Jump to content

100k Decision! Can it be done?


Recommended Posts

Hey Fellow Investors Enthusiasts, I Need to start a Business! Either Flipping at the begging or HM0 cash Flow model.

If I start either scenario I have got a Goal

Firstly What I hope to do then,I have got a questions to ask, I would be delighted if you Guys could Help out:).

 

So

Option 1

Is it viable when I say, With £90000-100000 in the begging could I start by buying £40000-£60000 Pound Houses in the Northwest Flipping for at least 10-20% 

Do this 5 times, Then with the original sum plus the additional funds from Flipping Get into the Cash Flow Model & acquire 7-9 BTL Houses IE: Interest Only Mortgages

Or

Option 2

Do I use My £90000-£100000 now and seek 4 Houses HM0 (4 deposits) and scale up with cash flow model.

Allow Management to oversee things for 3 years and hopefully by then have saved enough to scale Up.

Few things to know about me 

  1. No assets
  2. Currently not a resident, I am aware That could hinder my chances at first getting loans.
  3. I have experience where I Cosmetically Renovated A 30 sqm Sitting Room into a Great return & a Bleak space into a Smart flat. This was on My Parents property in order to create extra income. (Just to Note) Mild experience :D
  4. I could afford to subsidies My income as regards the Flipping side.

Question 1. What are my chances of creating a Cash Flow Model business in the short term?

Question 2. Are BTL Interest Only Mortgages Hard to Acquire

 

Conclusion; I might have to try the Flipping starting out but Within 3 years have built a worthwhile Cash Flow Business. 

 

Thank you for viewing, Regards Tom.

 

P. S.

 

I believe Career First.

Link to post

Hi Tom

 

I suggest you flip for now given your residency status, which will mean you will find it tough to get a BTL mortgage and if so it will be expensive.

 

Best

Richard

Richard W J Brown a.k.a. The Property Voice

Property Investment Strategist

10%+ ROI property deals every week: check out PROPERTY DEAL TIPS
Amazon best-selling author Property Investor Toolkit & #PropTech, YPN Magazine columnist & PODCAST host

Web & Blog: The Property Voice | Curated property news & insights feed

Facebook Page | TwitterLinked In

Let's connect...mention The Property Hub :)

Link to post

Not really much advice to offer as I don't quite understand your position, long term goals or question, but remember nothing is as easy as expected or goes to plan.

 

Personally if you were in a similar position to me with similar aims - buy 3 x single let BTLs for around the 90k mark.  It'll be a lot less stress and use any profits to save and purchase more properties.

 

I have done a couple of major refurbs on my own properties and have parents who flipped properties when I was growing up so have been around development my whole life, and I have no intention of doing any more unless I have to!  However good you are they are generally twice the price and double the time planned to do them.

 

Others will disagree with me, but I see tough times ahead for HMOs in so many ways - such as legislation, tenant demand apparently decreasing and competition increasing (I am on a couple of Facebook HMO forums), council taxation changes, room sizes, etc plus if you decide to sell it then you won't be selling to Family, it'll be to an investor who won't pay top money for it.  You would need to buy a property with cash or bridging and then pay for the works, then get a mortgage suitable for an HMO when the works are complete, it wouldn't be easy and would be very time and cash intensive at the start.

Link to post

Okay @londoner Thank you for your response! 

Forgive me for not been more articulate, the last quarter I have been accumulating  so much theory I'm at the stage where I'm just condensing down strategies that will suit! I see where you are coming from as regards HMOs besides from what I have learned I can not obtain leverage at the moment.

I understand I'am left with 3 options 

  • Buy 2 cash properties (northwest £400-450 per month potentially.
  • Flip 1 property  to start with and seek to continue.
  • Hold out till residency  and explore leverage.

What do you think?

 

 

Link to post

In my mind a property for 40-50k isn't one I'd necessary want.  If I had 90-100k I would probably focus on buying one BTL single let for cash at a decent price (I hate the term BMV)  and get it rented, then seek to see if I could get a mortgage on it. Or when you get residency status you can get a mortgage right away and roll on with the next one using the cash from the mortgage as a deposit for the next?

Link to post

Hi @thomasjr,

 

I think it's really commendable that you appear to have thought through your options quite well. I have a few questions that hopefully may help you to further define what you want and what would be the best course of action for you. 

 

You mention that you can afford to subside your income whilst flipping properties, how long do you think you could do that for? Are you clear on how much you are spending each month? Based on having a minimum of 3-6 months worth of expenses saved up (assuming something bad was to happen and you lost your job), I would personally go for flipping. 

 

But again it depends on your final goal and your time horizon. Is it a certain return on your cash to have in your account or is it to have a certain amount of cash flow? This will also massively dictate the best decision for you.

 

 

Link to post

I see the logic and I see that their is potential for capital growth in what you are saying very plausible indeed. 

The thing is their is two of us My Brother & I and if we could we would like to start a business out of this somehow, granted it is not too lucrative at the start. 

Flipping seems to be out of the question with you? 

Thank you for your response  @londoner

Thomas.

Link to post

flipping is risky thesedays - especially at the low end. There is lots of competition so BMV is very hard to achieve and the charges involved in buying/stamp-duty/selling/solicitors/bills/etc means that for a 100k property you are probably looking at 10k costs so you need to making minimum 20k to even think about spending 6-9 months buying/refurbing/selling. If you are down at the 50k end then a refurb isnt going to add lots of value..

I'm not saying flipping isn't a good idea but you really need to think through the numbers.

Ultimately you just need to do one and learn - even if you end up breaking even..

Link to post

OK, so thought I would share some actual cases here to give some insights.Flipping is harder these days I agree...but its not impossible and it also depends on your return expectations. I regularly see and undertake smaller flips that produce +/-15% ROI over 9 months when using cash in the £75k to £100k purchase price range. Here are some recent projects (round figures paying cash):

 

South Yorkshire (probably my worst deal in a long time to be perfectly honest with you...asbestos!)

PP £74k

Works £25k

Other costs £8k

GDC £107k

GDV £122k

Profit £15k (14%)

 

Kent (I actually kept it rather than selling it in the end but the figures are accurate)

PP £95k

Lease extension £17k

Works £12k

Other costs £11k

GDC £135k

GDV £155k

Profit £20k (15%)

 

Worcestershire (a project I located for a client)

PP £72k

Works £20k

Other costs £10k

GDC £102k

GDV £122k

Profit £20k (20%)

 

Work on 6-9 months project duration depending on the exit sale route, which puts the annualised rates at or above 20% in all cases. That said, it probably takes up to 3 months to find and conveyance the next deal, so have that in mind too.

 

I have a system set up to find them, its usually spits out around 1 'probable' in every 100 'potentials' and some of those I will not be able to buy for various reasons, usually not being quick enough to view! So, it requires a lot of patience and legwork and is also a numbers and negotiation game. I am still finding enough for my needs to churn a few projects and generate some additional cash for other projects to build my cash pot, but its definitely harder than the good old days. I tend to get better results with larger projects (which I prefer) and also when using finance at this level, which adds in some leverage on my cash. I don't tend to look at anything below the £70k PP mark as the £ margin is usually not sufficient and can't carry a large unforeseen expense...not in the UK at least ;)

 

@thomasjr I hope that gives some encouragement that it can be done and what to expect. Work on the +/-15% net profit mark as a budget figure, accept it could be end up between 12% and 20% (not usually more for a lower value refurb flip such as the value range shown here). Also, make sure you do your own numbers and always add in ALL costs, including buying, holding, updating, selling, financing and professional fees, along with a contingency and project management as appropriate. Contact me if you want to know a bit more about how I find these sorts of project, I have a webinar and / or a blog post on it somewhere.

 

Best

Richard

Richard W J Brown a.k.a. The Property Voice

Property Investment Strategist

10%+ ROI property deals every week: check out PROPERTY DEAL TIPS
Amazon best-selling author Property Investor Toolkit & #PropTech, YPN Magazine columnist & PODCAST host

Web & Blog: The Property Voice | Curated property news & insights feed

Facebook Page | TwitterLinked In

Let's connect...mention The Property Hub :)

Link to post

@haf1963100% I agree with you the competition can be fierce & of course numbers don't lie ;) I'm not the type who looks on breaking even at the start as as a waste of time really its the experience all the way that is tangible. I have witnessed projects go accordingly and not So smoothly at the same time,  However TOO idealistic is Foolish, I have jump trough plenty of hoops with solicitors so I Know how that scene plays out and As regards the selling aspect nowadays We can be more enterprising. 

So hopefully there is a Saving :) 

By the way, whats your interest in this sector? 

Thank you for you response.

Link to post

Wow, You and to be fair a lot of individuals on this site don't have what is called a Scarcity Mindset which I really admire in people nowadays.

 

Okay Richard,

 

When you say 6-9 months hypothetically speaking do you mean for example - (3 months) - Source - Negotiate - Buy (6 - 12 weeks) - Renovate - List for sale (Then waiting Game) fair to say? Only I read somewhere too that a lender wont facilitate a purchase if the House they are buying has not been in the Vendors Name for 6 months or above Correct?  

 

I noticed where there was extra expense in your 2 first deals  Asbestos - Extra Solicitor Fees for lease Extension. The The third deal however seemed to be more straight forward..

Just to note When you say 3 months to negotiate the next deal will it matter If I am waiting for the sale of my first deal to go through or is this what they mean when they say CHAIN.

 

Finance or even JV in the future seems like a potential avenue provided you showcase your ability.

 

Yes Richard I would be intrigued too delve more into a proven system. 

 

Of course when you see fit, Thank you for your response.

 

Thomas J.

 

 

 

 

 

 

Link to post

Hi Thomas

 

Mindset is such an important factor of a successful investor. You don't have to be one of these people praying that the Universe will shower wealth and riches on you and then hold your hands out, but some people attest to that theory also. I am more pragmatic and realistic, I know it is tough and a numbers game, but there will be a deal or three with my name on it and that's all I need to keep moving forward :)

 

As for project timescales - the 6 month rule is what sometimes restricts us on the resale in the UK yes. This essentially prevents many mortgage-backed buyers from applying for a mortgage until we have owned the property for at least 6 months; then up to 3 months to complete the sales process, which is usually 8-12 weeks with a mortgage-buyer. This restriction does not apply to a cash buyer and a small percentage of finance-backed buyers, so there is a chance that you could sell sooner to the right type of buyer. That's why I mentioned the 'exit sale route' above. However, we usually want to attract the widest rage of buyers and typically sell to homeowner buyers, who often have a mortgage and that's why the 9 month project duration usually applies.

 

Typical timesclaes:

4-12 weeks - source, negotiate and buy a property

4 weeks - source and contract with building team, etc.

6-16 weeks - undertake a typical refurb project, depending on complexity and scope

4-8 weeks - market and agree a sale

4-12 weeks - conveyance on the sale

Of course that makes a minimum of 22 weeks and a maximum of 52 weeks; the former probably being dependent on the exit sale route (i.e. cash or mortgage buyer).

 

In response to your observations on returns and complexity. We usually get paid more for fixing more problems...but some of these 'fixes' come at additional cost. The S Yorks project actually had two 'unforeseen events', which was the discovery of asbestos, which cost £2k to safely remove and the unexpected change on the PM, which resulted in an increase cost in this respect also. Whilst, I had a contingency line in my budget, I also upped the spec of the works to make the property more appealing, so 3 additional costs in effect. This was an ouch project, but still profitable as I allow a bit of fat in my numbers. I like lease extensions as long as I can get the process to extend the lease started before / at exchange and don't overpay. The last project was more straightforward and my margin here is largely around the need of the vendor to move quickly (had a stroke) and so accepted a larger than average price reduction, was still a win-win as he gets to reduce his stress and pocket some quick cash and I get a decent return too.

 

Project timing is tricky, especially of you plan to link exiting one to starting another and entering into a chain as you say. Remember, that around a third of all property sales fall through, which is more likely when you have a chain of people all reliant on various factors to proceed to completion. That's why I usually prefer to pay in cash and buy chain-free properties...but it also means you need the cash in hand ready when you go shopping.

 

Right, my wife is giving me 'that look' on a Saturday when we need to go out, so will have to leave it there. Drop me a line if you want to know more...contacts below.

 

Best

Richard

Richard W J Brown a.k.a. The Property Voice

Property Investment Strategist

10%+ ROI property deals every week: check out PROPERTY DEAL TIPS
Amazon best-selling author Property Investor Toolkit & #PropTech, YPN Magazine columnist & PODCAST host

Web & Blog: The Property Voice | Curated property news & insights feed

Facebook Page | TwitterLinked In

Let's connect...mention The Property Hub :)

Link to post
On 7/28/2018 at 1:01 PM, thomasjr said:

@haf1963100% I agree with you the competition can be fierce & of course numbers don't lie ;) I'm not the type who looks on breaking even at the start as as a waste of time really its the experience all the way that is tangible. I have witnessed projects go accordingly and not So smoothly at the same time,  However TOO idealistic is Foolish, I have jump trough plenty of hoops with solicitors so I Know how that scene plays out and As regards the selling aspect nowadays We can be more enterprising. 

So hopefully there is a Saving :) 

By the way, whats your interest in this sector? 

Thank you for you response.

 

I looked into flipping but ended up re-financing after refurb and letting out. works better for me as i wasn't interested in short term cash due to having a 'proper' job as well. 3 years and 5 properties since i started and glad i kept them all as have had decent capital growth.

Link to post

Okay Richard,

 

Thank you for your timeline, your quote ( We usually get paid more for fixing more problems...) + the logic behind chain free Properties.

I'am now going to research out of curiosity the three areas that you developed that price point an get my head around the numbers again Thank you for your tips.

 

Thomas J. 

 

 

Link to post
On 7/27/2018 at 4:40 PM, theo brown said:

Hi @thomasjr,

 

I think it's really commendable that you appear to have thought through your options quite well. I have a few questions that hopefully may help you to further define what you want and what would be the best course of action for you. 

 

You mention that you can afford to subside your income whilst flipping properties, how long do you think you could do that for? Are you clear on how much you are spending each month? Based on having a minimum of 3-6 months worth of expenses saved up (assuming something bad was to happen and you lost your job), I would personally go for flipping. 

 

But again it depends on your final goal and your time horizon. Is it a certain return on your cash to have in your account or is it to have a certain amount of cash flow? This will also massively dictate the best decision for you.

 

 

 

Hello @theo brown

 

Thank you,

 

Yes I believe that I could effectively sustain my outgoings for at least one project, only then could I evaluate to see if I could live off generated profits for future endeavors. 

However my intentions long term would be a Buy to let system. 

So to answer your questions 

  • Yes 1 project
  • Yes clear on spending
  •  Return on cash for now

Have you any niche yourself Theo? 

Link to post

@thomasjr  I started off in a similar position as yourself, but with less money.  I have to disagree with those saying that BTS is more difficult, you just have to look harder and really know your area.  Where is it that you are currently looking?

 

From my personal experience you need to know your area inside out to get the best deals.  I have Rightmove alerts set up for instant so that i get immediate notice on properties.  I then save anything that looks interesting, and then dig down deep into them.  Some sell straight away, some sit on the market for ages.  Some are listed incorrectly, some you can split a bedroom to increase value, some have really crap EA's with awful images.  My favourites are always the ones where they only have 1 picture.....

 

Feel free to read my journal to see what I have been through in the last 18 months..... lots of downs, but also a lot of ups!

 

 

 

Darren

 

www.fmp-investments.com

www.f-m-p.uk

property@f-m-p.uk

Link to post

Hello Darren,

 

I must complement you on the meticulous detail You have comprised together their in your profile, You should be very Proud. I too am not lying when I say I enjoy every aspect when it comes to this profession, Nevertheless negotiations can be a Drag + extending lease's look to be challenging. However that is not enough to deter oneself from the joys that come with Sourcing - Rolling Your Selves Up - Marketing especially Marketing & not to mention PROFIT.

 

I'am currently going trough a major negotiation at the moment Myself that will have steady prospects in time to come, I must point out this does not affect my current finances. In the mean time However I'am strongly thinking about moving my life to the Northwest with serious intentions to start something!

I would intend to build a base personally and then be drawn to Flipping Property only thing at the moment not coming into a great time of year:huh:

 

I have Really researched Liverpool then scrolled trough  Burnley - Wigan - Stockport - Manchester I found a lot of suitable BTL but I'am not really prepared for those strategies Yet. It is fair to say potential Properties are not hopping off the page.

 

(My favourites are always the ones where they only have 1 picture.....)  ;) Very True!

 

I @darren mcneillnoticed you intend to delegate more jobs in the future you should adopt well to this, I believe it is critical for future Prosperity.

 

Thank you for your Response,

 

Thomas J.

Link to post
  • 1 month later...
On 7/30/2018 at 9:43 PM, thomasjr said:

 

Hello @theo brown

 

Thank you,

 

Yes I believe that I could effectively sustain my outgoings for at least one project, only then could I evaluate to see if I could live off generated profits for future endeavors. 

However my intentions long term would be a Buy to let system. 

So to answer your questions 

  • Yes 1 project
  • Yes clear on spending
  •  Return on cash for now

Have you any niche yourself Theo? 

 

Hi @thomasjr

 

That's great, sounds like you have yourself a nice platform to go ahead with. You've got yourself financially secure for the duration of the project and flips would fit with your main goal of "return on cash" so I'd say your pretty much set. Just remember the fundamentals that Rob & Rob go on about when getting the house and I'm sure you'll be fine! Especially following the advice on this thread from people who are more experienced in BTS than me. 

 

Personally, I have a business providing Supported Accommodation, so LHA tenants. This works for me though as my model is similar to rent-to-rent and requires (comparatively) little money down but offers a good cash flow! Plus I get to help people who really need it.

Link to post

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...