renovation projects
3 Bed Cottage - West Ireland
property project deal analysis
The following article was written by myself for the August 2009 edition of Your Property Network Magazine. The full video for it is Project Number 4 in our Video Projects section above. I've written four articles for them now which have detailed some of our recent projects. The deal below is one such example that we completed in 2009. We decided the long term and short term profits were good enough to wait for the end game to play out. The existing mortgage had 7 years to run, and there was a secured debt of £55k which we are in the process of having renegotiated downwards.
Acquire > Refurbish > Multi-let All for £24k
the deal basics
- Acquire the property using an option contract
- Give the vendor cash to move out and pay debts
- Refurbish in such a way as to allow multi let (HMO)
- Rented to multi tenants for great monthly cash ?ow
- Await mortgage to run out / negotiate debt down
the details
This particular deal came to us via our estate agent contact. He phoned me and said that the vendor wanted to sell but could not afford the time / stress and physical cash for a HIP to be completed - hence he could not sell it on the open market.
The vendor had got in to difficulties after taking voluntary redundancy due to health reasons. About 4 years prior they had raised a secured loan via a well known company which was being paid back at a rate of 15% interest rate. In fact it wasn’t the mortgage the vendor had trouble paying - it was the extortionate loan payments from an increasingly aggressive lender which caused the problems.
This vendor had used the money to do some renovations to the property, but they were carried out quite poorly. Many were left incompleted, including;- a leaking boiler, exposed pipes, terrible decoration, badly laid laminate, new doors hung upside down with the frames askew and mis-matched wallpaper! Works had been done in the wrong order too which meant other trades that followed could not do a good job. (Like plastering after the kitchen was fitted!)
We were lucky that the kitchen and bathroom were new and double glazing had been installed. We considered this to be a light refurbishment project with an estimated 4-5k cost. The kitchen and bathroom were of good quality though. Basically this vendor had spent money on aesthetics without doing the proper behind the scenes work first.
This vendor was in so much distress that they had contemplated suicide. Unfortunately vendors like this can become all too common in the kind of financial climate we have now.
It may come as a shock for some new investors who purchase direct from vendors that you may have to deal with vendors in severe distress. Often you can become an unof?cial
counselling service whilst dealing with the property deal structure. This one involved a lot of hand holding and copious explanations of what we were doing at every stage.
how the deal stacks
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