Flipping a House for Six-Figure Profit

Samuel Leeds

Flipping a House for Six-Figure Profit…

Hello future property investors, Samuel Leeds here. I met up with Alasdair Cunningham in Bedford, where he recently acquired a house and refurbished it into a five-bedroom HMO. Alasdair is one of my students, who later became a business partner and close friend. Today, he has a massive property portfolio, and the Bedford property is just one of many deals. In this article, I’ll walk you through the cost breakdown of the property and share tips on how you, too, can successfully implement the BRRR method.

`Deal Packaging

“You’re one of the biggest deal sourcers in the UK,” I said to Alasdair, kicking off our discussion. “Yeah, well, we try,” he modestly responded. But he actually makes a lot of money packaging property deals and selling them to investors. And in the last 12 months, he has sold over 200 deals, where he keeps the best deals to himself,  the Bedford property, for instance.

“Presumably, you bought it with the money that you made from packaging and selling deals,” I asked. Alasdair revealed it was a combination of bridging finance and sourcing and packaging property deals. “Awesome,” I answered.

No One Wanted the Property

The house came with structural problems, and, as a result, no one would touch it with a barge pole. But Alasdair, who has vast knowledge and experience in property, saw an opportunity. “Talk to me about that,” I urged. Alasdair revealed that the agent told him he was the 44th person to view the house, then on the market for about six months.

No one wanted the property because of the information contained in the home information pack. The HIP had an estimate from a local company of how much it would cost to fix the structural issues. And the amount quoted was just short of £30,000 excluding VAT and about £36,000 including VAT. But while others wanted nothing to do with it, Alasdair was disappointed he hadn’t come across it sooner. 

The numbers and the amount of work needed didn’t scare him off. Instead, he reached out to people in his network, including a senior architect he met in the academy. After reading through the document, the said architect laughed, saying the contents were ridiculous. He advised Alasdair that all the structural repairs, including beam replacement, shouldn’t cost more than £10,000. He ended up paying less than £4,000!

Now, if the seller had the same training and network Alasdair did, they would have fixed it and gotten a buyer way sooner than they did. He went on to tell me that it was the local housing authority that previously owned the house. And they had rented it out to tenants that had lived there for a decade. These were problem tenants who trashed the place and even stole the boiler and all the radiators. “Who would do that?” I asked, obviously puzzled.

So not only did Alasdair have to deal with structural issues, but he also had to deal with the destruction of property. And he recalls his first day there as the house owner, an elderly lady, who’s one of the neighbours, came over to find out who was moving in next door. And honestly, after ten years of having neighbours from hell, who can blame her for being curious about her new neighbours. 

From a Run-Down Property to a Five-Bedroom HMO

We first made our way to the beautifully designed kitchen. “Huge isn’t it,” Alasdair remarked about the open kitchen before revealing that the kitchen area was initially two separate rooms. So they knocked down the wall between the two rooms to create a more spacious kitchen.

He then went on to show me the bedrooms. “Every time I’ve ever been in one of your houses, you always do it the exact same colours,” I commented when I saw the first room. “Yeah, grey and white,” Alasdair acknowledged. I asked him why these two colours, and he said because they give spaces a modern vibe and darker wood tones tend to hide imperfections. Also, because he has multiple properties, he can easily show which shades of grey and white he wants.

All rooms have an en suite except for one room, which has a private off-suite bathroom. There’s already a couple set to move into the downstairs room on 1st September, where they’ll be paying £775 rent. But why pay that much for a room when you could rent an entire house for the same amount? “Not in this area,” Alasdair informed me. In Bedfordshire, if you’re looking to rent, the options are:

 

  • Move into a fully-furnished HMO and pay, say, £775 monthly but have your bills paid for you. Or
  • Rent a studio apartment for about £1,100, but pay for bills, pay council tax, and buy furniture.

And that’s a no brainer. As we made our way upstairs, I noticed a mail organizer near the front door. I loved the idea and asked Alasdair why he did it. “It’s just attention to detail,” he answered, saying how he didn’t like finding paper clutter on countertops and tabletops in his HMOs. “And I bet that didn’t cost much at all,” I said, which Alasdair confirmed, revealing it was only about 18 quid.

The rooms all have heavy fire doors fitted with fire door closers, which offer around 30 minutes of fire protection. And to further ensure tenant safety in the event of a fire, Alasdair has also installed escape windows in each bedroom that open more than 90 degrees. The rooms also have interlinked fire alarms, meaning if one smoke alarm detects a fire, all others go off. 

While this was my first time seeing the house in person, I had seen photos. The back garden area was a wreck with tall weeds and overgrown fences. So when we walked outside, I was impressed with what Alasdair had done with the garden and house in general. He had, as I told him, created a fabulous product.

Article 4 Direction in Bedford

Now, you can only know so much by only reading books and watching YouTube videos. Without proper training, “you don’t understand things like the licensing rules, the planning applications, Article 4” and other regulations. Alasdair, being knowledgeable, was clever with the rules that would have otherwise placed restrictions on his HMO building plans.

As he explained, Bedford enforced Article 4 in November 2020, which they had announced a year earlier. So knowing this, he started looking for properties around Bedford and eventually found this property at the beginning of 2020, just before COVID-19 struck. But after seeing the state of the house, it was evident it wouldn’t be complete by November.

So citing delays caused by the pandemic, Alasdair went to the council and asked whether he could submit his application before completing the HMO.. They agreed. He handed in a blank application with just his name, address of the property, and signature, then paid a £790 application fee. Now, anyone thinking of creating an HMO needs planning permission, which the council will likely deny. But Alasdair’s house has grandfather rights, which further push its value up.

And more than a year back, I remember we were both encouraging people to buy property in Bedford. But people always find excuses why they shouldn’t invest until it’s too late. Alasdair added it’s too late for the 43 other people who viewed the property because now he’s the one making all the money. And honestly, if they had the relevant knowledge, they wouldn’t have passed on such a good deal. 

“This is a business. If you don’t get yourself trained properly, folks, you’re going to get blown flat in this industry,” I said. “And most of the training is free,” I continued to which Alasdair responded that it baffles him why people don’t take advantage of the learning tools at their disposal. Knowledge is power, people.

Cost Breakdown

“How much did you pay for this house?” I asked Alasdair as we continued viewing the house. “£210,000,” he revealed. Looking at the property now, you may think that was an absolute steal. But at the time, £210,000 didn’t seem like a steal because it was in a poor state, or as Alasdair put it, “It was back to brick in a lot of areas and had major structural issues.”

I then asked him to tell me about the structural issues, which he had severally brought up. He revealed that initially, the extension wasn’t attached to the main building, so there was no structural steel above. And since the house was practically uninhabitable when he bought it, he was exempt from Stamp Duty Land Tax (SDLT). However, he paid it due to bridging finance, then got a refund of £8,000 towards the end of 2020. “Education,” Alasdair emphasized, adding that many property owners don’t know they can claim a refund of SDLT.

“How much did the entire refurb, everything down to the cushion, how much did it cost?” I asked him. “Just over £68,000,” he answered. So including the buying price that’s £278,000. He got the funds from bridging finance, an investor, and his own money that he made from deal sourcing and other ventures. Upon completion, Alasdair expected the property value to be £350,000, but Connells valued it at £400,000! 

Alasdair now has the option to sell the property or refinance it. Connells offered to market the property for him for six weeks at no cost, which he accepted. He has already received offers from people wanting to buy it at the asking price, i.e., £400,000, but he has turned them down as he wants to wait to see how everything unfolds within the six weeks. “I’m so happy to hear this,” I shouted and clapped.

“I would probably refinance it,” I said because selling would mean paying capital gains tax and him losing out on the income. “I probably will go that way,” he responded. If Alasdair chooses to refinance the property, he’ll pull out £300,000, which is all the money he invested plus £22,000. Plus, he’ll benefit from a steady income stream from tenants paying rent each month. Speaking of rent, fully-occupied, Alasdair expects to make £3,525 in monthly rent as illustrated below:

  • Downstairs bedroom: £775
  • Three upstairs bedrooms: £700 each
  • One upstairs bedroom: £650

So with £980 monthly mortgage payments and monthly bills, he’ll be making about £1,800 to £2,000 profit a month. “That’s called financial freedom in one deal,” I stated. “For the majority of people in the UK, this deal” would be enough to attain financial freedom. But while his preferred option is to refinance, he has several deals in the pipeline that might need the money. These deals stand to make a lot more money than the Bedford property, so if the right offer came along, he’d consider selling. “Fair enough,” I said.

Why Does Alasdair Recommend Property Training

Alasdair went through the top-end training some years ago and is today one of the lead trainers at the academy. He paid £16,000 at the time for the property training, which now costs £12,000. And although one gets access to all the training programs and unlimited coaching and mentorship for a whole year, people still claim it’s too expensive. So I asked Alasdair what he would say to someone thinking of investing in property education. Here’s a summary of all the points he made:

 

  • YouTube is not enough. You can’t become successful and make hundreds of thousands of pounds from just watching YouTube. Forty-three other people saw the Bedford property before Alasdair. However, they didn’t see its potential because they didn’t have the knowledge, skillset, network, and vision he did, thanks to extensive training. But don’t stop watching my YouTube videos. They could be the start of your property journey.

 Invest your time. We constantly organize free training courses online and countrywide to teach property investing strategies, which can help you become

  • financially free even off just one deal. So Alasdair’s advice is to stop messing about and get a ticket for the next event.
  • It’s okay to be sceptical, but don’t be too quick to dismiss the value of property training. Alasdair revealed that he initially thought I was making property investment sound easy. But he soon realized that once you learn the ropes and walk the walk, it’s plain sailing from then on.

 

All in All Doing property deals has seen Alasdair become very successful. And to give back, he became one of our lead trainers to teach others how to become financially free. And he has also been actively involved in charity work, even accompanying us to Africa. And I respect him so much for helping others.Alasdair mentioned that he’s now looking to do bigger deals, so watch this space. I encourage you to watch his remarkable property journey story on Winners on a Wednesday. I hope it inspires you to invest your time and money in property training so one day you too can make six-figure profits from property deals.

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