Classic property developer mistake

[jrtbartley]

TV shows like 'Homes Under The Hammer' have helped perpetuate the myth that active property development is easier and possibly more profitable than it actually is leading to many inexperienced developers to think that they can make a career out of it.

A lot of people think that flipping a house like they do on the telly is easy, can be done DIY and always carries guaranteed ROI. However, there are so many things that can go wrong with this way of investing, whether that be unforeseen issues with the property structure, declining housing markets or inability to develop on time and on budget. It's a high risk, high pressure investment when you don't know what you're doing. If this sounds like you, it may be best to surround yourself with a team that help keep renovations on track - whilst they can help mitigate against risk, the nature of this kind of investment means you can't completely avoid it.

 

[diyhelp]

I totally agree - what we see in 10 minutes of TV viewing time can on occassion take years to complete. Delays in development and the selling process also rack up the interest charges which many people fail to appreciate. All makes for great TV, flipping a property for a profit in the hundreds of thousands of pounds but if it was that easy we would all be doing it!

 

[Longterminvestor]

I wonder how many property DIY projects end up on the cutting room floor? I cannot believe that all of the purchases pursued by the TV companies end up on the show?

Should they show the adject failures to give a little more perspective?

 

[5bsuccessnyc]

I agree 100%. We buy many properties in the U.S. and have run into many road bumps along the way. Right now we're handling a situation where the DOB can't find the papers confirming that the property is a two family and not a one family. Someone looking to "fix and flip" a property has to know what they're getting themselves into, especially if they are taking hard money.

 

[diyhelp]

Personally I think many people would learn as much from the mistakes on these property TV shows as they would from the successes. People who go into property thinking it is a quick route to riches are in for a big big big shock!

 

[MarkOBC]

Indeed. It's all about the numbers (and being able to sell). Thorough due diligence, hard work and experience will help to get the numbers right (most of the time). But even then, you've got to do the deal (i.e. sell) in order to release any profit you might have made.

 

[diyhelp]

One of the major keys to success is being able to give yourself some "headroom" when doing a deal. If there is no flexibility in your numbers then you are backing yourself into a corner. Nobody wants to pay the asking price and especially in current markets, every investors will be looking to squeeze you down.

 

[MarkOBC]

Stating the obvious (and frequently repeated advice),paying the right price in the first place will give you the best safety net and opportunity for uplift. If you can sell it for the same or more the day after purchase, you shouldn't go too far wrong.