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By-Tor

Real Life - Even The Builders Can Get The Sums Wrong

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Some of the figures in this post are fact (eg what he paid, what hes asking for them, others are educated estimate).

Local builder in Poole buys two houses next to each other in a road called Dorchester Road, Oakdale, Poole.

He pays £204,000 for each of the run down properties, thats £408,000 in total on 11th October 2004.

He then refurbishes the two properties, new tarmac driveway, decorated throughout, loos like two new kitchens, builds a loverly garage for each property, landscapes the gardens, some lovely decking out the back. Conservatively I would guess that must be at least £15K per property.

Total spend now running at £438,000 (conservatively).

Time to put the houses on the market, I think it was about summer last year, asking prices £250,000 and £245,000. A grand total of £495,000. He's doing OK so far. £57,000 potential profit (minus original stamp duty, conveyancing costs, 8 months interest on 408K@say 5% = 4080+1000+13,600) gives potential profit £38,320. Still looking OK.

Oops, no one wants to buy his loverly houses, another 6 months of £408,000 tied up with no money coming in. Thats another £10,200 gone. Still, if he gets asking price for both then profit could still be £28,120. Still OK. But the problem of no income a worry. OK, lets rent them out while trying to sell them.

He's got tenants now at, I quote "approx £900 pcm each", approx, well thats hardly likely to be £950 pcm is it? its going to be more like £850 pcm each. So £850x2x12 = £20,400. Funily enough, that is £408,000@5% interest on the nail = £20,400.

So he is now OK, his tenants are covering the £408,000 (if he had the money he could be earning 5% on it, if he borrowed it then 5% is quite conservative).

Snag is, the tenants appear to have about six trucks and vans between them as well as a number of broken down cars, the driveways now look like pikey alley at times. Good advert to sell.

But its OK as he is still sitting on a potential £28,120 profit, well apart from the fact that if the buyer tries to knock 5% off each residence (quite reasonable surely?) his profit just dropped by another £24,750, ahh, but its OK, because its still a profit, true only £3,370, but a profit is a profit as they say.

Oh sorry, forgot to add in the EA fees of 1% on the £495,000 - 5% reduction = £4,700

and the conveyancing fees for the sale, £1,000

Still, lesson learnt, only a small loss, because house prices only ever go up they say and someone will eventually make an offer, please, someone buy his houses, put the poor soul out of his misery. :D

One of the houses:-

http://www.fish4.co.uk/iad/homes/advert?adId=3437020

Sold info on nethouseprices, house numbers 133 and 135

http://www.nethouseprices.com/index.php?co...own=poole&year=

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Excellent post.

With this example you've illustrated the financial plight of countless thoasands of amatuer BTL landlords like this one.

Thing is he could hold out for many months yet before he becomes a forced seller.

Or am I overly pessimistic? At least he's got some kind of income from the houses coming in.

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Some of the figures in this post are fact (eg what he paid, what hes asking for them, others are educated estimate).

Local builder in Poole buys two houses next to each other in a road called Dorchester Road, Oakdale, Poole.

He pays £204,000 for each of the run down properties, thats £408,000 in total on 11th October 2004.

He then refurbishes the two properties, new tarmac driveway, decorated throughout, loos like two new kitchens, builds a loverly garage for each property, landscapes the gardens, some lovely decking out the back. Conservatively I would guess that must be at least £15K per property.

Total spend now running at £438,000 (conservatively).

Time to put the houses on the market, I think it was about summer last year, asking prices £250,000 and £245,000. A grand total of £495,000. He's doing OK so far. £57,000 potential profit (minus original stamp duty, conveyancing costs, 8 months interest on 408K@say 5% = 4080+1000+13,600) gives potential profit £38,320. Still looking OK.

Oops, no one wants to buy his loverly houses, another 6 months of £408,000 tied up with no money coming in. Thats another £10,200 gone. Still, if he gets asking price for both then profit could still be £28,120. Still OK. But the problem of no income a worry. OK, lets rent them out while trying to sell them.

He's got tenants now at, I quote "approx £900 pcm each", approx, well thats hardly likely to be £950 pcm is it? its going to be more like £850 pcm each. So £850x2x12 = £20,400. Funily enough, that is £408,000@5% interest on the nail = £20,400.

So he is now OK, his tenants are covering the £408,000 (if he had the money he could be earning 5% on it, if he borrowed it then 5% is quite conservative).

Snag is, the tenants appear to have about six trucks and vans between them as well as a number of broken down cars, the driveways now look like pikey alley at times. Good advert to sell.

But its OK as he is still sitting on a potential £28,120 profit, well apart from the fact that if the buyer tries to knock 5% off each residence (quite reasonable surely?) his profit just dropped by another £24,750, ahh, but its OK, because its still a profit, true only £3,370, but a profit is a profit as they say.

Oh sorry, forgot to add in the EA fees of 1% on the £495,000 - 5% reduction = £4,700

and the conveyancing fees for the sale, £1,000

Still, lesson learnt, only a small loss, because house prices only ever go up they say and someone will eventually make an offer, please, someone buy his houses, put the poor soul out of his misery. :D

One of the houses:-

http://www.fish4.co.uk/iad/homes/advert?adId=3437020

Sold info on nethouseprices, house numbers 133 and 135

http://www.nethouseprices.com/index.php?co...own=poole&year=

A good find!! This must be happening all over at the moment!!

Well he wasn't expecting stagnation or god forbid a dip!!

Something strange is happening at the moment - in the Poole area there were very few properties for sale in the 2nd half of 2005. Now there seems to be a lot more being added in the sub £200k category. Quite a lot advertised as immediate posession!!

He will do well to get what he want's for them. Personally I think they will go for no more than £220k each!!

I was in Poole a few weeks back and there was a lot of reduced properties in the Tony Newman's (EA) window. It will only be a matter of time before the builder thinks enough is enough!!

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.... loos like two new kitchens, builds a loverly garage for each property, landscapes the gardens, some lovely decking out the back. Conservatively I would guess that must be at least £15K per property.

what? can you eat your food off the new toilets??

Loverly post btw - deserves a bump - and like your west country accent

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Some of the figures in this post are fact (eg what he paid, what hes asking for them, others are educated estimate).

Local builder in Poole buys two houses next to each other in a road called Dorchester Road, Oakdale, Poole.

He pays £204,000 for each of the run down properties, thats £408,000 in total on 11th October 2004.

He then refurbishes the two properties, new tarmac driveway, decorated throughout, loos like two new kitchens, builds a loverly garage for each property, landscapes the gardens, some lovely decking out the back. Conservatively I would guess that must be at least £15K per property.

Total spend now running at £438,000 (conservatively).

Time to put the houses on the market, I think it was about summer last year, asking prices £250,000 and £245,000. A grand total of £495,000. He's doing OK so far. £57,000 potential profit (minus original stamp duty, conveyancing costs, 8 months interest on 408K@say 5% = 4080+1000+13,600) gives potential profit £38,320. Still looking OK.

Oops, no one wants to buy his loverly houses, another 6 months of £408,000 tied up with no money coming in. Thats another £10,200 gone. Still, if he gets asking price for both then profit could still be £28,120. Still OK. But the problem of no income a worry. OK, lets rent them out while trying to sell them.

He's got tenants now at, I quote "approx £900 pcm each", approx, well thats hardly likely to be £950 pcm is it? its going to be more like £850 pcm each. So £850x2x12 = £20,400. Funily enough, that is £408,000@5% interest on the nail = £20,400.

So he is now OK, his tenants are covering the £408,000 (if he had the money he could be earning 5% on it, if he borrowed it then 5% is quite conservative).

Snag is, the tenants appear to have about six trucks and vans between them as well as a number of broken down cars, the driveways now look like pikey alley at times. Good advert to sell.

But its OK as he is still sitting on a potential £28,120 profit, well apart from the fact that if the buyer tries to knock 5% off each residence (quite reasonable surely?) his profit just dropped by another £24,750, ahh, but its OK, because its still a profit, true only £3,370, but a profit is a profit as they say.

Oh sorry, forgot to add in the EA fees of 1% on the £495,000 - 5% reduction = £4,700

and the conveyancing fees for the sale, £1,000

Still, lesson learnt, only a small loss, because house prices only ever go up they say and someone will eventually make an offer, please, someone buy his houses, put the poor soul out of his misery. :D

One of the houses:-

http://www.fish4.co.uk/iad/homes/advert?adId=3437020

Sold info on nethouseprices, house numbers 133 and 135

http://www.nethouseprices.com/index.php?co...own=poole&year=

I agree with everything you've said. The point here though, is nothing to do with BTL like another poster claimed. It has everything to do with property flippers & their hope (and need) for an immediate sale at a high price to mak their efforts worthwhile.

You summarised well why I am into long term property investment rather than short term speculation. In effect, I'm a long term speculator.

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Absolutely agree with you TTRTR, the profit to be made from buying, renovating and reselling in the years 1997-2003 has been such that even a simpleton (witness several tv series) can make some serious money.

Also 'flipping' technically paying a deposit for an as yet unbuilt property and banking on an increase in value when you have to pay the rest and 'flipping' ownership on the same day to your purchaser has until 2003/4 been almost a guaranteed profit maker.

However as far as I can see the good times are over, both of these methods of making money have relied not on you giving a "value added" to the property but the rising market.

There is a right time to invest and a wrong time, imho even for long term investors there are better things to invest in at the moment. The only people still thinking a fast buck can be easily made by renovating or flipping need to be taught basic mathematics.

As for long term investment, fair enough, if you are insulated with enough properties with fixed rate mortgages with all the bases covered then why bail out, there's going to be a lot of amateur BTL's going to the wall first that have overextended themselves in the last two years.

PS Redwing, that west country accent was put on just to fit in darn 'ere, originate from the black country.

Shamus, Dorchester Road is a funny one in that it has a very wide range of property types dating from 30's through to 70's 2, 3, 4 and 5 bedroom so its difficult to tell what he might or might not get for them. The advantage they have is being detached and on reflection I am inclined to agree with you. I reckon if he put them up at 230 and 235 he would be getting offers.

Its very surprising round that part of Oakdale how well places are moving, there were four properties recently up for sale along Oakdale Road and three now have sold signs, the property round certain Poole districs seems to be moving quite well :angry:

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Damn, replied on wrong thread!

Edit. Yes, that builder is a fool.

Edited by Jason

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Absolutely agree with you TTRTR, the profit to be made from buying, renovating and reselling in the years 1997-2003 has been such that even a simpleton (witness several tv series) can make some serious money.

Also 'flipping' technically paying a deposit for an as yet unbuilt property and banking on an increase in value when you have to pay the rest and 'flipping' ownership on the same day to your purchaser has until 2003/4 been almost a guaranteed profit maker.

However as far as I can see the good times are over, both of these methods of making money have relied not on you giving a "value added" to the property but the rising market.

There is a right time to invest and a wrong time, imho even for long term investors there are better things to invest in at the moment. The only people still thinking a fast buck can be easily made by renovating or flipping need to be taught basic mathematics.

As for long term investment, fair enough, if you are insulated with enough properties with fixed rate mortgages with all the bases covered then why bail out, there's going to be a lot of amateur BTL's going to the wall first that have overextended themselves in the last two years.

PS Redwing, that west country accent was put on just to fit in darn 'ere, originate from the black country.

Shamus, Dorchester Road is a funny one in that it has a very wide range of property types dating from 30's through to 70's 2, 3, 4 and 5 bedroom so its difficult to tell what he might or might not get for them. The advantage they have is being detached and on reflection I am inclined to agree with you. I reckon if he put them up at 230 and 235 he would be getting offers.

Its very surprising round that part of Oakdale how well places are moving, there were four properties recently up for sale along Oakdale Road and three now have sold signs, the property round certain Poole districs seems to be moving quite well :angry:

Like a lot of places in the SW, Poole is desirable and probably more desirable than most. That is why I think most of the places being bought up are going to incomers. I wonder how the local population is doing? Wages are not great with only a few big banks about to pay the higher wages needed to afford the properties in the area.

Oakdale is similar to Upper Parkstone in that is is in the cheaper bracket with loads of different types of housing. Perhaps another reason why Oakdale might be seeing properties flying off the shelves?

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The two properties are next to each other with a shared driveway, about three quarters of the way up from the mini roundabout going towards the Ringwood Road on the left.

Slightly further up on the right is Dorchester Gardens with the house on the corner, 70's style, i think its up at about £265K so for another 15K you are looking at bigger house, newer, tidier, larger plot, no shared drive and no sitting tenants.

Whichever way the builder isn't going to get out of this without a loss.

Interestingly there is also another property in this stretch of road and I think its up for about £325 which imho is 50K ott.

But what do I know, there is a similar property also which was up for about 4 months with Key Drummond (ooooh, posh Canford Cliffs EA) at circa £325 and its recently got a sold sign outside.

It just feels like everything is out of sync. some are way ott priced, some are more sensible, many are selling of both types. Perhaps this is the muddle before the correction. We can but hope.

notanewmember - what do you think of the pricing valuations for Scott Baines and Chris Hedges? High, Low or Random?

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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