HOW WE ANALYSE A PROPERTY INVESTMENT DEAL BEFORE BUYING IT!

this week we're in a market town called Hinkle in leerer and we are on the hunt for a property deal we're heading to check out a three-bedroom n terce auction property and in this video we'll walk you through how we'd assess this property for a potential flip that means buying it renovating and then selling it for a profit we'll be looking at the condition location and potential Roi which stands for return on investment and if you're new here I'm AK and I'm Leah and this is our Channel where we talk about property business and working together as a couple this property is in the auction with a guide price of £69,000 So today we're going to look at how much profit we could make if we were to buy this and flip this [Music] house okay so we're outside the property now and we're having a look at the exterior we're talking about the curbside appeal so when somebody walks up to a property if they're going to buy it they need to to be impressed by what they see from the outside somebody said that buyers make their decision in the first 8 Seconds of seeing a property I'm not sure if that is true take from that what you will but overall the first impressions of this property are that it is tired it needs some attention from the outside and obviously the inside as well which you're going to see in a second one thing to notice about this property is that there is no driveway so lots of the neighbors have parked their car right outside the house whereas with this property there is this huge tree right in front uh as well as a bus stop and there is no drop curb so this means that in order for people to park their car on the driveway we would need to completely redo this front garden have block Paving drop the curb and allow access for the cars to come in front of the house as you can see NEX door has got the drop curb and cars park in front of it and they sold theirs last year for 220,000 one of the first things we also look at when we get to any property is the roof we're looking for any cracked loose missing tiles because things like this can lead to leaks and expensive repairs another thing we're looking at as we're outside the property is the windows we want to see the state of the double glazing if it is even double glazed to begin with there's a lot of condensation that you can see here on this window and overall from assessing from the outside it does look like all of these windows would need to be replaced they're not in good condition so from the outside you can see that the face is very tired it looks like it needs a really good lick of paint it needs freshening up here so that would be something you'd factor into this refurb as well now heading inside very narrow doorway this would absolutely need to be replaced I'm not sure how we would get any furnature inside so we just about fit in there ourselves because there were some other people viewing the property we decided to start upstairs so that not to get in their way AK is just having a look there at the gas and electricity meters so heading upstairs now and and as I have seen online from the virtual viewing there are three bedrooms to this property so let's start in the biggest bedroom on First Impressions I felt like this room looked a lot bigger online than it does in real life so it's really great to see the space CU actually it was quite small I would describe this as a small double if you've watched our other videos you'll know that we like to try and add on Suites where possible but this space was a lot smaller in real life than it looks in video we are filming this on a wide angle lens so we decided that actually this bedroom would be best without any on Suite then moving into the second biggest room another small double the windows again would need replacing and as you can see those small little vents up there we weren't sure what they were to begin with I've never seen vents that look like that in Old properties with the windows you'll notice that they haven't replaced them for double glazing they've just put this cheap covering in front of what was previously single glaze windows so all of that would need to be replaced placed with proper double glazing so the biggest cost here would be windows we need to strip out all the wallpaper assess the walls underneath replaster modernize everywhere and obviously a lot of the good stuff will be done with dressing and staging now into the Tiny Box room this really is not big enough to be a bedroom by today's standards so we do think we would turn this room into a family bathroom I think it would potentially get away with being a small Nursery but then if we did do that we'd be leaving the bathroom downstairs which is quite a dated thing in the UK having this like downstairs bathroom rather than having it upstairs we really don't want to do that so the main plan of action with this flip would be to turn this into a bathroom some Plumbing work would be needed upstairs which is never a problem and now heading down the stairs which were very narrow and very steep because this is a very old house was just noticing the original flooring underneath and into the living room it looked looks like somebody has pulled away one of the floorboards so we can now assess the state of the joists underneath to see if they're rotten see if there's any problems underneath you might remember from one of our previous refurbs we had some really rotten floor joists and we had to replace them it was quite expensive to replace them all these ones didn't look rotten but you can see that underneath the suspended floor there is no insulation that could be improved and that would also improve the Energy Efficiency of the property now moving into the kitchen super old kitchen and I actually have a little bit of soft spot for all these colors cuz we don't use color like this anymore this was the family bathroom which is Tiny I believe that we would remove all of this we would actually just keep a downstairs WC so just a l we plan to knock through and make a very big open plan kitchen Diner so this would be a back to Brick space where we would completely reinvent the kitchen area people like big kitchens now big social kitchens Now we move into this Conservatory this has got potential to be part of the kitchen and to be a really beautiful Extended space obviously that would come at a cost so we' speak to our Builder about the cost of extending the kitchen this way and having this as a really beautiful open plan space another idea would to be to change this area into sort of a utility area where there's washing machine laundry storage the house is lacking storage so just more cabinets and space- saving solutions for this small end Terrace property so as we're walking around we're talking about options and then we headed outside into the garden the main intention of this was to actually see the roof from the back and also to see what the state of the garden was because when it comes to a flip people want to be impressed by the garden so as you can see there is a lot of clearance that would need to be done that shed needs to be removed and quite a few thousand really needs to be spent on this Garden to really tidy it up make it nice and presentable so that a family walk around this property and go I really want to spend time in this Garden this is just not going to work for a flip it needs to have that curbside appeal perhaps a little outdoor patio area with some seating and the staging and dressing would really help dress the garden to a nice space where you'd want to spend time maybe get a little barbecue out there you can really start to imagine it looking at the roof we didn't see any major issues at all nothing that was obvious but of course it's always worth going into the Loft space as well to see if you can see any light coming through see any obvious gaps in the roof because then you'll get an idea if there's been any leaks also the fencing doesn't look too bad on this property probably just some paint needed to just Jazz that up and tidy it up a little bit so before I've even got to this property and before we've walked around I've been on property data doing my area research so what I do is I type in the post code and then what I do is I actually expand the area so so I can get more data points and make it worth my while on property data for anyone who doesn't use Property Data you get a certain amount of credits per month so to do this sort of research requires me to use one credit so I like to expand the area so I can make the most of those credits and then what I can look at is sold prices in the area so I can zoom in exactly on that street and see comparables what they sold for so I can see here on neighboring streets this one that I've opened for example sold for £200,000 on Che the road it will say the date that it's sold I can see the floor plan upstairs I can see it's slightly bigger than the property we're looking at I can see another house here which is 185,000 which is on a neighboring street so it's always good to have a look at what's selling in the area to give you a sealing price of the maximum value of the property that you're looking at if you were to decide to rent this property and not flip it you can also see on property data the average rent for a two bed average rent for a three bed in the area and the yield you can also see how that compares with HMO numbers houses of multiple occupancy where you rent out each room on a separate as next up we can see the growth price in the area so we can see the growth in the last 5 years on this upward curve it has started to drop a little bit which you've probably seen lately that house prices are starting to drop a little bit due to Rising interest rates next up I can see the activities the amount of sales in the month and the stock there's so much area research you can do for example you can even look at the schools in the area and how they're rated so I can see that there's three good schools in this area one of them is rated outstanding which is a really amazing pull for families that are always searching for best schools to send their children to so these are all the kind of things you want to be looking at if you're flipping a house because you need to put yourself in the shoes of the buyer and ask yourself what are they looking for our Builder was saying something that we really agree with which is Big newly refurbished kitchens and newly refurbished bathrooms are a big big yes for buyers because they really don't want to do expensive Works themselves especially when it comes to like extensions which are expensive so anything that's already been extended and modernized is a major plus so that's just a little bit of how I use property data to analyze a deal like this if you are interested in using it there is a link in our description which you and I can both share £50 in credit on property data so that is an affiliate link now we finished looking at the property we're heading back home and we're going to look at the numbers we have put in a purchase price for this property at £90,000 before we discuss why we've done that let's go through the rest of the numbers first and we'll explain those so let's start with the works for this project the refurbishment after talking to our Builder and including contingency we're estimating about 60,000 in order to do this project the next line item is professional fees there is a auction administration fee including vat and that comes in at £ 1,680 you should always read the legal pack and any teas and C's that come with the auction house that you're buying from usually I leave that up to Leah to do all that sort of amazing stuff stamp Duty here is £2,700 and that's assuming again that the purchase price is £90,000 it's 3% of the purchase price if you're buying in a limited company which is our buying position if you don't own any property you're buying in your personal names then you could be paying zero stamp duty but it's best if you check on the government website because this can change if you're a non-uk resident and there's loads of other things that could change stamp Duty calculation so make sure you work that out before putting it in your spreadsheet the next cost here is legal fees and this is solicitors and things like that so we've put that in at 2,500 and that's based on previous deals that we've done before and that's inclusive of vat most solicitors do charge vat broker fee has been put in at zero because because we are assuming that this is a cash purchase and that there's no lending due to the speed of buying at auction usually you have to complete in 30 days with this auction the legal pack said that you have to complete in 42 days so that's a little bit more rare also the valuation here is at zero because we're not sending a surveyor around to Value the property it's on an auction this would be different if it was not an auction property now insurance now this is pretty high so let's talk about insurance this looks like a significant cost here we're basing this off some of our most recent insurance quotes that we've been getting for some of our properties so this is not going to be exact but it's just to give us a bit of an estimate and for me personally I always like to egg the numbers just to give myself even more contingency when I'm looking at them and that's in at £6,000 so that's averaging around about £500 a month for the duration of this project and we're giving ourselves 12 months to do this 12 months there to buy it refurbish it and time to sell it as well and I think in this market specifically right now that's probably a wise thing to do as well it's just a little bit slower at the moment yeah things aren't selling in two weeks anymore no so the next line below is holding costs holding costs don't directly go into the refurbishment but they're part of owning the property for the time that you own it but they don't contribute towards the refurbishment so for this one I've put in 12 months of council tax and cost of utilities so minimal use of electricity gas water and I worked out the council tax by going on the local Council website and it came out at £135 per month and then I factored in a couple of hundred pounds for bills for the year assuming that nobody's living there obviously so as you can see the total investment for this project would be $164,400 th000 so we're not egging it too much to what next door sold for which was £220 ,000 and we're not going quite as low as what a nonone up property on the same street went for in the 180s a realistic sale price of £200,000 would leave us with a flip profit of just over £30,000 and an Roi which means return on investment of 18.24% there's just a couple of other costs as well to consider when you're coming to sell the property in this case agent fees usually between 1 and 2% of the cost of the sale and in this case we've put £3,000 if we were to sell this property on the back end at £200,000 of course as well the legal fees the solicitors that you have to pay for when you come to sell the property in this case £25,000 as well so all of that is baked into the flip profit and the ROI that Leah has just mentioned there 18.24% is quite a good Roi I would be super happy cuz that will leave us with £30,000 profit in doing that deal which I'm sure most of you agree is a decent return on your investment there some people ask what is a good profit or what is a good return on investment for a flip and the reason is it depends the more potential profit that you make in a deal then the more room for error that you potentially have in a deal so Leah and I always say that we want to be aiming for a minimum of £30,000 profit because like we've learned along the way and you've seen in many of our videos there is always things to consider there's always things that go wrong you know not always squatters or anything like that check out our squatter series if you haven't seen that but there's always things that go wrong and so for us we look at that minimum threshold of £30,000 profit when we look at a deal like this for you it might be different also it depends as well if you're in the trades and you can do your own refurbishment or your DIY for example then it's potentially going to leave you more profit there as well exactly we also spoke to another Builder who said that that refurbishment wouldn't cost them more than £40,000 but obviously they'd be doing all the work themselves with their own team at their own time expense so that's just another thing to consider is that we are not diyers we are Outsourcing the build and that comes at a cost which will always eat into the ROI too really good point if you have enjoyed this video then please give us a big like we post videos every single week and subscribe if you're not already subscribed to the channel and if you would like to work with us then there is a link in the description below please click that and I will get back to you personally thanks everyone see you next time see you bye [Music]

Channel: Property Couple

Views: 15,353

Keywords: uk property, uk real estate, uk property investor, how to start investing in property, buy to let, HMO, hmo conversion, property investing, UK real estate, wealth building, property investment tips, real estate entrepreneurship, financial success, property portfolio growth, financial freedom, UK property market, property investment strategies, entrepreneurial journey, real estate partnerships, business and life balance, personal finance UK, property

Id: 0-ndXihvcaE

Length: 16min 46sec (1006 seconds)

Published: Sun Oct 29 2023