Property developing - how to raise the cash to get started

Doozergirl

robbo1388 wrote: »

My story is, i'm to buyout a 1/4 housingassoc. share in my house and could sell for £230k then would look to buy for £185k in my surrounding borough. (These would be real figs, what with my property + street location) thus making back the HA's paid share in that 1st move..

Nice

robbo1388 wrote: »

I would then look to move regular into those bad 60's decors as mentioned (and there are a good number consistently coming up here) redoing decor/kitchen/bathrooms etc.. ..

Okay, I'm starting to worry slightly.....

robbo1388 wrote: »

Looking to spend say £8k on the gaff + £7k fees for the next move, in ur experience is there £25k to be put on remodernised homes in this way? I'm only looking to make £10k plus on the moves, if that's what's possible.

No. Not without a rising market no. If prices rise, why even bother doing any work? I know Sarah Beeny bangs on about it, but so many have made money from the market, not from being an able developer. I have never made £25k, without the help of HPI, from a house that didn't have "issues". You might make £10k maybe but it's not worth the hassle IMO. It only takes a slow market when you come to sell to wipe that potential profit out.

robbo1388 wrote: »

But 5 moves in say 2 years (a couple of results) and i could have negligible mortgage.

Entirely unrealistic. You will find it nigh on impossible to turn anything around in that timeframe. If you managed to pull it off, HMRC really will wonder what you're up to if you're thinking that these houses would be your main residence. You'll have to pay tax on your profits, so you'll need to look for bigger profit margins.

"A couple of results" is not the way it works. You look for the right property which will bring you the profit margin you need. There's no point wondering whether you're going to make £10k or £50k - you should know (without allowing for prices rises/falls) how much a house should make you. If you want £25k, you look for a house that will make you £25k when you've written everything into the budget. If you want to turn properties around quickly, you have to price them keenly, so it's not about punting it high and seeing if someone catches it.

You need to do a lot more homework.

dannyboycey

Hi Robbo, got your PM - sorry for the late reply! I'd echo most of what doozer said. However, I disagree on the refurb bit.

8k is sufficient to give a really good cosmetic makeover to an undesirable house, providing everything else is in good order (electrics, plumbing etc). I'd looking to provide a clean, liveable house that is ready for someone to move in to. Which at the end of the day is what many FTB's and young people want. Places like B&Q have some really good cheap and cheerful bathroom suites, and cheap laminate flooring (light colour) can make a carpeted house look a lot larger' . Bear in mind that I'm not talking about getting people in to do work - you need to do it to minimise costs.

A major factor with what you're suggesting is sticking to budget. This is a lot harder than you'd think. It's also too easy to get emotionally involved and try to do something that you'd be happy with. Also note that kitchens are very expensive things to refurb to a high standard.

Your biggest obstacle is picking the right property. This is extremely tough as you'll find a lot of people have the same idea as you. Many developers get tip-offs from estate agents about the sort of properties you are talking about - and many get sold before they 'officialy' come on to the market!

The temptation is there to settle for whatever you can get. This is a huge mistake it's all about profit and you need to buy at the lowest possible price. Make sure you really know the area. Everywhere has good and bad bits which are not always instantly apparent unless you have local knowledge.

I'm also inclined to suggest not buying anything that you wouldn't mind spending a few years in yourself. If the market turns quickly, you may have to!

Doozergirl

I didn't say anything about the cost of refurb. I said I doubt you'd be able to make £25k without the house having more serious issues than just needing a new kitchen and bathroom. Of course you can tart up a house up for £8k though the budget needs to be based on the house and what needs doing, not pulled from the air.

I'm a mardy cow, I know.

dannyboycey

Doozergirl wrote: »

I didn't say anything about the cost of refurb. I said I doubt you'd be able to make £25k without the house having more serious issues than just needing a new kitchen and bathroom. Of course you can tart up a house up for £8k though the budget needs to be based on the house and what needs doing, not pulled from the air.

I'm a mardy cow, I know.

Yeah, 25k is pushing it for a cosmetic makeover. You could probably double our 8k - maybe a bit more if you're lucky. This is why it's so important to do it quickly and cheaply. For 10k profit, you can't afford to spend long at all - and without strong HPI, things are gonna get really tough. It's not as easy as it seems!

robbo1388

Many thanks guys-food for thought indeed.

A very good modern, quality kitchen is actually my driver for this - and cheap too. Now, hold those triggers, i can put in a really nice quality kitchen for £4k. Steady! I did it in my own house for £4.5k inc £1k plastering + £1k new model Neff integrated oven and hob. Honest!
Ikea.
Fire!!!

Seriously, i'd love to believe you could add near to the £25k on bought price what with adding thru decor + the showpiece kitchen + buying £5k cheap and selling £5k dearer than perhaps should (realised thru the standard achieved and the SKitchen.)

I would do (and have done before) everything myself bar plastering, gasfitting (for the cert), electrics, etc... to v good standard.
Also (another driver) new shift job i have is 4 on/4 off, giving 4 day blocks to attack every job.

Totally agree with u Danny on the 'choose one you might have to stay in because of market drop' theory - and i have that very much in mind.

Point is, i will have to move somehow, anyhow, so i will more than likely try to go for it anyway.

Thanks for any reply. Nice one.

littlesos

dannyboycey wrote: »

Finding a house with an overgrown garden, a 60's avocado bathroom sweet, floral carpets and wallpaper is not as easy as you might think.

We've just bought one! but it's got an additional stone clad archway between the dining room and kitchen, and artes on the walls! It's to be our home though, not a development project.

To the OP I would say be cautious. Having just bought a property which is a developers dream there are an awful lot of hidden problems which are going to cost a lot to get right. As we're not in it for profit it's not that big an issue, other than the cash we have to shell out.

Example : rip out the avocado bathroom suite and replace. Seems like a simple job till you realise the existing pipes are under the concrete floor, and the concrete has collapsed away under the bath, so the floor needs digging up and then re-laying. The lintel over the window is in 3 pieces :eek:, so that's got to be fixed. In moving the loo to a better location in the bathroom we've discovered that the sewers outside are cracked and need replacing right up to the boundary, (a fair distance) This is all money that will have to be spent with nothing visible to show at the end of it.

In my opinion there is little profit to be had in property development as asking prices generally take account of the amount of work needed.

If your partner is in the building trade would it not be a better idea setting up his own business doing building work?