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Advice needed for Goal Setting in a Buy to Sell Strategy


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Hi!

Wow, 2nd forum post in two days; I'm really getting into this aren't I.

I'm in the midst of research to allow me to take a concerted step into full time investment, but business planning isn't my strongest suit. I know what my main goal is but I'm struggling with how to convert that into property terms.

My goal is to achieve a profit of a certain amount (equal to replacing my salary) per annum. Using rental yield data for a specific location, I've worked out how many properties I would need to own in a buy to let portfolio and how long it would take me to achieve the goal figure. But I want to do the same for a buy, refurbish, sell strategy, which I'm finding more difficult.

A good starting point would be to use the equation Profit = sale price – purchase price – costs.

I know its possible to look at the sale price of comparable properties in the same location so you can work out your sale price and purchase price. But until you've actually identified a property that might suit your strategy and been to visit it to inspect, its hard to know how much its going to cost to undertake the refurbishment works. this leaves you with not all of the information for the equation above.

Can anyone suggest how I can get round this? Its a research exercise so doesn't have to be perfect, rather to allow me to make some educated assessments to covert my financial goals into property goals.

Thanks in advance! Cass

 

 

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  • 4 weeks later...

I think one of the best routes for these types of strategies is to talk to agents etc so you can identify incentivised sellers (estates in probate, families looking to relocate in a hurry etc). Starting a conversation before the property is on the market sometimes helps and then it's down to how you add value to that property for further profit. I know it sounds a bit predatory but its often essential. Do bear in mind that the activity you describe sounds like one subject to income tax (at 20/40/45%) so you may want to consider a limited company for this, epsecially if you are looking to keep reinvesting.

Jerome

Jerome@TaxAntics.co.uk

www.TaxAntics.co.uk
 

 

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You can work out some rough numbers based on the types and values of properties you're thinking of and what you'd want as profit to make it worthwhile.

A full refurb (rewire, plumbing, kitchen, bathroom, plastering etc) is probably going to be c£20k. Slightly bigger house, slightly more. If it's a £100k house, you're going to want to keep costs to a minimum and you're going to struggle to find things that work - if the end value is only £100k, you'd need to be buying for £60-70k and vendors just don't seem to get that. You'll find them, but when the market is going well, it's a pain as they seem to assume it'll be worth £110k, knock the £20k off for the required works and think £85k is an insulting offer. Really, you'd need either houses that have been stuck on the market for a long time or you need to get direct to sellers who need quicker sales. For a good example of how it can work, have a look at Darren McNeil's progress journey on here, developing cheaper houses for clients or himself. He's made it work, but he's worked extremely hard to get there.

If you're looking at £1m end values, well the £20k will cover most of the basics, but you probably need another £20k for the kitchen and you'd probably want extensions etc to maximise it. The percentage profit margin might be exactly the same, but you'll find your hourly rate becomes a lot higher due to the bigger numbers.

I'd therefore say work back from your goals and the resources you have available. If you're only going to have enough cash to do the £100k houses, you could make £20k if you're really lucky, but it could easily be 9 months from having your offer accepted to completion of your sale and maybe more. So an average before tax income of about £25k, with a load of risk. Depends what your goals are, but that probably needs to sit alongside other forms of income or you need to be doing multiple at any one time. Increase the prices of the houses and the profits should rise roughly in line, but you need more capital for both the buying and the works.

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