Re: Would like advice please regarding flipping houses

Andrea2528

jimjames said:

Andrea2528 said:

He doesn't want to mortgage the property but he realises he will obviously have to if the venture doesn't work out

I'll repeat previous question. How do you know the property isn't mortgaged? (now or in the future) Why isn't your partner buying the house in his name if he's paying 100% of the cost?

Have a look at Blackmore Bonds, they were investing in property to renovate and sell. Investors all had a charge over the property but when it went belly up the properties were mortgaged to someone else so no money could be raised.

Also repeating previous question, if this friend is so well off and has assets why are they not using their own assets to buy this house? They would make more money and avoid involving others. Only reason I can see is that they don't want to risk their own money or don't actually have any money.

He purchased the farm from partner.  I've also asked him about why they are not using their own assets to purchase this house.  He is saying that he doesn't have the cash available as it's tied up in his assets.

Andrea2528

phlebas192 said:

Andrea2528 said:

Unable to actually use online banking.  I said he could do it over the phone or even go to the bank but he wants to do it through online banking

Andrea, from reading this thread I don't know whether your partner is being scammed but I am very worried that he/she is scamming *you*. Whatever your partner decides to do, do not involve yourself in any transfer of money from any account of your own. If they really have a few hundred thousand availble for this "investment" then they can easily arrange the transfer themselves. At the very best you are likely getting involved in some form of money laundering (a serious criminal offence which you will be guilty of), at the worst they are looking to steal from you. 

There is no valid reason why anyone would not be able to transfer such a significant sum of money themselves. You know in your heart that there is something very wrong with all this or you would not have posted here.

I am also not using any of my money as it's nothing to do with me.  It's partner's money and he wants to get involved in this but he is relying on me to do the internet transfer due to him being computer illiterate

TheSpectator

Andrea2528 said:

phlebas192 said:

Andrea2528 said:

Unable to actually use online banking.  I said he could do it over the phone or even go to the bank but he wants to do it through online banking

Andrea, from reading this thread I don't know whether your partner is being scammed but I am very worried that he/she is scamming *you*. Whatever your partner decides to do, do not involve yourself in any transfer of money from any account of your own. If they really have a few hundred thousand availble for this "investment" then they can easily arrange the transfer themselves. At the very best you are likely getting involved in some form of money laundering (a serious criminal offence which you will be guilty of), at the worst they are looking to steal from you. 

There is no valid reason why anyone would not be able to transfer such a significant sum of money themselves. You know in your heart that there is something very wrong with all this or you would not have posted here.

I am also not using any of my money as it's nothing to do with me.  It's partner's money and he wants to get involved in this but he is relying on me to do the internet transfer due to him being computer illiterate

As has been said, do you want your bank accounts frozen for running money that isn't yours to a 3rd party?

Andrea2528

Mr.Generous said:

i have renovated property for 10 years, I have worked with my brother as a business partner and alone. The quickest we have renovated a 2 bed house for a flip was 4 month with both of us working full time. Then allow about 4 months for the sale if a cash buyer with no complications. How quickly is your renovator estimating he can do the job on presumably a large property?

I have a good friend who is doing this work now, he did a property course and is a very handy guy. His estimates on how long it would take are ridiculously optomistic, even when I tell him and loint out the complications.

The only property worth flipping is a wreck. Half decent can only be made half better, and the fixed costs remain the same. It costs about the same to rip out an OK kitchen and replace it with a really nice one, as it does to rip out a musty rotting tip of a kitchen and replace with a really niced one. So its going to be a wreck.

My mate told me he would do the bathroom in a week. I told him it would take me three weeks. I was too optomistic.

I won't go into loads of detail but he planned to do 10 in 2 years (please don't laugh).

I think he managed 2. He wasn't selling them, he kept them to let out, so no time delay waiting for a buyer, but the workload is huge. I did it full time, he tried to do it weekends, evenings and an occasional week full time. It is much harder than you think. Watch "The great house giveaway" to see how many renovations lose money. Half done they sell for less than they were purchased for.

Property courses encourage people to use someone elses money, and stress how simple and profitable it is. they do this because that's how they make their money.

This is a very stupid idea that will not end well if you go ahead.

Surely though with the first charge in place on his asset, which he purchased from partner, is a way of securing his investment and the 10%.  So, if the house flipping didn't work out, or he didn't make enough profit to recover the investment amount, he would have to sell his farm to pay partner, wouldn't he?  That's what the solicitor was pointing out anyway.  It isn't a large property but he is expecting to renovate it in about 5 months or even less than that

Martico

Andrea2528 said:

jimjames said:

Andrea2528 said:

He doesn't want to mortgage the property but he realises he will obviously have to if the venture doesn't work out

I'll repeat previous question. How do you know the property isn't mortgaged? (now or in the future) Why isn't your partner buying the house in his name if he's paying 100% of the cost?

Have a look at Blackmore Bonds, they were investing in property to renovate and sell. Investors all had a charge over the property but when it went belly up the properties were mortgaged to someone else so no money could be raised.

Also repeating previous question, if this friend is so well off and has assets why are they not using their own assets to buy this house? They would make more money and avoid involving others. Only reason I can see is that they don't want to risk their own money or don't actually have any money.

He purchased the farm from partner.  I've also asked him about why they are not using their own assets to purchase this house.  He is saying that he doesn't have the cash available as it's tied up in his assets.

So he mortgages his assets to release funds at a much better rate than 10% or he's already over extended

crumpet_man

10% is way too low for such a high risk venture.  You should be looking for 50% of the profit.

dinosaur66

Mr.Generous said:

i have renovated property for 10 years, I have worked with my brother as a business partner and alone. The quickest we have renovated a 2 bed house for a flip was 4 month with both of us working full time. Then allow about 4 months for the sale if a cash buyer with no complications. How quickly is your renovator estimating he can do the job on presumably a large property?

I have a good friend who is doing this work now, he did a property course and is a very handy guy. His estimates on how long it would take are ridiculously optomistic, even when I tell him and loint out the complications.

The only property worth flipping is a wreck. Half decent can only be made half better, and the fixed costs remain the same. It costs about the same to rip out an OK kitchen and replace it with a really nice one, as it does to rip out a musty rotting tip of a kitchen and replace with a really niced one. So its going to be a wreck.

My mate told me he would do the bathroom in a week. I told him it would take me three weeks. I was too optomistic.

I won't go into loads of detail but he planned to do 10 in 2 years (please don't laugh).

I think he managed 2. He wasn't selling them, he kept them to let out, so no time delay waiting for a buyer, but the workload is huge. I did it full time, he tried to do it weekends, evenings and an occasional week full time. It is much harder than you think. Watch "The great house giveaway" to see how many renovations lose money. Half done they sell for less than they were purchased for.

Property courses encourage people to use someone elses money, and stress how simple and profitable it is. they do this because that's how they make their money.

This is a very stupid idea that will not end well if you go ahead.

good advice from mr generous

i also used to flip property

mostly on my own with my brother doing the boiler and a mate the electrics if required.

front and back garden are also very time consuming and lots of trips to the dump

garage needs tanking /asbestos roof replacing /etc etc all money

as mr generous says this is what you see when i have watched the schemes on the internet you tube channels about property investing.

by 3 sales people talking blks givin it the big un with hard sell.

and in todays market with the massive increase in all property related taxes/ and huge increase in materials plus this is currently a slow market / this is not the time for a novice to invest

Alexland

Andrea2528 said:

He purchased the farm from partner.  I've also asked him about why they are not using their own assets to purchase this house.  He is saying that he doesn't have the cash available as it's tied up in his assets.

Your partner is not a bank or commercial lender. If this person has such a good opportunity then they should seek specialist lending. A professional market exists for that although it's likely to cost more than 10% because this is high risk stuff. 10% return is really poor for the risk being proposed.

Nobody who has replied on this thread with all our collective experience together managing many millions of pounds in various investments including a few who have done house flipping before thinks this is a good idea.

kaMelo

Andrea2528 said:

Mr.Generous said:

i have renovated property for 10 years, I have worked with my brother as a business partner and alone. The quickest we have renovated a 2 bed house for a flip was 4 month with both of us working full time. Then allow about 4 months for the sale if a cash buyer with no complications. How quickly is your renovator estimating he can do the job on presumably a large property?

I have a good friend who is doing this work now, he did a property course and is a very handy guy. His estimates on how long it would take are ridiculously optomistic, even when I tell him and loint out the complications.

The only property worth flipping is a wreck. Half decent can only be made half better, and the fixed costs remain the same. It costs about the same to rip out an OK kitchen and replace it with a really nice one, as it does to rip out a musty rotting tip of a kitchen and replace with a really niced one. So its going to be a wreck.

My mate told me he would do the bathroom in a week. I told him it would take me three weeks. I was too optomistic.

I won't go into loads of detail but he planned to do 10 in 2 years (please don't laugh).

I think he managed 2. He wasn't selling them, he kept them to let out, so no time delay waiting for a buyer, but the workload is huge. I did it full time, he tried to do it weekends, evenings and an occasional week full time. It is much harder than you think. Watch "The great house giveaway" to see how many renovations lose money. Half done they sell for less than they were purchased for.

Property courses encourage people to use someone elses money, and stress how simple and profitable it is. they do this because that's how they make their money.

This is a very stupid idea that will not end well if you go ahead.

Surely though with the first charge in place on his asset, which he purchased from partner, is a way of securing his investment and the 10%.  So, if the house flipping didn't work out, or he didn't make enough profit to recover the investment amount, he would have to sell his farm to pay partner, wouldn't he?  That's what the solicitor was pointing out anyway.  It isn't a large property but he is expecting to renovate it in about 5 months or even less than that

No he wouldn't, they could sit in their home, with your charge against it, until the day they die. The only way you could force this 'friend' to sell their house to repay the debt is by issuing a statutory demand and threatening bankruptcy, even then there are no guarantees. If the house is mortgaged or in joint names then any charge is almost worthless. 

Sack the solicitor too.

Mr.Generous

What I predict if stupidly go ahead is that the renovation takes much longer than expected. The utility bills and council tax will rack up. If the place has been empty expect penalty council tax. When you take out the bathroom you find the floor poor, with smelly rotting boards and failing plaster board. Also needs a complete re-pipe. The ceiling may well need to be renewed too. An experienced renovator might be able to do this room in 3 weeks. Materials will cost more than expected. The person doing the work will expect a return on their time, remember 6 months labour they will be expecting at least 2k a month. Then there are fee's - estate agent, solicitor, gas and electricity specialists - If you do work yourself get it certified otherwise you can just cross your fingers that nobody gets hurt and takes legal action.

The place will eventually get done, and re-sold for less than expected. The renovator will consider this most unfair, will claim it's not their fault that unable to repay the sum and fall out with investor and stop all communication. The gaurantee will prove to be useless as others have mentioned, already mortgaged or in joint names or just not enforceable. The OP will post a new thread asking for help getting SOME money back.