I have mentioned this in my previous book: The Landlords Guide to Surviving the Credit Crunch, however, it is an area that deserves further investigation and analysis. In the past few years this method was my bread and butter. I would do up to 15 of these deals a year and on each deal have plenty of margin to either hold on to the property and remortgage my initial investment back out (plus some extra) or to sell the property.What I would say is that with the demise of the day 1 re-mortgage it has become more tricky to do these types of deals, especially when trying to remortgage and hold on to the property by renting it out after refurbishment. Also the existing housing market conditions with falling house prices, lack of cheap mortgage finance and drought of willing and able buyers means that the likelihood of being able to sell these deals on is very unlikely, unless you source a very low price in your initial negotiations.

There are options of using bridging finance, however, the high costs and high interest rates usually eat up any profit in the deal you are trying to do. I am not happy paying a lender the bulk of my profit when I sit with all the risk of potential house price falls, and the efforts of managing the rent and maintenance of the property. However, in cases where either a property has sufficient margin to give a decent slice away to a lender and still make good money, or in cases where the rental yield is very substantial, you may still want to look at utilising bridging finance.

The types of properties I would class as refurbishment deals are those where most property investors won’t even walk through the front door. There are a range of reasons for this such as being fire damaged, internally vandalised by previous tenants (not external vandals), infestations of various insects, rodents and birds and many other reasons.

Now I am not suggesting that every property that is a wreck offers scope to make money, and this is where it becomes important to identify the key factors that make or break these types of deals.

I have 2 Main rules when it comes to properties requiring refurbishment:

1) The property must be structurally sound;

2) The property must not be located in a vandalism hotspot.

Taken from Toby Hone’s fantastic new book ‘Make Money From Property In the Credit Crunch‘. Available to buy online: click here