How much of a gamble to take??

[kaz123]

Hi ... I'm about to purchase my third house. Although ive made a good profit from my last 2 houses and sold within 5 weeks on both i really have pushed myself to my limits to finance them so a real gamble to start with, even using my credit cards to live on till i completed on them, so very stressfull!!

I am a bit of a risk taker as think if you don't take risks you won't get anywhere, however i'm in the middle of offering on a house that is a great buy in a fantastic location, with a great profit and no more that 10k to turn it around... but to finish the work i would again be living off my credit card untill i can either release equity or sell!

I suppose what i'm asking as i do write essays lol... is if you know its a great deal is it worth pushing yourself to limit???

Really appreciate any advice, although ive sold my last 2 houses in a bad economic time im still very inexperienced in property and i dont want to mess up so early in the game !!

Karen

[Kevin]

Hi Karen

Well done on your last two properties, it sounds like you are off to a really good start. I am very close to dipping my toe in this area myself, I'm just trying to gather as much information as I can before I take the plundge. I'm actually off to my first property auction today, just to get a flavour of the atmosphere. I'll be watching this post very closely to pick up any uselful advice.

I agree with what you said about taking risks. You need to push yourself as much as possible but without being stupid. Keep a sensible head and an ambious heart and you should be ok. In my book there is a huge difference a calcuated risk and a blind gamble. Dont expect to win absolutely every risk you take, but as long as you can recover from the odd bad choice you should be ok in the long run.

Good luck and I hope you get some useful, sensible replies.

Kevin

[kaz123]

Hi Kevin,

Thanks for your reply!! Not tried the auctions yet as only ever have the 25% deposit and the risk of not getting the rest of the funds in time and loosing my deposit is far too big a gamble for this little risk taker, but must admit just to go and watch and get a feel for it is a great idea... and if ever i make enough money just to use cash i'll be at all the auctions lol!

Enjoy the experience and looking forward to any replies and advice from this thread!!

Karen

[New Homes Expert]

You are taking unnecessary risks with your financial future.
Dont you think every builder and his mate would be able to do what you do?
Sarah Beeny has a lot to answer for!

In the end greed will be your downfall in my opinion.
You cant live off credit cards and hope for a property to sell in the worst market in living memory to save you.

[Dav_Oak]

Karen the short answer is always going to be it depends on each deal.

If the number stack and it seems as though you've already made the decision that they do then the most important next step to consider is an exit strategy.

If your exit strategy is to sell at the full market value then you are walking a tight rope.

There are other options such as releasing equity after 6 months or using the GDS scheme where by you only require a 5% deposit therefore providing you with more capital to fall back on if the property doesn't sell immediately.

Before you buy your next property be fully aware of all your options before hand, then and only then based with all the facts can you make an informed decision.

Hope this helps

[kaz123]

Thankyou for the advice and suggestions!!

Think Sarah Beeney has been an inspiration to a lot of people.... and if you are prepared not only to make money but also be prepared to loose all you have, in my book as long as you are prepared to work long hours and get stuck in its a great way to earn a living!!

I was earning pre tax 13k a year before i began my property adventure so to me i don't feel that i took much of a gamble leaving that job in the first place in that respect!!

Would love any other tips or advice

Karen

[Kevin]

I agree with you Karen...


If you are prepared to put in the hard work, the hours, the blood sweat and tears than you 'should' reap what you sow. That’s how I look at it anyway.

And although I will be the first to admit that shows like Property Ladder and Homes Under the Hammer have gone along way to inspire the property developer in all of us, I think you should remember that these programs show only an edited, rose tinted glimpse of what could happen when all the pieces fall into place. Be inspired, but know that property development will be a long, hard and often frustrating endeavour.

This is what I am telling myself as I prepare to take the plunge.

Oh, and as mentioned above, the auction was a real eye opener. An exciting, buzz filled atmosphere. Daunting and inspiring all at the same time.


Kevin

[Trades MASTER]

I admire you views on risk taking Kazz, You could have done well ten years ago,

With the way things are at the moment with this country and the housing crisis i can say do not count on selling to get yourself out of trouble...

The risks far out weigh the rewards now, there is no dead cert in property at the moment, this does not mean there arent any returns to be made it just means that whatever homework you have done, step it up a gear or two, thouroughly research the area the market and also the rental demand, and then if and only if you still feel positive about it work out your budget and double it, far to often people say ive brought this house, im going to spend this much and i will make this much cash only to undervalue there budget for a: works to be carried out b: the fees involved both buying and selling , and also the morgate payments you have to make, if you say i will turn this house around in 5 weeks then sell it within 3 months, what will you do if it takes 6 months, a year or more to sell will you even have a profit or will you have debt id say the latter.

Property development is not just about fixing up a house and selling it, it is a business and like any business every day is a risk, so if at any point your gut has doubt walk away, you must trust your instincts you will make mistakes but you will learn from them, My first project was when i was 20 and my mistake was not having enough cash for the work after a lot of begging and borowing i got there, The next project i made sure i hade enough mainly due to a very healty profit from the first project, now two kids later and a few years out of the game a new apple comes in the market, my third i had a good system going and with that beautifull £250,000 profit in the bank ready for the next step, what happens the whole market collapses, and i am glad that i listend to my gut although the potential was in this house it just didnt feel right, and boy am i glad i didnt buy. So always step back from the carrot dangeling in front of you, dont let the money side of things consume you, you must be realistic,then when the risk presents its self you jump all over it but with a detached viewpoint.

The most common mistake people make when flipping a property ( thats the term we use for buying and selling) is they go mad spending, all of a sudden you have £10,000-£20,000 -£30,000 to play with and you just go nuts, you end up trying to create that dream home that you want ,fancy kitchens,bathrooms,expensive fittings, tiles,flooring. You dont do this if you have £10,000 for works then aim to do it on £5,000 or less always aim to spend less than what you have because if you can do it for 5 grand then you have just saved five grand, but dont get carried away and think "ok ive saved this much money im going to treat my self" keep it in the bank as a back up, any money you save keep it because you dont know when you will need it, And one day you will be greatfull for holding on to it. now when you bring your project in under budget and have sold then you will be smiling, Your only dilema will be what do i spend my fortune or do i do another one

[kaz123]

Hi...

I'll have to go to my local auction house and see how it works, sounds like a great afternoon out... and although i'm not ready financially for auction properties yet, maybe one day i'll have cash behind me to have a dabble!!

Thankyou for that advice and tips!! On my last 2 i created homes, proberly being a woman it's hard not too.. lol, and i think thats why they sell quickly as end up ripping the house to bits and everything is brand new! I even make make blinds for the kitchen and bathrooms as costs very little and easy to add a touch of home in an empty house. I do proberly spend far too much on them, and although i have made a great profit on both... i work my nuts off everyday and won't stop till finished.

I've decided to take on board the advice from here and other people and go for a lower risk on my next one so have put an offer on a house that already has DG and central heating, no damp... doesn't have walls to move or staircases to move ha ha... and really apart from new kitchen and bathroom, decoration and new carpets, it would be ready to go in a short time and is really popular road so a no brainer however not huge profits but a good profit for small amount of time it would take to turn around.

It's right in what you say, it's taking calculative risks... and buying this house is a lot safer option than my last 2 as won't have to use credit to do complete the work, be good to sleep at night lol!!

I do have a risk taking spirit, i have never bought a house for me that is lovely.. all finished, always bought the house thats falling down and needs renovation, must be crazy ... and that was before sarah beeny and homes under the hammer, so maybe i was destined to do this lol!!!

So kevin... what are your plans then??

Karen

[Trades MASTER]

I to am a risk taker, have always gone for the derilict houses so i understand your emotion,
Best of luck with your new venture.