How to find profitable ‘doer-uppers’
I'm constantly looking at properties to add value to, but they always seem to be marketed by the estate agents at finished value - the renovation cost i.e. with little or no profit margin once complete.
Or they sell at auction for way too much.
What am I missing?
Getting all your money out (i.e., 25% deposit and refurb costs) at the point you refinance is a lot harder than getting most of your money out. If you are basing it on getting all money out at refinance, you are probably setting the bar a bit too high, which is why deals might not be stacking up.
If you can pull out the residual cash left in the deal by the cumulative positive cash flow of rent over mortgage, over a 12–24-month period, investors often judge that to be a stackable deal.
Discipline is required to only buy the right property, with the right uplift potential, from the right seller, and only ever at the right price. The skill of working out what is the right price is key.
You have a better chance of that by focusing on the more dilapidated properties that are currently unmortgageable, but fixable. This gets rid of the mortgage dependant investors as competition. Cash buyers are pretty much your only competition - plus those who know how to use and price bridging finance intelligently into deals like this. This is where, with the right knowledge, you can start making serious profits.
The longer such properties have been on the market without selling, the greater the chance of the seller accepting a price that works for you.
Auctions are mostly not the route to find such deals, too many competitive buyers are present on auction days. Pre or post-auction bids have a better chance of avoiding auction day bidding frenzy.
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