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The Property Investment Conundrum



  • Schwarzwald
    Schwarzwald Posts: 505 Forumite
    First Anniversary Name Dropper First Post
    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).

    not sure this is universal though.
    my builder, who is great, for example, uses all his cash to build himself a large house in his non-UK home country so he simply doesnt appear to have sufficient savings to do a refurb/flip himself, though very well suited from a skills perspective.

    Plus, I think many that work on a day rate / project basis really require the cash flow from working for external customers and not sure they could stomach plunging 100-150k into an auction purchase, then spend another 20-30k on materials plus workign 4-6 weeks without getting paid before reselling afterwards.
    At least my builder just doesnt have the mindset to do that while he has a wife and 3 kids at home that he needs to provide for ....

  • Herzlos
    Herzlos Posts: 14,740 Forumite
    First Anniversary Name Dropper First Post
    I know a few builder types that flip houses in their down time though I've no idea how they finance it. They presumably buy materials as required/budget allows and then work on the house when they have a spare few hours.

    I'd assume the busier builders will make more money by keeping their calendar full of paying clients but some delays are always going to be inevitable.
  • annabanana82
    annabanana82 Posts: 3,042 Forumite
    First Anniversary First Post Name Dropper
    This house has recently been flipped, it was on the market along time beforehand too. Sold last year for £230k and now on for £45k more. I don't think a huge amount was spent on updating it but doesn't seem to be a huge amount of profit after all the other costs involved in buying and selling a house.
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