This weeks question of the week comes from Caroline, who found a flipping deal whilst searching for property in their area with the potential for residential developments into flats.
The property is in an old and dilapidated condition, however this can be used to alter the potential offer price. The property is on for £210,000 but Caroline will offer £180,000.
The end goal is to transform the property into 3 flats, 2x single bed flats and 1x 2 bed flat. As the single bed flats would achieve £100,000 each and the 2 bed flat would achieve £120,000, creating a total of £320,000.
Before he worked out the numbers, Glenn advised Caroline to check with the local council to see what their rules are with parking and apartments, to which Caroline has already checked out and wouldn’t be an issue as the property has on street parking already reserved.
Glenn asked for the numbers on the property and then workout out the proposal on the development project. With development on flats, it’s safe to allocate £30,000 per flat, to cover all the associated costs such as architects fees, property planning fees, splitting services and so on.
Therefore the purchase price of £180,000 and three flats at £30,000 each, the total comes to £270,000. Which leaves £50,000 minus the buy & sell costs and funding costs.
With the buy and sell costs being around £22,000 and still having to pay the funding costs of anywhere between 1% – 2% per month, unfortunately this deal didn’t stack up.
Although this deal didn’t make it, there are still many out there waiting to be found.
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