council tax water insurance etc in figures
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