The Property Investment Conundrum

Smalltownhypocrite

If your into shows like that you might enjoy 'the great house giveaway' show. Spoiler alert in the latest season (with the market 'crash') people do make some losses.

ManuelG

Smalltownhypocrite said:

If your into shows like that you might enjoy 'the great house giveaway' show. Spoiler alert in the latest season (with the market 'crash') people do make some losses.

Just watching that now while working

strawb_shortcake

Smalltownhypocrite said:

If your into shows like that you might enjoy 'the great house giveaway' show. Spoiler alert in the latest season (with the market 'crash') people do make some losses.

I was going to mention that show, I think it gives a far better view of what the average Joe can achieve (or not) in trying to flip a house

Herzlos

RHemmings said:

Herzlos said:

You can make money flipping the houses, by buying one that's in a bad state and making it appear presentable as cheap as possible. I say that because flippers don't have a reputation for doing a good job because a good job eats into profits.

So you buy an ex-lease or a reposession or something that's full of junk, overgrown garden, damaged kitchen/bathroom/whatever at auction pretty cheap. Get a skip and throw everything out, paint over everything and DIY install the cheapest fittings you can find. It might cost you £5k and a couple of weeks of work but could easily add £20-30k to the house value. Of course half the fittings will fail in short order and the new buyer will probably replace the cheap kitchen in a few years time but by that point you've already got the money so why would you care?

Buyers by large have no imagination and want to move into a modern clean house and not one that needs a lot of work.

Though homes under the hammer it tends to be "property moguls" who buy a wreck of a house, bodge it together and then rent it out for even more profit.

1. A number of the cheaply refurbed houses are going to be rented, not sold. Surely then the landlord retains responsibility for the fittings etc. into the future. And, those properties are also cheaply refurbed. 

2. I wanted to move into a modern clean house which doesn't need a lot of work. Would you say that this is because I lack imagination or because I don't have the spare time to spend a lot of time working to make a refurb property liveable and have other priorities in my life? 

1. Yeah for a rental the landlord is responsible for the fittings, but not all landlords care that much. If you don't have to live with it, you don't need to put up with shoddy work and can hire a cheap handyman/DIY a bodge later if the tenant complains.
My local kitchen/bathroom manufacturer has a bottom end range they refer to as the landlords special and don't recommend it to anyone beyond those shopping purely on price.

2. I did say by large; people will pass up on houses for the most trivial cosmetic reasons, and estate agents usually recommend having a house laid out normally (instead of empty) to help buyers visualize. There are definitely valid reasons for not wanting to buy a doer-upper.

My new house has horrific wallpaper and will need a lot of upgrading work, but nothing we need to address immediately, for instance.

RHemmings

Herzlos said:

RHemmings said:

Herzlos said:

You can make money flipping the houses, by buying one that's in a bad state and making it appear presentable as cheap as possible. I say that because flippers don't have a reputation for doing a good job because a good job eats into profits.

So you buy an ex-lease or a reposession or something that's full of junk, overgrown garden, damaged kitchen/bathroom/whatever at auction pretty cheap. Get a skip and throw everything out, paint over everything and DIY install the cheapest fittings you can find. It might cost you £5k and a couple of weeks of work but could easily add £20-30k to the house value. Of course half the fittings will fail in short order and the new buyer will probably replace the cheap kitchen in a few years time but by that point you've already got the money so why would you care?

Buyers by large have no imagination and want to move into a modern clean house and not one that needs a lot of work.

Though homes under the hammer it tends to be "property moguls" who buy a wreck of a house, bodge it together and then rent it out for even more profit.

1. A number of the cheaply refurbed houses are going to be rented, not sold. Surely then the landlord retains responsibility for the fittings etc. into the future. And, those properties are also cheaply refurbed. 

2. I wanted to move into a modern clean house which doesn't need a lot of work. Would you say that this is because I lack imagination or because I don't have the spare time to spend a lot of time working to make a refurb property liveable and have other priorities in my life? 

1. Yeah for a rental the landlord is responsible for the fittings, but not all landlords care that much. If you don't have to live with it, you don't need to put up with shoddy work and can hire a cheap handyman/DIY a bodge later if the tenant complains.
My local kitchen/bathroom manufacturer has a bottom end range they refer to as the landlords special and don't recommend it to anyone beyond those shopping purely on price.

2. I did say by large; people will pass up on houses for the most trivial cosmetic reasons, and estate agents usually recommend having a house laid out normally (instead of empty) to help buyers visualize. There are definitely valid reasons for not wanting to buy a doer-upper.

My new house has horrific wallpaper and will need a lot of upgrading work, but nothing we need to address immediately, for instance.

My house has white ceilings and painted creamy but lighter than magnolia walls. These are not the colours I would have chosen, but the paint is all in good nick and I can't be motivated to change it now. The carpet in the house is boring but it works. Maybe I will redecorate in the future, but I wouldn't want 'redecoration' to be one of the many things that I have to get on with in my life right now. Later, yes. However, there is no need for me to do this right now. 

I'm planning to learn DIY skills by doing, and I have permission from my allotment society to repaint the shed on the allotment - they encourage painting. I wonder if they realise that I was serious when I gave them the example of painting the shed shocking pink with turquoise polka dots and asked if that was OK. I'm planning to go ahead with this too.  

In my previous rental property the kitchen was new, but the materials are cheap. E.g. simple laminate worktops that clearly won't last a decade. 

Schwarzwald

ManuelG said:

eddddy said:

ManuelG said:

However, it's always shown the successes... even more so recently. 

They only show successes because, realistically, only people who've done well will agree to appear on the program.

In simple terms, this type of invitation isn't too appealing...

"Would you like to come on national TV to explain that you bought a property at auction and lost £100k, because you're daft and...

• you didn't read the legal pack properly
• you didn't know enough about property to notice the obvious structural problems
• you didn't research prices properly in advance and/or you got carried away with the bidding - and hugely overpaid
• you botched the refurb, and caused lots of damage to the property
• you underestimated the refurb costs, and so you have a half refurbed property, and no money to finish it

... so that everyone watching at home can think "what an idiot - it serves you right"?


Conversely, people who think they've made lots of money on a project will want to go on national TV to gloat about it.

I assume they pay you *something* for being on it though? And if I'd lost a fortune, I'd take anything going!

friend of mine appeared on the show with a refurb in Southend-on-Sea, he received £200 ... so you definitely only do it for the fun and/or vanity to be on national television, £200 is definitely not convincing enough to publicly shame yourself ...

Albermarle

Schwarzwald said:

ManuelG said:

eddddy said:

ManuelG said:

However, it's always shown the successes... even more so recently. 

They only show successes because, realistically, only people who've done well will agree to appear on the program.

In simple terms, this type of invitation isn't too appealing...

"Would you like to come on national TV to explain that you bought a property at auction and lost £100k, because you're daft and...

• you didn't read the legal pack properly
• you didn't know enough about property to notice the obvious structural problems
• you didn't research prices properly in advance and/or you got carried away with the bidding - and hugely overpaid
• you botched the refurb, and caused lots of damage to the property
• you underestimated the refurb costs, and so you have a half refurbed property, and no money to finish it

... so that everyone watching at home can think "what an idiot - it serves you right"?


Conversely, people who think they've made lots of money on a project will want to go on national TV to gloat about it.

I assume they pay you *something* for being on it though? And if I'd lost a fortune, I'd take anything going!

friend of mine appeared on the show with a refurb in Southend-on-Sea, he received £200 ... so you definitely only do it for the fun and/or vanity to be on national television, £200 is definitely not convincing enough to publicly shame yourself ...

£200 could be enough to carpet a whole house in Homes under the Hammer.

RHemmings

Albermarle said:

Schwarzwald said:

ManuelG said:

eddddy said:

ManuelG said:

However, it's always shown the successes... even more so recently. 

They only show successes because, realistically, only people who've done well will agree to appear on the program.

In simple terms, this type of invitation isn't too appealing...

"Would you like to come on national TV to explain that you bought a property at auction and lost £100k, because you're daft and...

• you didn't read the legal pack properly
• you didn't know enough about property to notice the obvious structural problems
• you didn't research prices properly in advance and/or you got carried away with the bidding - and hugely overpaid
• you botched the refurb, and caused lots of damage to the property
• you underestimated the refurb costs, and so you have a half refurbed property, and no money to finish it

... so that everyone watching at home can think "what an idiot - it serves you right"?


Conversely, people who think they've made lots of money on a project will want to go on national TV to gloat about it.

I assume they pay you *something* for being on it though? And if I'd lost a fortune, I'd take anything going!

friend of mine appeared on the show with a refurb in Southend-on-Sea, he received £200 ... so you definitely only do it for the fun and/or vanity to be on national television, £200 is definitely not convincing enough to publicly shame yourself ...

£200 could be enough to carpet a whole house in Homes under the Hammer.

Or to do a full kitchen refurb! 

Mgman1965

I asked my builder why he doesn't do refurbs and flips and this is what he told me.

Estate agents and sellers (guided by the EA no doubt) have wised up to developers and flippers making big profits.

This is what happens mostly now he said.

Old tatty House in need of refurbishment/modernising is to go on the market. 

EA/Seller look at prices of broadly similar properties in area already done and their value and use this formula. 

Value of house when refurbished -  £150,000

Work out cost of basic refurbishing - £30,000

Put un-refurbished house on market- £115,000.

Makes it viable for buyer who intends to have work done and live in it, but not for a developer or flpper (around 5k profit or less just not worth it).

Albermarle

Mgman1965 said:

I asked my builder why he doesn't do refurbs and flips and this is what he told me.

Estate agents and sellers (guided by the EA no doubt) have wised up to developers and flippers making big profits.

This is what happens mostly now he said.

Old tatty House in need of refurbishment/modernising is to go on the market. 

EA/Seller look at prices of broadly similar properties in area already done and their value and use this formula. 

Value of house when refurbished -  £150,000

Work out cost of basic refurbishing - £30,000

Put un-refurbished house on market- £115,000.

Makes it viable for buyer who intends to have work done and live in it, but not for a developer or flpper (around 5k profit or less just not worth it).

Although going back to Homes under the Hammer ( although not taking all the figures they mention as gospel)

Using your example, you will normally find the house would sell at auction for something like £90K to £100K, as more likely to be a developer/flipper buying it. As you say they need to make a decent profit to compensate for the risk of it all going wrong.