Latest / The Property Entrepreneurs Podcast with Alasdair Cunningham / The £160k Derbyshire Auction Block That Revalued at £330k

Transcript

The £160k Derbyshire Auction Block That Revalued at £330k · The Property Entrepreneurs Podcast with Alasdair Cunningham

• 0:04
  SPEAKER_00: Welcome to the Prophet Broad Podcast.
• 0:10
  SPEAKER_00: 700 right later.
• 0:14
  SPEAKER_00: If you're looking to build a property business, we'll be coming to FTCM.
• 0:18
  SPEAKER_00: Strategy, Insight, and Technique Work Today.
• 0:21
  SPEAKER_00: Meet me a full node.
• 0:22
  SPEAKER_00: We're on Spotify, Apple Podcasts, and Audible.
• 0:25
  SPEAKER_00: Let's crack on it and let's build your business.
• 0:35
  SPEAKER_00: Hey, good morning everybody.
• 0:36
  SPEAKER_00: Welcome, welcome, welcome.
• 0:38
  SPEAKER_00: Good morning.
• 0:38
  SPEAKER_00: Get yourself out of bed if you're still in bed.
• 0:41
  SPEAKER_00: Today is going to be an awesome day, and we are back in the world of business.
• 0:45
  SPEAKER_00: Welcome to the Property Entrepreneurs Bootcamp.
• 0:48
  SPEAKER_00: Now, today I want to talk about my favorite property strategy.
• 0:59
  SPEAKER_00: I love doing them, and I think it's the best strategy for creating big money.
• 1:09
  SPEAKER_00: Okay.
• 1:09
  SPEAKER_00: And the strategy I'm talking about is the buy, refurbish, refinance strategy or the buy, refurbish, and flip strategy.
• 1:17
  SPEAKER_00: So I've been involved in around 35 refurb projects since I started my property business.
• 1:24
  SPEAKER_00: And I've loved pretty much every one of them.
• 1:28
  SPEAKER_00: And I've made some, you know, really, really good money doing buy refurbished.
• 1:35
  SPEAKER_00: I've made some good money on flips.
• 1:37
  SPEAKER_00: And I can tell you now, it's always my go-to.
• 1:44
  SPEAKER_00: Okay.
• 1:45
  SPEAKER_00: I obviously started out with property sourcing, and that was, you know, great.
• 1:49
  SPEAKER_00: I loved that.
• 1:50
  SPEAKER_00: And I still do property sourcing, just not anywhere near as much as I used to.
• 1:55
  SPEAKER_00: I've never really been a bigger a big fan of rent to rent in the sense of I've never really been that keen to have lots of rent to rents or be involved in them.
• 2:07
  SPEAKER_00: I have got involvement in them, but you know, it it's always been as a joint venture partner where I've I've got involved in a partnership or I've done them as a JV with a friend or I've loaned some money for somebody to do it and I've just got a cut of the the returns.
• 2:25
  SPEAKER_00: But you know, from a rent-to-rent point of view, I've never done one on my own because I don't want to, never have.
• 2:32
  SPEAKER_00: I used to do lease option agreements.
• 2:34
  SPEAKER_00: Um they're very similar to rent-to-rent, but you you buy them at the end.
• 2:38
  SPEAKER_00: Um but yeah, again, it's a control strategy.
• 2:40
  SPEAKER_00: But for me, the buy refurbished finance is you know, it's the thing that gives me the biggest lessons, it's the strategy that gives me the most fulfillment because you're taking a a very run-down property and you're getting good um good returns from it, but you're also transforming it.
• 3:02
  SPEAKER_00: And I'm gonna come back to the the worst one I've done to date.
• 3:08
  SPEAKER_00: Um, and the worst one I've done today was actually a block of apartments in Derbyshire, and you know, I bought the property for£160,000.
• 3:19
  SPEAKER_00: So£160,000, I bought the property from auction, um and I ended up spending£98,000 on it.
• 3:29
  SPEAKER_00: So£160,000 purchased,£98,000 was for the refurb, the legals, and all the interest payments.
• 3:38
  SPEAKER_00: Um, and then the property revalued at£330,000.
• 3:45
  SPEAKER_00: So, you know,£160 plus 90, or£160,000 plus let's say£100, you're at£260, refinanced up at£330, which you know it gave us a nice healthy return.
• 3:57
  SPEAKER_00: Okay.
• 3:58
  SPEAKER_00: More importantly, that property was converted into three apartments, and then three apartments, since pretty much the day it was finished, have been consistently making um between four and five thousand pounds a month income, um, and we rent them to contractors.
• 4:17
  SPEAKER_00: So there's three properties in there, and they're getting um you know, the two one beds downstairs are getting you know about 80 to 90 pounds per night, and the the three bed upstairs is getting between 90 and 110 pounds per night, um, and it runs at a reasonably good occupancy rate.
• 4:34
  SPEAKER_00: So the property generally brings in between you know two and three hundred pounds a night um for let's say 80% of the month.
• 4:42
  SPEAKER_00: Okay, so it you know it does make good money.
• 4:45
  SPEAKER_00: Excuse me.
• 4:46
  SPEAKER_00: And but let's let's let's look at the lessons, right?
• 4:51
  SPEAKER_00: So when I when I bought that property, like I say, it was a very run-down property.
• 4:57
  SPEAKER_00: Um it was empty from 2019 all the way up to 2023 when I bought it.
• 5:06
  SPEAKER_00: And the owner of the property, he also bought the property from auction um in 2019, but he never done anything with it.
• 5:14
  SPEAKER_00: It just sat there um getting into a state of disrepair.
• 5:18
  SPEAKER_00: I remember the day um I went to view it.
• 5:23
  SPEAKER_00: When I went to view it, I actually um I wasn't able to actually get inside the property because the agent didn't or couldn't find the keys, so I wasn't actually able to view the property internally.
• 5:34
  SPEAKER_00: I mean, for me that wasn't the end of the world, and I'll tell you why.
• 5:38
  SPEAKER_00: Because I knew it was gonna be a complete rip out.
• 5:41
  SPEAKER_00: So, you know, seeing inside and it really doesn't matter.
• 5:46
  SPEAKER_00: Um the the property's getting completely gutted, it's going to you're we're gonna be doing a back-to-brick refurb on it, and you know, it didn't really matter because you know, we weren't gonna try and save anything.
• 5:58
  SPEAKER_00: We'd done a full and uh external um inspection of it, um, and that was all good.
• 6:05
  SPEAKER_00: The property had been surveyed already, so I I had access to the survey, and you know, we could see through all the windows and things like that.
• 6:12
  SPEAKER_00: So there was no real big surprises when I actually got the keys.
• 6:17
  SPEAKER_00: Now, when I got the keys, I went down and the big surprise actually, there was a little surprise, the big surprise actually, was the property actually had mushrooms growing all over the walls.
• 6:29
  SPEAKER_00: Um, it was it was that damp inside.
• 6:31
  SPEAKER_00: Um, but again, I didn't really care because we were going to be going back to brick, so I didn't really, you know, I wasn't fussed about that.
• 6:38
  SPEAKER_00: Um now when I bought the property, bought it for 160,000, bought it at auction.
• 6:45
  SPEAKER_00: Um one of the things I realized very quickly is EDF energy are a nightmare to deal with.
• 6:53
  SPEAKER_00: Now, this property was originally four apartments on four separate meters, but somebody had gone in and tampered with the meters.
• 7:03
  SPEAKER_00: So, you know, we had a lot of problems with EDF getting the meters reconnected, uh, we had to run new cable in, and we you know, that caused us a hell of a lot of problems.
• 7:12
  SPEAKER_00: So the big lesson I'm gonna tell you here anything when it comes to flats, anything that involves splitting electrics, having to get the electric board out, takes a lot longer and costs a lot more than you think it will.
• 7:28
  SPEAKER_00: You know, for instance, we had to have a new main cable run run from the middle of the road into the property.
• 7:34
  SPEAKER_00: That was seven and a half thousand pounds.
• 7:36
  SPEAKER_00: Okay, so just be mindful of all of this, all right?
• 7:40
  SPEAKER_00: Now got the keys, went there, and I met my build team there.
• 7:46
  SPEAKER_00: And step one was ripping the property out.
• 7:49
  SPEAKER_00: And and you know, we ripped that property out.
• 7:52
  SPEAKER_00: It took us a week.
• 7:53
  SPEAKER_00: Um, the property was gutted, top to bottom, absolutely gutted.
• 7:57
  SPEAKER_00: Um, all the the wood work off, all the pipe work out, all the you know, the floors up, the the ceilings were all brought down, had latin plaster ceilings, so they were all brought down, or latent plaster ceilings, they were all brought down.
• 8:10
  SPEAKER_00: You know, the mess was atrocious.
• 8:12
  SPEAKER_00: We filled, I think, seven or eight skips, um, big six-yard or eight-yard skips, they got filled up with all the plaster, the you know, all the doors, the woodwork, the kitchens, the bathrooms, um, you know, full strip out back to brick.
• 8:26
  SPEAKER_00: And if you go into my Instagram, you will find videos of this and you'll see.
• 8:30
  SPEAKER_00: Um, and the best thing I do know what I loved about it, you're going back to the bare bones of the property, you're going back to the skeleton of the property, and that it it shows warts and all, if that makes sense.
• 8:44
  SPEAKER_00: So, you know, when we went back, we we saw all the old brickwork, was you know, a lot of damage to the brickwork, there's a lot of grout missing, a lot of cracking in the walls, things like that.
• 8:54
  SPEAKER_00: And it gave us a really good opportunity to really assess the property and fix it properly.
• 9:00
  SPEAKER_00: Like do it properly from the offset.
• 9:02
  SPEAKER_00: So, you know, we got my structural engineering, um, he done all his calculations and draw-ins.
• 9:08
  SPEAKER_00: We actually installed, believe it or not, 13 steel beams.
• 9:13
  SPEAKER_00: Yeah, 13 steel beams.
• 9:14
  SPEAKER_00: There's more steel in that than the Titanic.
• 9:16
  SPEAKER_00: Um, and you know, 13 steel beams um to secure the property up, um, lots of you know, anchor points, all that sort of stuff.
• 9:24
  SPEAKER_00: And you know, it took probably a good month to get all the steels in place and to get everything sorted out so that it was structurally sound.
• 9:32
  SPEAKER_00: Um, and then we started obviously the the rebuild of it, getting all the walls done, getting all the plaster back up, um, getting all the ceilings up.
• 9:41
  SPEAKER_00: And you know, it was a a brilliant experience to see the processes of back-to-brick refurbishment um going all the way to um the end.
• 9:54
  SPEAKER_00: Now, some of the big lessons I got from this particular property.
• 10:00
  SPEAKER_00: EDF takes a long time, remember that.
• 10:03
  SPEAKER_00: Um, and it's always wise to get build and control involved.
• 10:08
  SPEAKER_00: Obviously, there's certain out elements of build and control that you'll always have to get involved if you're doing any sort of extensive heavy refurb.
• 10:15
  SPEAKER_00: But speak to them sooner rather than later.
• 10:18
  SPEAKER_00: Be very open and transparent with them.
• 10:20
  SPEAKER_00: They're actually really helpful.
• 10:22
  SPEAKER_00: The build and control inspector we had was very helpful.
• 10:25
  SPEAKER_00: Um, they actually popped in numerous times, you know, just to keep an eye on things, and they were always really helpful, really accommodating, and really informative.
• 10:35
  SPEAKER_00: Never had a problem with them whatsoever.
• 10:37
  SPEAKER_00: Um what I would say is shop around, okay?
• 10:43
  SPEAKER_00: So by Refurbie Finance can be expensive because you know, you're always going to find more than what you expect.
• 10:51
  SPEAKER_00: Like, you know, for us on this particular example, right?
• 10:54
  SPEAKER_00: We went back to brick.
• 10:55
  SPEAKER_00: So we did know that we're going back to brick.
• 10:58
  SPEAKER_00: It was all planned and budgeted for at the very, very start of the job.
• 11:01
  SPEAKER_00: But when even when you go back to brick, you're still uncovering years of neglect.
• 11:07
  SPEAKER_00: And essentially, we probably had to factor in another another four or five thousand pounds for the uh additional steelworks and the like I'll give you an example.
• 11:20
  SPEAKER_00: The the front wall of the building was starting to push out, so we had to, you know, reset all of that, we had to fix all of that, pin it all back.
• 11:29
  SPEAKER_00: You know, that was uh there was an additional cost to that.
• 11:32
  SPEAKER_00: We would never have seen that if we didn't go back to brick.
• 11:35
  SPEAKER_00: We would have plastered over it, and that would have been a problem that occurred in a couple of years' time, and it would have cost me a lot more money and a lot more inconvenience, okay?
• 11:43
  SPEAKER_00: So that's why we go back to brick, right?
• 11:45
  SPEAKER_00: Now, long story short, right, we spent£160,000 buying it,£98,000 on refurb, it valued at£330,000, the property cash flow is four to four and a half thousand pounds per month, um gross, and then after mortgage and stuff, you know, I'm making around three, like two and a half to three thousand pounds a month profit on that particular property.
• 12:09
  SPEAKER_00: We still own the property, um, it's now worth about 380.
• 12:13
  SPEAKER_00: Um, so it overall it's a fantastic asset to have in the business.
• 12:18
  SPEAKER_00: And the way I financed it, um, so I I borrowed£100,000 from an investor, and then I used bridge and finance the remainder of the purchase, and then I personally funded the refurbishment.
• 12:32
  SPEAKER_00: Um, obviously, it wasn't 98,000 in one goal, it was 98,000 spread over a year, because it did take uh you know nearly a year to complete that job by the time we got the keys, and by the time we, you know, got it to a point where it was fully painted, ready to rent out.
• 12:48
  SPEAKER_00: Um, so yeah, it was monthly invoices, but it was all cool, right?
• 12:52
  SPEAKER_00: At the end of the day, you gotta do these things if you want to build wealth and you got to be able to take the risk.
• 12:59
  SPEAKER_00: And bi-refurbish refinance for me is the way forward, and I I genuinely think everyone should be aiming to do at least one or two bi-refurbish uh projects in their property career, in the span of their property career, because you can keep them forever, providing you can get most of your money back.
• 13:16
  SPEAKER_00: Um, and if you don't if you decide you don't want to keep them, you don't want to be a landlord, then you can always just um you can always just flip them and just make the profit, okay?
• 13:28
  SPEAKER_00: And the profit can be substantial, okay?
• 13:31
  SPEAKER_00: So look, hope you're excited about bi refurb.
• 13:35
  SPEAKER_00: I am, I love bi refurb.
• 13:37
  SPEAKER_00: I now try and do one by refurb a year.
• 13:41
  SPEAKER_00: Um I used to do a lot.
• 13:43
  SPEAKER_00: Um, I used to do four or five at a time.
• 13:46
  SPEAKER_00: Um, but what I realized was actually the more you do, the more stressful it is.
• 13:51
  SPEAKER_00: I had five on at one go once, uh, and I've never been so stressed in my life because you've got five lots of builders chasing you.
• 13:58
  SPEAKER_00: You've got just all sorts of things going on.
• 14:01
  SPEAKER_00: So I I didn't um you know I didn't want to do any more than one at a time going forward.
• 14:08
  SPEAKER_00: Um so yeah, that's what I'd advise.
• 14:10
  SPEAKER_00: No more than one at a time.
• 14:11
  SPEAKER_00: Anyway, hope you enjoyed today's show.
• 14:13
  SPEAKER_00: A little bit longer than normal, but uh, let's catch up tomorrow.
• 14:20
  SPEAKER_00: That's it for today, folks.
• 14:21
  SPEAKER_00: Thanks for tuning in to the Prophet Entrepreneurs podcast.
• 14:24
  SPEAKER_00: Hope you got massive value from today's show.
• 14:26
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• 14:33
  SPEAKER_00: tomorrow morning.
• 14:34
  SPEAKER_00: Also, jump over on to Instagram and Facebook, drop us a comment, let us know what you've got today's show, head over to Alistair.
• 14:40
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• 14:47
  SPEAKER_00: Remember, property is all about building systems, created systems, created systems, it's more interesting.