How can we raise money for potential second home/property development business?

LaDiva_2

redlady_1 wrote: »

Another thought, if you are going to renovate and then sell, this could take 6 months or even a year. What are you going to do if the property crashes in price? Who says it will be worth £100k, you or an estate agent?

Good luck if you take it on

The estate agent selling the property is saying it will be worth £120K should the work be done to a good standard without cutting corners-seems too much considering prices of other properties that have sold in the area.
Spoke to another estate agent, who sold a similar property one street away, and was given the information that of course prices can drop realistically I should be expecting to get 100K rather than 120K which makes better sense.

We're looking at a time scale of 6 months, minimum.

We've got a 'buffer' on top of the kitchen and bathroom budget.

The current owner wished to have professionals in such as GPs/Solicitors rather than renting out to familes. We are looking at families as our market (should we purchase it).

Electrical wiring, re-tiling of the roof and a new central heating system were put in 13 months before the previous tenant sadly passed away. Of course everything must be checked out to make sure it's even safe.

Thanks again folks for the input. Will print off this thread and include it as research of the interesting kind :beer:

chewmylegoff

if it was as simple as putting down a bit of weedkiller, painting a couple of walls, and paying someone to sticking a new bathroom and kitchen all for £7k, so an easy £33k profit, do you not think that a professional property developer would have already snapped it up, or that the estate agent would have found a mate and gift wrapped the deal for them.

MobileSaver

LaDiva wrote: »

The estate agent selling the property is saying it will be worth £120K should the work be done to a good standard ... realistically I should be expecting to get 100K rather than 120K which makes better sense.

Check Nethouseprices for recent sale prices of similar properties in that area if you haven't already.

redlady_1

If you have never done something like this before and don't have the tradesmen in place, then prepare yourself for some heartache and hassle. Oh and definitely double your budget! That £100 you have just spent in B & Q or Wickes will soon add up too. When you start to peel away the old there will nearly always been something else to be done underneath. Are you going to do any work yourselves or just pay for others? Floorboards? Cellar? Damp? Insulation? Rot?

Vincenzo

Generally a professional developer will look to achieve c.20% profit on cost. So for argument's sake if you bought at £60k and sold for £100k, taking into account all purchase and mortgage costs I calculate you could spend c.£18,000 on renovations and walk away with a £15,000 profit (17.6% profit on cost of £83,000).

Clearly I cannot comment on the cost of renovating that particular house since I have not seen it but that should be sufficient to renew electrics, heating system, new kitchen and bathroom, general decorating and plastering. I doubt whether it would be suifficient for any major roof works, structural issues or full doubling glazing replacement.

Re earlier comments on the mortgage costs, if the house is habitable you need only a standard BTL mortgage. Something like this one (which is very reasonable):

http://www.bocukltd.co.uk/mortgage/buytolet.html

As far as raising the funds for the works, costs and deposit goes, your main residence holds the answer. Many lenders will not allow you to borrow for this purpose though. You can however borrow money to buy a car or rennovate your own home.....

The other option is for your partner to buy it on a residential mortgage, this way you can borrow on a higher LTV and if they live there whilst doing the works, this would help with your potential tax liability.

Jowo_2

maninthestreet wrote: »

As ILW asks, why is a property worth £100,000 on the market for only £60,000??

The cynic in me says it's because it will take 60k to repair it and bring it up to the standard for those selling at 100k...

The non cynic in me says it's because the only way to shift it is by presenting it to the market with some latitude for profit making.

However, as someone that's refurbished three owner occupied properties to date (roof renewal, kitchen/bathroom replacements, new floors, etc), I know that its very easy to underestimate costs and the time required and very hard for a novice to find reliable workmen.

I found it tough despite a history of project management (albeit unrelated to property) so am very aware about time/cost/quality issues.

It's really, really hard graft in terms of research, planning, supervision even if you don't do any of the manual work itself. It's not for the faint hearted.

Vincenzo

LaDiva wrote: »

Electrical wiring, re-tiling of the roof and a new central heating system were put in 13 months before the previous tenant sadly passed away. Of course everything must be checked out to make sure it's even safe.

Where is the house? If you decide not to proceed, let me know!

LaDiva_2

In terms of doing the work, we have assisted others when they've purchased properties to do up and sell on. I've done: gardening (removing the weeds, laying down lawns, planting etc), laying a new patio (done a bit of work with decking, but cannot say I could do it without any assistance), painting, wallpapering, tiling, cleaning, sanding floorboards/staining/polishing...that's about it really. So we'd look at doing similar things ourselves, but only if we were confident at the time that our finish would match that of those who will fit the kitchen and bathroom.

On of my parents previously worked alongside my grandfather who was a property developer when I was a child, so they have been helping me develop a realistic time scale of things, as well as looking at areas we could do ourselves.

We have the following tradesmen in place should we go ahead with the project: plumber (we've seen his work and have used him before), electrian (used him before) plus the building company that will send a rep along with us to the future viewing of the property so they can give us a money accurate costing of other areas that may need attention which to our untrained eye may escape our planning.

MobileSaver, I have looked online, and I've been warned by an estate agent that information can quite often be wrong, so any stats I get online I'm taking with a big pinch of salt.

For those who are cynical over this project, I have been in two hearts over this too. Half of me wishes to believe it's a genuine bargain and the other half of me (the former journalist) isn't sure why it feels like something isn't adding up. I shall have to weight for the structural report, I'm assuming that's were a problem maybe, saying that though I am no expert.

I've been to see my friend earlier today and she's kindly offered to give me a list of the tradesman she uses and has suggested when I go to see the house again I take more photos on a camera rather than a phone and look for anything sheepish as well as asking if I'm okay to lift up the carpet to cheap the state of all the rooms floorboards :eek: I never realised it was acceptable to ask to do such a thing but I shall try.

Vincenzo, once we've had our reports back and have decided if we can/cannot go ahead with the project I shall send you the details. Am I allowed to post the details of the property on here (I have a feeling I won't be so shall stick to PM).

Thank you again everyone for your input.

FATBALLZ

You seem to place high value on the opinion of estate agents.

MobileSaver

LaDiva wrote: »

MobileSaver, I have looked online, and I've been warned by an estate agent that information can quite often be wrong, so any stats I get online I'm taking with a big pinch of salt.

If Nethouseprices shows similar properties have sold recently but you don't trust the online stats then you can always confirm the price at the Land Registry (costs a negligible £4.)

Personally I'd trust Nethouseprices more than what an EA with a vested interest told me!