Property Developing Question

princess275

Hi Diamond

If you are thinking of buying and flipping then i don't think the market conditions are right. As already mentioned above, flipping was good a 2 to 3+ years ago but now properties that come to market tend to stay there for a long time. The days of the quick buck are over, unless you buy a rare opportunity where anyone would kill to own the property you are selling.

If i was you, i would seriously consider buying discounted property below the current market price from one of the investment suppliers where you have instant profit. Rent that property for good cash flow and sell when the market stabilises/ picks up.

For £75K, you could pick up at least 3 good rentable properties on 3 mortgages that can probably make you around £200 profit each from rent (£600 from 3 props). Added to that, if you get the properties at say 20% discount from the current market price, then you are already sat on a 20% profit. If the market stabilises and prices go up then your profit rises above 20% and you can either hold on to keep enjoying monthly income or sell at a healthy profit.

tc

Sonia

googler

"For £75K, you could pick up at least 3 good rentable properties on 3 mortgages that can probably make you around £200 profit each from rent (£600 from 3 props)."

Rentable houses at less than £25k each...? Where?

poppysarah

googler wrote: »

Rentable houses at less than £25k each...? Where?

I took it to mean 25k deposits on three houses .. Moston in Manchester has cheap rental but has extra landlord rules in place because the place is prone to slumlords.

princess275

googler wrote: »

Rentable houses at less than £25k each...? Where?

Hey Googler

I should have been clearer. Sarah is right, its by using £25K as deposits. In fact, if you use the whole £75K properly, you can end up with around 5 -6 properties under your belt and end up being very rich a few years down the line.

Sarah, i hear what you are saying about ending up buying in areas like Moston in Manchester. But to be honest, if you had £25K as as deposit, you don't have to put your money in run down areas. A £25K deposit should get a £100k mortgage and you can buy much more then problem property for that price these days.

Sonia

Doozergirl

princess275 wrote: »

Hey Googler

I should have been clearer. Sarah is right, its by using £25K as deposits. In fact, if you use the whole £75K properly, you can end up with around 5 -6 properties under your belt and end up being very rich a few years down the line.

Sarah, i hear what you are saying about ending up buying in areas like Moston in Manchester. But to be honest, if you had £25K as as deposit, you don't have to put your money in run down areas. A £25K deposit should get a £100k mortgage and you can buy much more then problem property for that price these days.

Sonia

It's run down areas though that produce yields good enough to warrant being a landlord. Around much of the country (London very much excluded), similar sized houses attract similar rents regardless of their sale values.

I would personally rather eat my own hair than own 5 or 6 properties with only £75,000 to put down on them. This is exactly how people have been caught out over the last couple of years and to suggest that someone could be very rich a few years down the line is flippant to say the least. I would definitely be described as someone who is not risk adverse but every risk must be calculated and buying up property willy-nilly using capital only to fund deposits is frankly wreckless. Even with 3 properties you'd need a considerable amount in reserves to cover maintenance and voids.

Property investment is about far more than you seem to be suggesting - you make it sound easy and I am wholely unimpressed by that. It is not easy at all.

And why is flipping 'over' if you are able to buy property at 20% below market value? If it can be resold for 25% more than you paid, then flipping is most definitely not 'over' and returns can be made much more quickly that sitting on property.

princess275

Hey Doozer

Nice to have some input from you. Let me just cover some of the points you have mentioned:

Buying property “willy-nilly” - Who said anything about buying property willy-nilly. Perhaps you can explain what buying willy-nilly really means because it’s not a practice I am accustomed with.

In property investment everyone has their own strategy. If you want to eat your hat then please feel free to do so. However, your hat eating will not make another strategy as crazy as you have just made it sound. In my opinion whatever strategy you select, just make sure you buy the right property at the right price and in the right area to give both long term returns and good rental yields (as a bare minimum). Of course there are many other elements that need consideration but I would suggest further reading rather than relying on posts before spending money.

I agree that many people fell victim to the recent collapse, we all know that. But the losses were more to do with what they bought, timing of the purchase, the price they paid for it and the list goes on… You may have noticed that the situation now is completely different. It is completely careless to compare what happened 2 or so years ago with what is happening today. You may have even noticed that a lot has changed. If anything, if you know how to spot opportunities then I would argue that you would be wise to buy in today’s market, Remember that “buy low sell high” term that usually gets banded around? You may have read it somewhere.

You have just suggested that I have made property investment sound easy. I am not here to tell people whether property investment is easy or hard, I simply answered a question of the original poster to what the likely option would be to exercise.

Your comment about flipping has completely baffled me. Are you saying that if you buy 20% below the market price you can sell for 25% higher from the purchase price? Hmmm… that sounds very “easy” to do from how you have explained it. I would love to hear how that works, especially flipping like that in today’s market.

Doozergirl wrote: »

It's run down areas though that produce yields good enough to warrant being a landlord. Around much of the country (London very much excluded), similar sized houses attract similar rents regardless of their sale values.

I would personally rather eat my own hair than own 5 or 6 properties with only £75,000 to put down on them. This is exactly how people have been caught out over the last couple of years and to suggest that someone could be very rich a few years down the line is flippant to say the least. I would definitely be described as someone who is not risk adverse but every risk must be calculated and buying up property willy-nilly using capital only to fund deposits is frankly wreckless. Even with 3 properties you'd need a considerable amount in reserves to cover maintenance and voids.

Property investment is about far more than you seem to be suggesting - you make it sound easy and I am wholely unimpressed by that. It is not easy at all.

And why is flipping 'over' if you are able to buy property at 20% below market value? If it can be resold for 25% more than you paid, then flipping is most definitely not 'over' and returns can be made much more quickly that sitting on property.

Scabs

princess275 wrote: »

Hi Diamond

If you are thinking of buying and flipping then i don't think the market conditions are right. As already mentioned above, flipping was good a 2 to 3+ years ago but now properties that come to market tend to stay there for a long time. The days of the quick buck are over, unless you buy a rare opportunity where anyone would kill to own the property you are selling.

If i was you, i would seriously consider buying discounted property below the current market price from one of the investment suppliers where you have instant profit. Rent that property for good cash flow and sell when the market stabilises/ picks up.

For £75K, you could pick up at least 3 good rentable properties on 3 mortgages that can probably make you around £200 profit each from rent (£600 from 3 props). Added to that, if you get the properties at say 20% discount from the current market price, then you are already sat on a 20% profit. If the market stabilises and prices go up then your profit rises above 20% and you can either hold on to keep enjoying monthly income or sell at a healthy profit.

tc

Sonia

You say you can get property at 20% below market price from "investment suppliers" until property "stabilises/picks up".

I hate to disagree but I think both the above quotes are very wishful thinking.

Making money through property is easy in a rising market but extremley difficult in a stagnant or falling one however you make it sound easy.
p.s. what is an investment supplier?

princess275

hi scabs

I'm in a bit of a hurry and will explain what an investment supplier is a bit later. But help me out with a question pls. How is waiting for market to stabilise/ and buying at 20% discount wishful thinking?

Doozergirl

princess275 wrote: »

Your comment about flipping has completely baffled me. Are you saying that if you buy 20% below the market price you can sell for 25% higher from the purchase price? Hmmm… that sounds very “easy” to do from how you have explained it. I would love to hear how that works, especially flipping like that in today’s market.

You're the one talking about buying at 20% below market value. Market value is the price that a property would sell for if placed on the open market. Therefore a genuine purchase at 20% below market value sold on at market value should fairly quickly realise a 125% return on the purchase price, before associated costs. I'm trying to fathom how someone who suggests buying at 20% below market value doesn't think it's possible to flip the same property?The property is either below market value or it isn't!

Fair enough, you're not obliged to give the ins and outs but your posts do make it sound easy and I think that's a bit irresponsible, regardless of the fact that this is a forum. Someone offering genuine advice should be able to counter their own suggestions with the risks.

princeofpounds

If a 'supplier' had properties at 20% BMV, they could potentially realise a return on invested capital by buying and selling on the open market of 25%.

They could also use mortgage finance to do this (interest costs on a short term mortgage are pretty low these days so let's ignore those), perhaps at 75% LTV. The return on their equity, the 25% cash they put in, would be 100%.

If such a transaction took 4 months start to finish, then they could do three a year and compound to receive an annualised return on the original equity of 800%.

So if anyone really has property BMV, they ain't going to sell it to you, and even if they do they will sell it at a steep price that takes account of the opportunity they are forfeiting!