Timing is crucial in property.
You have to know when to buy and when to sell.
The oft quoted maxim is: You make money when you buy, not when you sell. Sounds weird, but the thinking is: buy smart, buy well and you will always make money.
And so to illustrate the importance of timing in the property market I’m going to take you through a real life auction property trajectory that has happened in the last year.
This flipped property may surprise you – it’s an ex-council flat, in a not particularly salubrious part of town – and in the beginning nobody wanted it!
So here’s the property:
128 Joyce Avenue, Edmonton, London, N18 2DR
On 6 March 2013 this property failed to sell at auction. Despite being tenanted at £9k per year, the last bid was £86k which didn’t hit the sellers reserve.
On 1 May 2013 the property goes to auction again, it’s still tenanted at £9k per year and it now sells for the princely sum of £87k. That produces a gross rental yield of 10.34%. In London.
On 4 December 2013 the property has been newly tenanted to produce an increased rental of £19,239 per year. The property is entered to auction, but sells prior at £120k.
Fast forward to 26 February 2014, the property remains tenanted at an income of £19,239 per year, but this time sells for an astonishing £158k!
In less than a year, this property has been flipped twice, seen the sales price rocket by almost double (£71k from the start point) AND seen the rent more than double.
Is it still a good buy?
Astonishingly, despite the massive increases on the price paid last year – the whopping rent increase means that even at a purchase price of £158k this flat will still produce an annual gross rental yield of 12.18%! In London
The moral of the tale: Buy smart, maximise what you’ve got…then get out!
And if you need more proof how flipping at auction can work in your favour check out the garden in Chelsea which I wrote about originally for the Evening Standard. Just a few months on and the buyer has flipped for a whopping £31k gross profit on their initial £53k purchase!!
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Amanda qi
Sam, very interesting read. There is no guarantee in auction flipping and sometimes it does not make any sense at all. There was a piece of land in my village which was sold by Romans in 2010-2011ish for £65k. The new owner applied planning permission for a detached house but was refused. Due to it is on flood zone 3a and it’s position at a double T junction, some pipe work below it and public access, it will never gain planning permission unless the whole area to be removed from flood plan. It was put on auction again a couple of month ago and was sold for whopping £350,000! Initially I thought did the auctioneer make a mistake on the decimal point in the published price? No, it was £350k! And the vendor must have been laughing to the bank!!
Sam
Yes, there’s no guarantee – but wowzers your story just goes to show what rewards are on offer when you take a risk (and it works out!)