Tips on Flips

Yeah, so we're now live. So good morning everyone, um, I'm here with Heidi and we're just doing a quick 10-minute session to have a chat about one of the top sort of, some like sort of strategies for property investors. And today we're talking about something that everyone loves, which is flipping property. We're going to give you some key takeaways, things that have gone wrong for us both in the past what to look for, and how to sort of maximise the sort of profit from your flips. Uh, so we're going to share some real actionable tips you can use right now, and if you're thinking about your next deal. But anything you want to add, Heidi, at the minute?

Yeah, I think obviously we'll go through the basics. We'll go through what actually is a flip, um, like a true flip, selling on the other side, not holding. So what actually is a flip, what you need to know if you're going to do a flip, um, costs that you won't necessarily have taken into account if you're going to use a bridge. So how to do a flip on a bridge, how to do a flip with other people's money. If you've got your own money, cool, that's better because you have to pay less interest. And then I'll just give you a little final tip that a mortgage broker recently told me that I wish I'd known about 2 years ago. And I will share that with you. So Steve, I think you're more experienced, you've done way more than me. Do you want to go through the basics and I can jump in?

Yeah, yeah, so that's absolutely fine. So obviously tip number 1 is you've got to buy at the right price. If you, you've got to buy so that there is enough by the time you've included all your refurb costs, all your holding costs you're in, you're in for the cost of buying, your sort of stamp duty, solicitor's fees, and then on the exit you've obviously got your solicitor's fees again and your estate agent fees and everything else. But it's important that when you look at the analysis of the deal, that all of that gives you a profit at the end.

Yeah, I think a lot of people, if the deal doesn't Yeah, go on. Sorry, I was going to say it's a little bit laggy today. I think a lot of people forget the— look at the— look at the price of the house and look at the refurb. What they fail to take into consideration is if they're using a bridging loan, what you actually get on day one. If you use an investor finance, the interest rolled up on top. And then people also forget stamp duty, legals. And then if you're using a bridging loan as well evaluation and the tranches. So if you're getting a development cost on top of it and it's pulled down in 2 tranches, 1 or 4 or whatever it is, and they pay you that— one, it's having that money in the bank to make sure you can start the, the tranche of work, and two, the costs associated with that. So someone's got to come out, assess the building work, and then you get some more money, and you have to pay the privilege of them doing it every time. So it's basically making sure you've got all of those costs, your valuations, your solicitors, all factored into the deal as well. A lot of people don't factor those in.

Yeah, because with the tranching, how that works is you will get that money in, lent to you after you've then basically spent it. Yeah, so you've got to make sure you've got those funds from day one.

Yeah, absolutely. And One of the tips I was going to say at the end is, and this is where I've sort of failed, I think genuinely 5 times, because I didn't realize you could do this. Um, and I've just recently lost a deal because of the process that I started implementing. So for example, I've tried to purchase a row of 8 houses on one title. I've tried to purchase below market value, no money down HMOs. I've tried to purchase just a standard off-market, um, house, and I've tried to purchase a block of flats to title split, all with the same methodology, methodology of using a bridge, getting it below market value. But I was holding those ones, and a mortgage broker has recently said, do not enter legals until you've done your valuation. So even if there's a RICS valuation or you've valued it yourself or an agent's been around, do not enter legals until that valuation is done. Because all of those properties that I've spoken about got a completely different valuation, and I'm going to say this depending on the mood of the valuer that day. So it doesn't matter how much research we put into the valuations, how much we stacked the deal, how much we negotiated, etc. We lost, we lost the money on legals every single one of those, which was really annoying. I've lost thousands of pounds doing that. So The recent block of flats that I just, um, lost is because we didn't enter legal straight away with them and they said, we'd like to do the valuation because you have advertised it wrongly. So that's my biggest tip on flips, is if you are gonna do it, get your valuation done first, then enter legals, because it could completely change the deal.

Would you get two valuations, one for how the property is now and then one at the proposed end of the project when you've done the upgrade?

Yeah, to be honest, it depends. It depends on the lender you're using and, and again, their mood and how you, how you're buying it. So if you're buying it, um, if you're buying it with a SSAS pension or you're buying it with your own money or you're buying it with other people's money that isn't a SSAS pension or a bridging loan each has its own slightly different process with the lenders and who's going to value it. And again, it could be completely different. So I say, yeah, you can waste your own money on a RICS valuation, but if they're going to value it differently, it's difficult to appeal. You can appeal it, but it's difficult to appeal.

So yeah, it's a nightmare process to appeal, isn't it? Because once, once they put their pen to paper sort of thing trying to get them to change the opinion is an absolute nightmare.

I have known someone who's done it successfully recently, and I was quite impressed, to be fair. But they're the only person I know who's done it successfully.

Yeah, I mean, one tip I've heard of is, so when you get your RICS value around, is to sort of prep some comparables and have a folder there so that you're giving evidence to the RICS valuer on on the day and trying to influence them in their decision-making a little bit.

Absolutely.

Rather than just letting them go cold.

Yeah.

What's your thoughts on that?

Also deeply offends them at the same time that they're—

does it?

Yeah, they're well more qualified than us, obviously, to, to value a house. And then again, a recent one, and this was naughty, I was pissed off, but the— so Again, this is another deal I backed out on because it was a nightmare. So we got it off market, um, the valuer went in to value the property, but previously they'd valued it as an agency, but they lost out on the sale because it was off market and I knew the owner. So they had that valuation previously. They've then gone in and valued it as a sister company because they own the valuing company. But it was a relative. I've lost out on that deal, and we was going to raise it through the mortgage company that it was a conflict of interest. Um, but yeah, you don't know who owns the valuing companies as well. So again, there's little, little things like that just to take into consideration of who's actually valuing the property, where do they come from, um, is it fair? Because again, there was a property across the road and 3 or 4 doors down from that same company, their true comparables that they didn't take into account.

Because the same company owned the valuation company and the agent.

Yeah, God forbid I, yeah, I challenged that. And I think we could have done, but I just, I've just lost the will to live at that point, to be fair. I was just like, to make money elsewhere, I don't care.

Yeah, yeah. And then another good tip as well is being realistic with your estimation on the refurb costs. Yeah, to make sure that you don't underestimate, because obviously if you estimate that your refurb is going to be £40,000 and it ends up being £70,000, then there's instantly a £30,000 loss in the potential profit that you scoped out at the beginning of the project.

And as well, Get— we don't always get surveys, but I think if you're going to do a huge massive project, it's worth it. Because again, I'm working closely with someone who's doing 3 massive HMO conversions, but originally wasn't going to touch the electrics because they, they was okay. Now there's a £14,000 bill because of the electrics, and the floors have caved in. We didn't know about that originally. So yeah, yeah, surveys are helpful if you're going to go completely back to brick, assess everything, because obviously we'd plastered that whole building, now the electrics need doing. So it was like, that's delayed it by another 3 weeks. And then also in regards to a value, like an estimation, my other business partner has created a spreadsheet of worst, best, and ideal comparables to flip out how much money you're going to get at the other end. And we always, always, always start jack it on, absolute worst-case scenario, then we see if it's a deal rather than hoping for the best and getting the worst.

Yeah, that's a good tip. Yeah. And obviously the location of the property really, really matters. It's all about the location. You can't fix a bad street. You can fix a bad house, but you can't fix a bad, like, sort of general location.

God, no. Um, and there was one time in Lincoln actually when I still lived there that we truly was gonna buy the worst house on the best street to live in ourselves, but I just couldn't get past a couple of the— it was like petrol station, right? I can't remember the road. It was near, um, I remember near Yarbrough Road, right? At petrol station. I was going to live there. It was only a little 3-bed. Yeah, I think they're our tips for today. If you've got any questions or you've, you know, feel free to ask away and we'll get back to you.

Yeah, we do have an upcoming event with Valeria Romano, who's going to be, is an expert on doing flips. She's been doing flips for about 8 years, I believe. Can you remember when that is, Heidi? I've got a mental block without looking at it.

Possibly the 25th. I've got the 25th in my mind.

The 25th at 12:00 PM.

Yeah, so keep an eye out for our events as well. And then if you've got any questions or you think, oh, I really need help with this strategy, we'll get that organized as well.

Yeah, let us know what you want. Basically, we'll help you where we can.

Absolutely. Lovely to speak to you again, Steve, and we'll see you on Thursday for another one.

Excellent, thanks a lot, Heidi. See you later. Hey!