In a recent video, I visited Hilary's latest property project. She is turning a 2 bed into a 3 bed. It has some issues, but she has been able to manage and account for everything which is impressive! She bought this property in Newport. The Valleys in Wales are one of my favourite places to do Buy Refurbish Refinance Rent (BRRR) deals and flips. I covered this area in a recent article about the best places to invest in the UK for 2022. Check that article out if you haven’t already done so.
Hilary was working as a waitress when she first came to the UK from Canada. After discovering my training, she began taking action in property and became financially free. She bought this particular house for £75,000 as it is in serious need of refurbishment. Other properties on the same street are selling for £125-130k. Once the project is finished, she will make around £20,000 for 10 weeks' work. This is a great accomplishment and I can’t wait to see what the future has in store for her. I predict Hilary has a very bright future ahead of her. In this article, we will take a look at three lessons that you can learn from Hilary's project.
1. Add an extra bedroom
Hilary saw that there was a huge difference in price between 2 bedroom houses in the area and 3 bed room houses. Luckily there was a large bedroom in the house that Hilary is converting into 2, turning this 2 bed house into a 3 bed. This is a very smart approach. Sometimes people think it is better to have large rooms rather than more rooms. But it is always important to think with your formulas rather than your feelings. Take a look at the local market and see what is wanted by buyers in the area, don’t simply go by what you would like. In many cases, adding an extra bedroom can make all the difference.
2. Build contingency spending into your deal
When Hilary bought the property there were things that needed work that she didn’t know about until after the purchase. This is why it is always important to include in your calculations an amount for unknown expenses that may come up. Just because a deal looks profitable on paper doesn’t mean it will be in real life. If you budget in the unknown however, you will have a better idea of what you are likely to make once every issue has been fully discovered. In the best case scenario, you will not find any issues and simply make more profit than you expected to.
3. Buy unmortgageable property to limit competition
Hilary’s property didn’t have a kitchen and was uninhabitable. This means that an ordinary buyer couldn’t purchase it as they wouldn’t be able to get a mortgage on it. This narrows the amount of competition for these types of property to serious investors who have the cash to buy or know how to get bridging finance. This is one of the keys to doing BRRR deals or flips. If you can use your own money, investors' money or bridging finance to fund your deals you can pick up deals that your average punter isn’t even looking at buying. This limits your competition and allows you to bargain more effectively.