Advice for new investor

[marble2]

Hi guys,

I have been thinking of retiring and investing my savings into renovating and selling properties to make a full time income, I thought this would be the perfect place to get some good advice as a beginner.

We have around £300k-£370k to invest so we would not be applying for any mortgages, the aim would be to purchase properties which need renovating and sell them for a profit after renovation. Since I live up north, the typical property prices around my area for a 2 bedroom terraced house which doesn't need renovating would be around £60k however I am not aware of how much a property which needs renovating would be, as I imagine those sort of properties are mostly sold at auctions?

I was just wondering,based on these figures how much would that same 2 bedroom terraced home sell for if it needed renovating? Also, what would be the average renovating costs if we would find reasonably priced workmen to undertake all of the work? I understand that each case is different depending on the state of the property, however I thought I would find out the average figures. That way, I can calculate how much pre-tax profit would be in each property and whether it would be worth it to purchase a few 3-4 bedroom properties at a time instead of purchasing 5x or 6x two bedroom terraced properties.

The aim would be to purchase,renovate and sell the property within 9 months, I guess in some instances a property may sell quickly whereas in some cases the property will be on the market for a long time.

Thank you!

 

[Longterminvestor]

There is no one size fits all calculation when it comes to renovating and selling property, it depends on the area, cost of the property and cost of renovations. I think you would be well advised to have a back up plan incase these properties do not sell and you are left with them in the short to medium term. Work out the rough rental income in the area for your type of property and if you cant sell it then at least it can be earning some rental income for you.

Also, research the price ceiling in the area as far as house prices and rental income goes. In many areas people will only pay up to a certain price, no matter how good the property is. Be very aware of this!

 

[marble2]

Hi Longterminvestor

Thank you for your advice! I have considered what you have said so I will always try to minimize the costs of renovating the property.

That was always going to be my plan regardless to maximise the profits when selling the property as I appreciated that it would usually be first time buyers who would be looking at 2 bedroom terraced homes (or other landlords) so neither would be willing to pay higher prices just for a more expensively done property.

I have also followed your advice and worked out the rental income in case I am stuck with these properties in the short to medium term. I understand that some people are optimistic when calculating rental yields as they imagine the property would be rented out for 12 months of the year but am I right to use 10 months of the year in my calculations? Then I would deduct a few hundred pounds for odd repairs.

 

[Longterminvestor]

Hi @marble2

You are very sensible using a 10 month calculation for your rental income as this errs on the side of caution. The key to your buy rennovate and sell strategy is having a backup plan incase you cant sell straight away. You want to get the best price possible and if that means waiting a year or so, with rental income helping your finance costs, is that really such a bad thing?