Starting out in property development

[Julie Allen]

Hello, I would like some advice if possible. I am in the process of buying my first house to renovate and sell, or that was the plan. I have recently found out that I can't sell the house for 6 months unless it is to a cash buyer. My original plan was to renovate 3-4 houses each year. Is there a way to contact property developers who would be interested in buying a BTL property once it has been renovated? Any advice would be greatly appreciated.

 

[profitxchange]

I am not sure whether you need property developers or property investors. If you watch the TV house auction programme you will see a lot of developers doing it on behalf of an investor. You might get some hints from there.

 

[ethical PR]

Why don't you just look for another house if you want to turn something around more quickly?

 

[Annoying Donkey]

I have recently found out that I can't sell the house for 6 months unless it is to a cash buyer.

Huh? I used to flip properties well within 6 months. Who told you that...?

 

[Julie Allen]

My solicitor advised me that the majority of mortgage lenders won't give a mortgage on a property that has been owned for less than 6 months. It has something to do with money laundering apparently. Would an estate agent have cash buyers who want a house for BTL but don't want to do the work?

 

[tony84]

I think you have misunderstood or not been given the full information.
Firstly, there are not many lenders who will give you a Mortgage on a property you plan on doing up and selling (if you are honest with them, if you are not honest, you will only get 2-3 properties in before lenders start to pick up on it) - you would need development finance/bridging loans, which are more expensive than a normal mortgage.

The issue you are coming across is a general rule. Most lenders who your buyers will use, will not lend on a property that has been bought in the previous 6 months. There are a couple of lenders who will do it, but their options will be few and far between.

You have a couple of options, find lenders who would be open to lending in this situation. You can then give any potential buyers a list of lenders they can use. Keep hold of the properties for 6 months or do the properties up, remortgage them on to BTLs (puling some of the equity out) and moving on to the next.

 

[Julie Allen]

Thank you Tony84! I have been researching and requesting information on different areas of property development for several months and this is the first time I have received a coherent, straight to the point answer. I am a cash buyer so will this make any difference if I was to look at BTL?

 

[tony84]

Being a cash buyer does not alter your options for BTLs as far as I am aware - although I have never had a cash buyer remortgage to pull money out before so not something I have ever had to research.

It really depends on whether or not you want to be a landlord. I have been a landlord and would never do it again. But I have landlords on my books who have 3-10 properties and have never had a problem.

 

[Julie Allen]

Has anyone experienced being gazumped a week from completion? Another cash buyer has put in a higher offer on a repossession. My question is when should I put in another offer given that we were closing next week?

 

[Forest Magic]

Hi Julie
my wife and i started to do the same as you 2 years ago with the idea of doing 3 a year.
We have found out it does not quite work out like that i'm afraid.
Our experience to date
bought a renovation job April 15
spent 4 months working on it, managed to sell it March 16 profit being about £25000
During that period bought another one, which we did up and moved into where we currently live - revalued recently with a profit of about £45000
we bought our third April last year, finished and marketed August, still not sold, profit may, if lucky, be mid 20's.
and we are self-funding.
You will need deep pockets to be able to 3-4 a year and work very quick
think 3 months for purchase time
3 months work time
at least 3 months selling time - if lucky
that makes 1 every 9 months if you are lucky with selling time

the only way to do 4 a year is to have funds to have 3 on the go at the same time = 1 purchasing at the same time as working on another and selling the other one. That means you need masses of money or masses of borrowing. Also forget about Homes under the Hammer, they rarely show anyone with low profits or problems with timings. They so often show people making masses of money and never how long it took to sell.

Sorry to put a dampner on it, just telling how it is from my point of view

 

[Julie Allen]

Hi and thank you for your feedback. Please don't apologise, this is exactly the kind of information that is invaluable to someone starting out. I went to a property development work shop recently and was advised by a very experienced developer that in my situation I should concentrate on BTL so this seems the way to go.

 

[billmccallum1957]

Only go the BTL route if you are a really strong person, dealing with tenants who don't pay the rent and wreck your property is a nightmare, I know from experience.

 

[tony84]

Have you accounted for stamp duty on second properties if you go down the BTL route? - https://www.stampdutycalculator.org.uk/ (you may be able to claim this back fi you sell the property within 3 years).

Also, there are tax changes coming in to play with regards to how much interest you can declare as an expense. Have a chat with an accountant.

 

[Julie Allen]

How do people make money from flips and btl if they are both so risky as these posts seem to suggest?

 

[pentel]

Money can be made BECAUSE they are so risky. More risk, more reward.

 

[garyk]

Only go the BTL route if you are a really strong person, dealing with tenants who don't pay the rent and wreck your property is a nightmare, I know from experience.

Everyones experience is different. We have 5 BTL we rent and just got number 6, we have had very few issues. Sure you only need one rogue tenant to change that but these are the minority.

To the OP we (well my wife) buy them post auction as you can get them under market value. She's written a book about it (link in sig.) so if you are buying to sell or rent out might be worth a read.

 

[billmccallum1957]

Everyones experience is different. We have 5 BTL we rent and just got number 6, we have had very few issues. Sure you only need one rogue tenant to change that but these are the minority.

To the OP we (well my wife) buy them post auction as you can get them under market value. She's written a book about it (link in sig.) so if you are buying to sell or rent out might be worth a read.

I know that not all tenants are bad, but the OP needs to be aware of what might happen and be prepared to deal with it if it does.

Our nightmare tenant was actually a close family friend, who my wife was confident would never do something terrible to us, but 2 years later, £3,000 in owed rent and another £3,000 of damage to the property before we managed to get it back.

 

[Pish_Pash]

'Homes Under the Hammer' has a lot to answer for...

 

[HomesWarehouse]

In all honesty, if you want to flip 3-4 a year, you need to be able to buy 3 or 4 and renovate in one hit, from a spare cash point of view

it takes a few months to buy realistically 3-6 months minimum for a full refurb and selling a house is just a joke, 3 months completion time after usually 6 months for sale if u start at a top end price, that's a year each

my best advice if you have cash to buy outright is just don't bother, finance is king, split it into deposits and refurb cash, interest rates are less than 3% if you shop right and u can make 10-20% minimum on property flipping easily if your smart, makes sense to borrow 500k and make 20% on that figure rather than the 100k cash u may have hanging around

the BTL game is a long one, most people use it for retirement, as your not going to get rich making 200 quid a month on the rent per house, although if you buy 10 and pay them off over 25 years you would be a multi millionaire by retirement, so that's a thought

for the record I have 17 properties at the moment, most rentals and I flip a few a year, but my best advice for flipping is to buy the biggest house you can afford in the best area, the ceiling price for the property with be vastly higher than the small terrace properties and profits are crazy in comparison, making 100k per property is regular on larger properties but a small terrace is never going to make you more than 30 odd thousand really more like 15-20k in real life

also homes under the hammer is legit, I have been on it myself in 2013 and made 36k on a semi in 7 months,

happy flipping

 

[Gordon - Commercial Finance]

my best advice if you have cash to buy outright is just don't bother, finance is king, split it into deposits and refurb cash, interest rates are less than 3% if you shop right and u can make 10-20% minimum on property flipping easily if your smart, makes sense to borrow 500k and make 20% on that figure rather than the 100k cash u may have hanging around

Well said - couldn't agree more! Doesn't make any sense to tie up all your own cash when debt is quick and easy to get hold of. Leverage to increase your reach and reduce your risk!