I was amazed this week as there was yet another program on TV
about buying distressed property, renovating it and selling it on
for a profit. Where as this may have been a good strategy a few
years ago when the market was going up, I feel it can be very
risky now and can cause all sorts of problems in the current
If you are using a buy–renovate-sell strategy, there are not
surprisingly three factors which can influence your success or
otherwise of your strategy. These are:
1) The price you purchase at
2) The cost of the renovation
3) The selling price.
Now whilst I strongly maintain that now is a great time to buy,
as there are so many motivated sellers out there, now is NOT
the time to be selling and with prices set to come down even
further there is a big risk if you are trying to sell property that
you will have to reduce your selling price so much potentially
wipe out most of your profit.
I have never quite understood people who buy-renovate-sell.
Yes you can make good money from a deal, but once you sell
the property that is it. You have crystallised your profit.
To make more income you need to go and find another property
and do it all over again. You are in fact still trading your time
Don’t get me wrong , buying a property and adding value through
renovation is still a good strategy but why sell? Would it not be
better o re-mortgage the property to recover your deposit and
refurb costs then rent out to hold for the long term growth. This
way you get paid forever. All of the statistics and trends support
the fact that property prices will continue to rise over the long
term. The important thing is to make sure you can afford short
term holding costs, and always keep a cash reserve in a high
interest instant access bank account to ensure that you can
cover any void periods or interest rate rises.
Speak to you soon,