Making the most of what you have

Making the most of what you’ve got!

With this months magazine leading on deals which can produce a substantial profit I thought I would consider some of the successes that I have had and that I have witnessed others perform in the hope that I can assist you in your quest for enhanced profits on your property deals.

My best deals have been those where I have bought a property and then secured a planning consent and created value that way. I have bought former hotel premises and sold them on with consent to subdivide into flats as well as assembling adjoining owners properties to create a workable plot and sold that off as one site.

But many of you will be looking at physically undertaking some improvement works to make your profits and that can be very lucrative too.

The first thing I think you should consider when aiming for a healthy profit from a refurbishment is to understand who your buyer is likely to be. An Owner Occupier will likely pay a higher price for a property than an investor would as the investor is commercially driven whilst the owner occupier is emotionally driven. Depending on your market place, you may wish to target your refurbishment to an owner occupier or someone who, equally emotionally driven, is looking for a second home.

Spending a little extra on quality fittings can lead to an enhanced sale price as can the general quality of finish. As a former Estate Agent, I can tell you that the offers you receive in the first six weeks of marketing are likely to be the best ones and so ensure your property is priced at a level that will attract early  interest. A profit is worth noting unless it is in your hand!

Notwithstanding the above, there are many people actively seeking investment properties and many are keen just to improve upon the return their money would yield if left on deposit. When refurbishing or improving an investment property it is key to spend your money in areas which will improve the rental value of the property. Your buyers funders are likely to calculate their numbers based on the income potential of the property and so the more rent it can create the more money someone can borrow to purchase it.

By way of an example, I acquired a block of three flats for a Client six months ago for £305,000. The property was producing £1500pcm, a broadly 6% gross yield. My Client has lightly refurbished the units and the rent passing is now £2300 pcm. Based on a 6% gross yield that could now value that block at £460,000. A healthy profit for six months work.

The items which will improve the rental value include the subdivision of rooms, or simply the relocation of the Kitchen into the Lounge to create an additional bedroom, the creation of off street parking, improved Kitchen and Bathroom fittings as well as the addition of a Conservatory or Garden Room.

Bear in mind that an increase in rent of £250pcm, based on a required yield of 6%, will give you a capital value increase of £50,000 and so you can see how some people can generate a £50,000 profit by basic refurbishment works or maximizing their rent by targeting certain tenant groups.

In a market place where in most areas there is a shortage of available property to buy, you may wish to review some of your existing stock to see if you can create some additional equity.  You can then call on this new found wealth once a suitable property becomes available.

Another opportunity awaits for those of you who fully understand the new permitted development regulations that are being introduced. I remain confident that there is still a window of opportunity to purchase small semi-industrial premises in largely residential areas and then create value through their conversion to housing use. Such buildings often allow for a more individual design and may therefore be capable of achieving an enhanced sale price once converted.

Whilst I have provided you with a number of options, I urge you to select one strategy and pursue that relentlessly. This will doubtless achieve better results than if you were to try many strategies all at the same time. That said, the time to take action must be now.

The market continues to move forward with most areas of the UK reporting a 10% increase over the last twelve months. Think of the profit you could create following a sensible strategy at a time when the market is moving upwards!