STRATEGY & CALCULATOR FEATURES
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Estimate sale profit
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What to offer to get the profit you want
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Purchase closing expenses
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Monthly expenses
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Total expenses during refurb and sale
FIX AND FLIP/
BUY TO SELL PROPERTY
STRATEGY & CALCULATOR
HOW THE CALCULATOR WORKS
HOW I WOULD DO THE STRATEGY
THE THEORY
BUY TO SELL/ FIX AND FLIP-Grow your capital with each deal
The Method, Calculator and Step by Step Guide to the strategy
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What is it?
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BUY TO SELL/ FIX AND FLIP is a property strategy where a property investor grows their capital by buying a property, fixing/refurbishing/adding value and then selling it for a profit.
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Simply put this is the process of buying a property, refurbishing it and adding value and getting it sold as quickly as possible.
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This way, profit is generated and this makes the investment capital larger. This helps us grow and invest in bigger projects.
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Features
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Generates chunks of money that could be used to build up the investment capital and create a bigger property portfolio
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Not very time intensive if the business is set up correctly
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Has a good scalability potential
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Could be risky if the market turns
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If the property is unsold then monthly payments still continue going out
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Competitive
What resources do you need and what skills do you require?
The first and most important resource you need is time. Without it, you would not be able to succeed. You need time to look at and analyse deals, do research and speak to relevant people.
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The second most important resource is the knowledge of property investing.
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The third resource is money. This is widely available via savings, investors, banks and other lenders.
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THE PROPERTY DEAL ANALYSIS
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The principle is simple; you need to find a property that you can be cheaper than what it would sell for in a good condition after deduction of all expenses and profit.
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The first thing you need to know is how to estimate the value of a property in a good condition. This is quite simple actually.
ESTIMATING THE POTENTIAL VALUE OF A PROPERTY
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You need to get the averages of
1. the prices of 15 properties for sale currently on that street or very close by
2. the prices of 15 properties currently with accepted offers
3. the prices of 15 properties sold recently (I prefer 1-6 months but if the market is volatile then a shorter time frame should be used).
4. Call up 3-5 estate agents with good reputation that cover that area and ask them what they think the property is worth.
Add all these together and divide them by the number of property valuations you have added and this will give you the average, which is the estimate value of the property in a good condition.
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Example:
1. Average of 15 for sale = £200,000
2. Average of 15 offer accepted properties = £220,000
3. Average of 15 Sold properties= £190,000
4. 5 Estate agents online valuation= 210,000
So, (£200,000 + £220,000 + £190,000 + £210,000)/4= £200,000
Therefore, the estimate value of the property is £200,000.
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Free websites you can use for this research are rightmove, zoopla and mouseprices to name a few.
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The real life value of a property may vary and some properties achieve more and some less during valuations by RIC Surveyors or when sold. It is best to always consider the worse case scenario and have an exit strategy.
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In my opinion if a property is considered for Buy To Sell/ Fix and Flip then, it should also be a property that could be rented at the right price and to the right tenant.
So when the research is being done then both Buy To Sell and BRRRR Strategy options should be considered.
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Another thing is to estimate the amount of money it would cost you to buy the property, pay the monthly bills while it is empty and being refurbished + the profit you want (the profit could be what ever you want it to be).
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If you subtract the total estimated expenses, and the profit you want to make, from the value of the property in a good condition and that number is close to the amount the property could be bought for, then you have a potential property deal (pending other indepth research).
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Example:
Let us assume that there is 3 bedroom house for sale at 135,000 on a street where similar properties have sold at an average of £200,000 over the past 2-3 months and the property market is currently stable.
You then estimate that the cost of buying, paying the monthly bills and refurbishing/ adding value to the property + the profit you want is £65,000.
This means that you have a potential property deal.
This is because
£200,000 (Estimated value of the property in a good condition)
-£135,000 (Property asking price)
=£65,000 (our total estimated expenses and profit).
If further research on the area, people and trasport links appear favourable then you could consider going for it.
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Disclaimer.
All investing is risky. Capital is at risk and real life results may vary from the calculations you do. For this reason always seek professional help in making any financialor legal decisions.
Please do not invest based on anything you see or read on my website.
STEP BY STEP GUIDE TO BRRRR PROPERTY STRATEGY
STEP 1
This is setting a budget and investment criteria like
- Property Purchase Price
- How would the purchase be financed- Personal/Investor Cash, Mortgage,
Bridging, etc.
- Ideal buyer
- Ideal tenant if the property does not sell quickly (2 months)
- Location
- Proximity to amenities
- Refurbishment budget
- Type of refurbishment. Many stay away from properties with structural
problems and japanese knot weed, etc.
- Rent al yield minimum. This is the ratio of the rent to the property price in a
percentage.
- Other personal criteria...
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STEP 2
Find potential properties that fit your criteria of a deal.
You can use professional deal sources who charge a comission of 3-5% of the property price. You can also do it yourself for free by searching through properties listed on rightmove and zoopla.
Property auctions are another good source of deals but only if the price is right and you have the means to complete the transaction within 20 working days or so.
Auctions are usually for people with either their own or investor cash, or using bridging lenders (Very expensive and risky for new peoperty investors. Be Very careful!)
Finding a potential property deal may take minutes or days it all depends on the information and network of people you have access to.
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STEP 3
Analyse the properties you have found.
This means doing the numbers and researching the area. You need to make sure that the potential candidates are fit for both Buy To Sell/ Fix and Flip and BRRRR Strategy (Or other property strategies like Serviced Accommodation).
This is the stage where where you work out the numbers and values.
I have created The Buy To Sell/Fix and Flip Calculator below for this step.
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The calculator has different sections
- The Property Valuation Estimates section
- The Desired profit section
- The Purchase expenses section
- Monthly Hold Expenses (Bills when unrented) section
- Monthly Expenses when rented section
- Refurbishment estimates in cost and time section
- Sale Expenses
- The Results section. This gives you what to offer based on the numbers you have entered into the calculator and some other statistical values like the yield, return on investment and profit
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If you do not know what to put in the sections you can leave the current values or you can contact me for help HERE.
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STEP 4
This step involves ringing the sellers or agents of the properties that you have analysed and fit your criteria and seeing if they would accept your offers (Offers from the calculator based on the numbers).
If there is no chance that your offer would be accepted or considered then there is no need to bother going to see the property. I would only go and view properties for which there is good chance that my offer would be accepted.
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STEP 5
Going to view the properties. Prebook and preplan your viewings to save time.
Take lots of photos and videos for each or if possible go with a professional with experience in refurbishing properties.
Many investors get a home buyers survey, which is a detailed report of the state of repair of the property and an estimated budget on the refurb and what could go wrong in the future. This costs around £600, but may be worth it to protect you against a little mistake that could cost £1000s.
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STEP 6
After the viewings the next step is to start sending the offers.
Some people send the offers that day, some wait until the next day.
The way to send an offer on a property professionally is to send an email with
1. The offer amount
2. Proof of funds. This could be a bank statement, a mortgage decision in principle or a letter from a solicitor or an accountant.
3. Name and contact details of your solicitor or conveyancer
4. A brief message of your intention to buy the property.
The sending of the email is then followed up by a phone call at the same time to make sure that the email has been received, opened and read. Many offer emails get missed if not followed by a phone call.
NEVER REDUCE YOUR FIRST OFFER!
People take it personally if you do and you may end up loosing people's trust and respect, which may in turn cost you money in the future.
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STEP 7
Thext step is chasing the feed back from the seller's or agents.
If your offer is accepted then good if not then start looking for other deals. Only about 1% of advertised properties are good deals.
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STEP 8
Once your offer is accepted then make sure you have informed all those to be involved. This includes your solicitor or conveyancer, finance people and professional that would do the refurb.
Plan ahead and line things up so there is always something happening. the more the property stays empty the more money you loose. Plan far ahead for expenses and keep in contact, at least 2 or more times weekly, with all relevant parties to make sure things are getting done.
STEP 9
Now the refurb. Make sure it is done quickly and with good quality products by skilled professionals. Make sure the job looks clean and great. This will help to get a better valuation when it comes to refinancing. Please dont buy gold toilets and diamond encrusted door knobs as a property can not be valued more than a certain amount no matter what you do to it.
Things tha increase property value are additional bedrooms, good kitchens, bathrooms and making the property look bright and spacious. Open plans may some times devalue a property but this depends on the location so do the research and speak to the estate agents to hear what they think.
In terms of a refurb I would never manage all the different professionals my self. I would hire a builder and get a quote for the whole job. This way I only need to manage 1 person as compared to 5 or 6 others. Many handimen and builders are very unreliable so do your research ahead and find a good recommended one (still not a guarantee that things would go smoothly). Make sure you plan for some extra time as refurbishments never finish on the estimated date as well as the budget. Always budget 15% more than the quote when calculating the expenses and unpredictable expenses could pop up.
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STEP 10
Once the property is nearing completion of the refurbishment then you need to start advertising it for sale.
You can advertise it yourslef via different online websites or you can use the services of local estate agents (They will charge you about 1.5% + VAT).
STEP 11
Once the refurb and value adding period is complete, it is time to dress/stage the property.
This is the propcess of temporarily furnishing the property and making it look beautiful so as to attract a higher price and make it more desirable.
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STEP12
Once the property is gaining interest and offers, then it is time to choose the right candidate.
In my opinion it is best to accept the offer of the candidate who is most likely to complete the purchase. 1 in 3 property sales do not go through for 1 reason or another.
The best characteristics of a great potential candidate to buy our property is some one who is
1. A cash buyer
2. Not needing to sell a property in order to buy ours (no chain involved)
3. Not trying to bargain too much ( as they may feel unhappy at a later stage and call off the purchase)
4. Organised
5. The decision maker
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STEP 13
Once the property sale has been completed then congratulations. You now have more funds to do the next deal.
If the property does not sell within 2 months of being on the market, then it needs to be rented out so as to start generating some income.
The longer the property is unsold and empty the less profit we would get when it is sold.
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Summary
Now you know the 13 easy steps of the Buy To Sell/ Fix and Flip property strategy.
If you have any questions I am here to help.
I hope the content and tools I have on my website help you in your property journey.
Good luck and I look forward to your questions.
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If you want to be kept informed and up to date subscribe here.
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My website has calculators for other property strategies HERE.
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Contact me for inquiries and business opportunities HERE.
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Disclaimer.
All investing is risky. Capital is at risk and real life results may vary from the calculations you do. For this reason always seek professional help in making any financialor legal decisions.
Please do not invest based on anything you see or read on my website.