Property Auction Gold: £9,000 profit in just 48 hours (or £30,000 in 8 weeks)
It’s easy to get disheartened in these times of apparent doom and gloom. But there are rich pickings to be had if you look hard enough.
I thought I’d share with you a little deal I put together last week which, depending on how we decide progress, will earn Forshaw Land and Development either £9,000 (for next to no work) or £30,000 (for a bit of work).
The story is a quick demonstration of how easy it is to spot a deal in your own back yard and make a very substantial profit in return for a couple of hours work.
Just another normal day at the office
I was sat at my desk last Wednesday when I received an email from a local estate agent advertising an upcoming auction.
Lot number 5 immediately stood out: 518 Leigh Rd, Westhoughton. A rather run-down 3 bed terrace property in an area I know well. With a guide price of just £50,000 – £55,000 it seemed a very good deal… even for a property in need of some serious TLC. A quick look at Rightmove confirmed that a 2 bedroom house in this location sold fairly recently for £100,000 and similar 3 bed properties had achieved £110,000.
It was obvious from the photos on the agent’s website that the house was in dire need of modernisation and judging by the furniture and decor, it was probably a probate sale. For those unfamiliar with the term, a probate sale is where the executors of a will are required to sell off the assets of someone who has passed away. Probate sales usually present ideal investment opportunities because, unlike owner occupiers, executors are less motivated to achieve maximum sale prices. Their main concern is to achieve a quick sale. A perfect scenario for us investors!
Next step was to call the agent and arrange a viewing. By chance there was a block viewing the next day at 1pm. My brother and I went along and it was clear from the number of people crawling all over it that there was a lot of interest in the house. My assumptions were confirmed. It was indeed a probate sale and the house required a full refurbishment job…
- New central heating
- Full electrical rewire
- Damp course
- New PVC windows and doors
- Re plaster throughout
- New joinery throughout e.g. new skirting boards, architraves, doors and sills
- New fireplaces to lounge and dining room
- New render to extension
- New kitchen and tiles
- New bathroom and tiles
- Move the bathroom from extension to main part of property to create 3 double bedrooms and large bathroom
- Redecorate throughout
- Tidy front and rear garden / yards
- Overhaul roof
Luckily, I’m an old hand at refurbishing houses having completed over 100 projects to date. So after a quick look round I was fairly confident the work would take my team around 5 weeks to complete. The cost? Around £25,000 should cover the refurbishment work and finance costs (we’ll use a local bridging firm who charges between 1% and 2% per month depending on the deal).
As soon as I’d finished looking round the house, I called the agent and asked whether the vendor would consider pulling out of the auction if they received an immediate offer. She confirmed they would… but due to the high level of interest shown so far, £56,000 would be the lowest offer they would accept. Even at this price we still stand to make around £30,000 profit… and we won’t run the risk of losing out to a higher bidder at the auction. We immediately emailed our offer, less than 24 hours after receiving the details from the agent.
Our offer was accepted on Friday morning. We paid the 10% deposit and signed the contract Friday afternoon. The whole process took less than 48 hours!
So, what next?
We now have two options…
We either sell the house today for a quick profit of £9,000 by passing the contract to an investor who’s willing to pay £65,000. In this instance, the investor will pay back our deposit of £5,600 plus our £9,000 ‘fee’ and then complete the purchase directly with the vendor. That’s £9,000 pure profit for a couple of hours work. Not bad eh?
Or, we complete the purchase, refurbish the property and earn ourselves a profit of around £30,000. A bit more hassle… but we stand to earn a lot more.
Decisions, decisions! Whichever route we decide to take, I’ll let you know how we get on.
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If you already have a team to do the hard work what you got to lose? Go for the 30k!
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[...] Property | by Lyndon Forshaw I thought I’d give you a quick update on the little refurbishment project I mentioned a few weeks [...]
[...] Auction Property Renovation Project. Done and Dusted! Aug 17, 2009 | under Investments, Property | by Lyndon Forshaw It’s about time I brought you up to date on my little refurbishment project. [...]
Just wanted to drop you a line to say, I enjoy reading your site. I thought about starting a blog myself but don’t have the time.
Oh well maybe one day….
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Hi i have just bought a rundown property for refurbishment can you give the contact details of your builder as am i struggling to find a good one.
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Lyndon Forshaw Reply:
October 29th, 2009 at 9:19 pm
HI, Can you tell me where your property is?
cheers
Lyndon
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Hi Lyndon,
i keep looking at all the bargain properties on sale at auctions at the moment but haven’t a clue about getting the finances to buy them – if i want to do them up quickly and sell on is a bridging loan the best thing or are auctions best for those people with good cash flows? any help would be great.
many thanks
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Lyndon Forshaw Reply:
November 20th, 2009 at 11:58 am
Hi Alison,
Yes there are some great deals to be had in the auction rooms or even before the auction as you can often secure them prior. However, funding is key. Most bridging companies require a deposit contribution today so you will require cash input. Another restriction is the 6 month rule. This means that you now have to own the property for a minimum of 6 months before re-mortgage. Therefore if you buy a property using bridging finance you need to be aware that you will have to cover the loan payments for at least 6 months before you can re-finance onto a cheaper term loan. Having said this if you buy the right property at a the right price, then it can still become a LOW money down deal but I think you will struggle to make it no money down. Borrowing bridging funds from friends or family is a good option if available too.
Hope this helps
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Hi Just read you article about refurbing the house that needed a full refurb, you estimated the cost at £25,000. Is it possible that you could give a basic breakdown? Thanks Garry
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Lyndon Forshaw Reply:
May 18th, 2010 at 3:32 pm
HI Gary, there is a run down of the main work carried out on the blog
Cheers
Lyndon
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