f1_fan

iTrader: (9)

Aabout 6 months ago a mate of a mate decided to dabble in property development. As I have developed a couple of properties in the past (a long time ago) for myself I got asked to advise on his first attempt.

He had bought a stone terrace in Lancs for £35K, but was struggling on how best to 'do it up' for sale so I went and took a look with him.

I advised him to move the bathroom upstairs and make the seond bedroom a bit smaller, to extend the downstairs kitchen into what used to be the bathroom, re-roof it, re-wire/pumb and fit central heating, new bathroom, new kitchen.

He wanted to spend thosands on the bathroom and kitchen, but I told him look at the area it's in... no one will pay thousands extra for things like that and told him to put a good basic bathroom/kitchen in.

Anyway he listened and mainly did what I said. Just got a call from him this morning to say thanks for all the advice as the property sold yesterday for £77K after he spent £18K on it netting him £24K before tax.

He asked if I fancy going in with him on some other properties... I am actually quite tempted, but is it as easy as buying sensibly (the right property for the right price), minimising costs, refurrbishing to the standard dictated by the area and moving them on for a sensible price or is it as I suspect a lot harder than that. What are the pitfalls other than buying a property with structural issues or the likes?

Matteeboy

The imminent crash in prices perhaps? ;-)

hodgy0_2

putting to much "emotion" into the project

dukeoffenland

Yeah we do this at work as infill jobs , if you know what your doing its easy , the key is move fast so you don't pay council tax or if it sits empty can you afford for it to sit empty ? Or rent it

Most the time if we do a smaller house we hit it in 2 weeks then advertise for 2 months . If no joy we rent for a year to cover ourselves

Plus most tenants lately asked about buying it direct off us which is good

pimmo2000

iTrader: (6)

Did he give you a cut ?

f1_fan

iTrader: (9)

Yeah I figured the key to this would be tunraround time. Thing is I just wonder if you stick to smaller cheaper properties you will never be a millionaire, but it could still earn you a good living. Seems to me most property developers end up moving up market and often eventually get burned on a massive project that they lose control of.

Also as mattee says if the prices ever do crash you're not going to be overexposed financially if you are only focusing on the cheaper end of the market.

Graz

Something I fancy getting into myself but I'm not brave enough. Like you say if you're sensible about it, do the maths and research then there is plenty of money to be made. If you can build up a rental portfolio off the back of it then even better.

The other thing I think is key is having a bunch of contacts for tradespeople you can rely on, i.e. builders, plasterers, sparks, plumbers, decorators, etc. Some of the fun it doing some of it yourself but you can't do everything (and some stuff you're not legally allowed to).

f1_fan

iTrader: (9)

Yes actually he offered me a payment, but I turned him down mainly becuase i didn't do it for that... it was an interesting exercise. That and my tax affairs are complicated enough already

f1_fan

iTrader: (9)

Yes I know that makes sense, but I am not cut out to be a landlord... couldn't bear having other people 'wrecking' a house I'd spent money on! One of my many hangups

No and if you want to get it done quickly you need to use professionals for a lot of it and only do the bits yourself you can do quickly. Luckily I know quite a few good tradesmen as a couple of my mates are in the building trrade.

GlesgaKiss

This is interesting. I was wondering how much of the work he actually did himself?

stevebt

iTrader: (8)

It sold quickly cause its a cheap price and probably looked nice, he could of made more profit by making it look nice with basic fittings / kitchen and bathroom.

I have a few friends who dabble in the property game some low end and some high end and the low end market is always the hardest as if a millionaire chooses to buy a high end property he just buys it and doesn't worry about the market.

tony de wonderful

Without trying to be negative, I think the amature can only make money doing this in a bull market for property...a rising tide lifts all ships as they say. For the amature then it is more a form of property speculation rather than using your niche knowledge and skills to develop houses to maximise returns. I've said before that property being so illiquid and costly to trade as an asset is bonkers on the face of it as a way to invest for most people. It's like betting down on a single thinly traded stock with a terrible spread with all your dosh.

f1_fan

iTrader: (9)

He did all the non-skilled work basically - stripping out, building of stud walls, plasterboarding, fitting kitchen, flooring and decoration. He left the remainder to the tradesmen, roofing, plumbing, electrics, bathroom fitment ad the plastering.

He worked some long hours in it, but he enjoyed it and work is much easier if you enjoy it.

f1_fan

iTrader: (9)

He did put basic but good fittings in the kitchen and bathroom. Agree in part about the millionaire scenario, but an expensive property ties up a lot of cash while it's not sold.

f1_fan

iTrader: (9)

Yes I think you are part way right, but I do think sticking to a part of the market that always sells and not being greedy will help alleviate that. If you look to doing it as a way to make a living rather than become some sort of tycoon then I think you may be fine as long as you keep a tight control on costs and timescales!

romford-boy

Don't do it. All will be well until the first time a project doesn't break even or one of you experiences financial projects.

Either do it alone or don't bother.

I'm in a similar position and I'm not going to do it with any mates, but most importantly make the numbers work, including accounting for your own time.

f1_fan

iTrader: (9)

Yeah that is kind of the way I am leaning. I am aslo hoping to emigrate in just under 2 years so would be better saving my money for that frankly!

romford-boy

No no no no!!!!

I hate people who think that property investment is the same as capital growth. It bloody isn't. There is money to be made no matter what direction this market is heading.

Right now we're seeing the biggest yields in property outside of the south east even though the greatest growth is in the south east (excluding a few very high end properties in WC1 which are in their own little world).

tony de wonderful

You are right but one needs to know houses and building etc, most amateur developers don't hence why they are amateurs. These people got away with putting solid oak floors and designer kitchens in ex council houses cos the market was booming.

ditchmyster

iTrader: (7)

Partnerships are imo a bad idea, something like 90% of them fail, this guy is buzzing right now because he just made a decent whack in a short space of time imo he was lucky, you need to think how the relationship would go if something went wrong, i'm not too sure you have the right personality for it as at the end of the day there can be only one boss and that will need to be you in your eyes.

I'm currently doing one / two although both are very long term and i'm planning on keeping Croatia as my retirement home / business so not quite the quick turn around fast buck scenario, which I think can be very hit and miss, I prefer my method of live in it and fix it up over a few years, which in my experience reduces the financial pressure and you can ride the market and pick your moment to cash in, I also always like to make sure I can earn something from a property along the way by renting rooms / apartments to ease the burden,which comes from growing up in boarding houses as the family business.

I'd think long and hard (well actually I wouldn't) before I got into something like that and make sure you knew the area and the target market as well as your potential partner and that the property was very rentable should it not sell immediately.

Where you thinking of immigrating too, i've got a nice plot of land in florida for sale.

jonc

Well you've certainly changed your tune, what about the "white elephant in the room" you keep banging on about!

f1_fan

iTrader: (9)

You will note references in the thread to quick turnaround, using it to make a living rather than being a property tycoon, keeping your financial exposue low, NOT building a rental portfolio and the matter originally raised by mattee is even referenced directly in point 6.

Anyway it's just a discussion rather than me saying 'hey I'm going to be a property developer' ... thinking out loud if you like! Just sometimes I get a bit bored with my current businesses so was wondering about sdoing something like this to spice things up a little.

Of course I know you probably read all that, but thought 'what the hell, let's have a dig anyway'.

f1_fan

iTrader: (9)

To be fair he wasn't lucky. He studied the market and areas very carefully and knew what the finished article could sell for. He identified a number of properties and got this one at below the price ceiling he set for it whereas othrs all went for too much in his opinion. He then asked the right questins before ploughing in and when he put it on the market he priced it to sell so fair play to him!

Actually one of my other two businesses is a partnership and we both have equal say... it works very well, but I do know what you mean abut my personality

That said I don't think I would go in to this as a partnership, but if I wasn't planning on emigrating then I may have had a dabble myself.... as I said just thinking out loud really.

Western Australia

Dingdongler

I dabble and there is money to be made in all markets, the trick of course is to get the property at the right price. This in turn often means good relations with the local EAs.

I've also just completed on the first property I've ever bought in partnership with somebody, one of my oldest friends. A stones throw from the City and needs complete refurb, hopefully we'll still be friends at the end! I might post a photo diary in the diy section if anybody is interested.

GlesgaKiss

Would definitely be interested in that photo diary.

cookstar

iTrader: (6)

Was that the one we spoke about briefly?


A diary would be great.

Dingdongler

I'm out of the country at present but as soon as I'm back I'll start the photo diary under the DIY section.
It's in a right old state at present, the previous owner was a bit of a slum landlord. It amazes me how much rent people paid to have one room each in that sh3t hole.

Cookstar, no this is another one.

tony de wonderful

'Dabbling' in a central London property?

Dingdongler

If by central London you mean Zone 1 then no I've never had the pleasure. If you include zone 2 then yes.

tony de wonderful

I just assumed you were trying to appear nonchalant about a fairly large investment.