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If you had £80k what would you do?

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Benproperty123

New Member
I am a teacher looking to get out of education and I have come into some inheritence which may be my saving grace. I have many friends who are within the trades and have advised me to put the money into property (probably knowing I would come to them for the work). I have recently finished renovating my current house and I have made a fair profit on it, considering we have only lived in it for a short time. So I would consider myself to have a small amount of experience.

I have a sum of 80k and I am now thinking about venturing into property. Feeling a bit blind in this field, I’m asking the question - what would you do with 80k considering these factors:

- You live on the wiltshire/hampshire border.
- You can buy properties at auction for around 90k - 200k locally.
- You have friends in most trades (except joinery/carpentry).
- You have some experience in renovating a house.

All ideas are welcome.

Thanks in advance.
 
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Benproperty123

New Member
I should add that my short term goal is buy to sell, to find my feet and build capital. The long term goal is to build a buy to let portfolio.
 
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George Ahye

New Member
Hi Ben, congrats on making your first profit! I hold a senior role in a large UK Build to Rent company, have invested successfully myself and have a family background of builders/investors. Nonetheless, this is simply my opinion!

Buying a home to live in, renovate and sell on is still a great way to build up equity/capital pretty quickly. It goes without saying many areas of London aren't so appealing currently, so I'd start with looking at house prices in the area you're considering.

If you can get 'mates rates' for work around the home, then you're onto a winner. Bear in mind they say money's made when buying the home, so a below market value purchase price is essential. As you mention, auctions are a good way to achieve this, however beware of the risks as when the hammer hits, it's yours! You need to be ready to put down money and you always run the risk of buying something that isn't quite what the tin suggests. So your idea of buying, flipping and selling will work if you plan and budget well.

The government are making it harder for us buy to let landlords to make money with tax deductibles decreasing over the next few years. If you're sure this is how you want to plan your future, each home has to be run like an efficient business. This makes it hard for when you have great tenants and want to treat them with a fresh coat of paint...

To bring what's a huge topic to some sort of end, if you're going to invest to let, go up north. Rent returns are increasing much faster than down here, and for #80K you could probably buy 3 properties!

I'd love to hear your plan as talking about this genuinely excites me. Here's to your success!
 
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Josh Caldwell

Josh Caldwell - American Real Estate Investor
You have a solid concept. In the US we call this a flip. You buy low, renovate and get big money when you sell. To do this you need to know a could bits of info about your target property.
Is the neighborhood improving, or declining. Stay away from declining.
Your typical target market should be a family looking to upgrade to a better place.

Look for the sexy features in your market. Is the property near good schools, shopping, transportation etc. If you get too far away from the amenities then your house will be hard to sell for top of the market price. I like to put high end features in lower priced property, so that it stands out and sells quickly. I will add granite counter tops and spa showers in price points where no other house has those features The cost to me is minimal and my selling price is always at the top of the market.

The biggest areas that sell a house are the entrance, the kitchen, and the bathrooms. You need to WOW your buyer in these areas.

Find the bargain priced home. One of the best ways to do this is to find sellers who are in distress. People who need to sell a home will sometimes walk away from big equity.

I hope some of that helps
to your success
Josh

All of my examples will be from the US but I just bought a house by taking over the mortgage payments, the sellers is walking away from $50,000 in equity because they need to move 1000 miles away for a job, and they cant afford to pay two mortgages.
 
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diyhelp

Active Member
I would look at a long term steady approach including renovating and buy to let. Flipping is all good and well but dont forget that if you cant sell you property quickly then your capital is tied up and you may miss other deals. Have a back up plan, i.e. a rental option where the figures stack up.

Also, if you do go down the flipping route, do not be too strict on your price targets. If for example you refuse a offer because it is a couple of grand less than you wanted, look at the bigger picture. If the market turns you could be left with your capital tied up, all for a sake of a few grand.
 
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Josh Caldwell

Josh Caldwell - American Real Estate Investor
I would look at a long term steady approach including renovating and buy to let. Flipping is all good and well but dont forget that if you cant sell you property quickly then your capital is tied up and you may miss other deals. Have a back up plan, i.e. a rental option where the figures stack up.

Also, if you do go down the flipping route, do not be too strict on your price targets. If for example you refuse a offer because it is a couple of grand less than you wanted, look at the bigger picture. If the market turns you could be left with your capital tied up, all for a sake of a few grand.
@diyhelp makes a good point. The flipping world is all about fast exits, and you better have a strategy to make that happen. I tend to track days on market as an important metric.

For me, flipping is a great way to get my buy and hold properties free and clear. I use the money from flips to buy rentals with no loans and no mortgages.
 
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Josh Caldwell

Josh Caldwell - American Real Estate Investor
@Josh Caldwell

I would be interested to hear what is the average property flipping return - target and actual?
There really is no typical as no two houses are the same. In my city, we have a lot of pre 1900 houses that have not been updated. When you target those houses in desirable gentrifying neighborhoods, you should look to profit at least $50,000. If I had to reduce this to a common formula, I would state is something like $100,000 purchase and holding costs + $100,000 renovation budget = Sale price above $300,000. I happen to live in one of the best flipper markets in the US. So deals like that are not uncommon.

At some point, we (the entire US market) will experience a correction. Our stock market is overvalued and that will cascade into real estate. When that happens, speculators who invest for appreciation will be destroyed like they where when the bubble popped in 2007-2008, so it is best to target areas where you can still get positive cash flow if you need to keep the property. The reason is that in times of correction, credit tightens, and the average buyer can no longer get a mortgage to buy your flip.

I have a very good example that I am working on right now. Non typical, but these deal exist. I am buying a house for $20,000, it smells, trees are growing in the front yard, and windows are broken. Rehab estimate was $80,000, we are going $20,000 beyond that because we couldn't see the sub standard wiring and a plumbing that were hidden in the walls. Expected sale price is $280,000. Holding costs were a lot more expensive than most deals because the local code enforcement wouldn't issue a building permit until some legal issues from the previous owner were cleared up. That cost me an extra few thousand, but the numbers still work quite nicely. This was an odd deal because we acquired the property through a court order, rather than from the seller (who is believed to have fled the country due to some criminal charges).
 
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Josh Caldwell

Josh Caldwell - American Real Estate Investor
I wanted to add a non typical deal that is a bit larger in scope

This is an old abandoned foundry. It hasn't been operational in more than a decade. We are at the early stage of evaluating it as a condo conversion project. Because it was a foundry, there may be some environmental contamination issues. We need to investigate that during due diligence if the deal goes forward. Environmental issues could kill the entire deal.

The purchase is $750k and build cost around $2M would give you total of $2.75M and with other holding cost around $3M. The building is already gutted so it is unlikely that we would encounter any substantial surprises during renovation. The adjacent building has already been converted to condo use and is currently selling at $270,000 per unit. We would create similar 2 bed 2 bat units, and we can upgrade the amenities that the competitor offers. We went very conservative on our sale estimate @$220k per condo would give you $5.5M A gross profit of $2,500,000 would be fine.

The problem with this sort of deal is that financing is a pain in the ass. Banks have no interest in funding renovation of this sort. Traditional private equity funds think the deal is too small, and many private funders cant raise enough money to fund it. So we will most likely form a joinit venture, or syndication to take this one.
 
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Alex Deacon

New Member
@Benproperty123 flipping a property in the Pittsburgh market can be a challenge. We do 3-4 a month here and we know what we are doing and have the resources at our fingertips. Your best to buy and hold long term in this market to be honest.
 
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lookinginvest

Member
Have you looked at crowd funding as a potential funding option? This is a growing market in the UK.
 
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Josh Caldwell

Josh Caldwell - American Real Estate Investor
Have you looked at crowd funding as a potential funding option? This is a growing market in the UK.
I have considered that, but to be honest I dont really like the anonymity, and at least in my experience I have seen a lot more promise than action out of people who attempt to do crowdfunding.

For me it is a lot more natural to put up a deal with proforma numbers and assumptions and invite willing participants to form a joint venture on a project.

Sadly my wife has an IT degree and could probably build her own platform, but when I retired her from the working world, I told her I wouldn't ask her to do anything more crazy that build me an occasional website.

I am actually going to post a perspective deal on this site and see what questions people have, just to help me sort out all of the answers.
 
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FWL

Active Member
Are you looking for passive or active investors? Passive investors allow you to manage assets with minimal fuss, but no assistance, while active investors will not always agree, often prompting a standoff but they can be a good sounding board to work with.
 
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Josh Caldwell

Josh Caldwell - American Real Estate Investor
Are you looking for passive or active investors? Passive investors allow you to manage assets with minimal fuss, but no assistance, while active investors will not always agree, often prompting a standoff but they can be a good sounding board to work with.
It has been my long held contention that a ship only needs one captain. I am a very seasoned investor with a top notch team, so in general I only deal with passive investors. Basically, I put forth a deal and we negotiate a good rate of return for the passive investors.

There is an alternate to that formula. If the other investor brings a deal to me, but they dont quite know how to pull all of the pieces together, then I will form a limited partnership with them and allow them to be active with me as an advisor A prime example of this is a group of investors put a deal together to buy a local hotel. They had 70% of the funding, but needed help to find the other 30%. I let them lead that deal, but i was able to connect them with the rest of the funding, so they didnt really need me to do much more than guide them.

I hope I explained that well?
To your success
Josh
 
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Josh Caldwell

Josh Caldwell - American Real Estate Investor
There is also a size consideration here. In small deals, it pretty much has to be passive investors. In larger deals, there is room for active investors as long as roles are codified in the partnership agreement and the partner does in fact bring value and experience to the table. I knew I was forgetting something.
 
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realdeals

Active Member
Also, any active investor would want their share to reflect what they "bring to the table" against a passive investor who "only" brings funding. However, I would guess the best way to protect yourself would be to link any additional share with the performance of the project on a stage by stage basis. There is nothing like a financial incentive to focus the mind of investors :)
 
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MechJony

Member
It is a decent amount of money to start something, but it depends on what you are willing to do. The best long-term idea would be to invest in something and continue collecting money. I know this might sound like a terrible idea, but there are apps to make money in some minute or apps that give you cash back every time you buy something or leave a review. I thought this was a scam initially, but if you choose the right apps or platforms, you can save a lot of money. They allowed me to buy new devices to start the photo business I had wanted for a long time.
 
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