A win-win situation is the rarest of results – one that is truly good for everyone involved. It’s a deal that works well for everyone, where all parties leave the table with their objectives fulfilled and a sense of a job well done.
There is one little known investment strategy, which above all others strives to deliver a win-win situation. A strategy that when run properly, is ethical, smart and highly profitable.
At Sourced, we call this strategy the Assisted Flip.
What is an Assisted Flip?
It is a form of a strategy known as an Assisted Sale. In this scenario, the investor assists a seller in the refurbishment of their tired property, so it can be sold for its true market value. This ensures the seller achieves the price they need, while also achieving a strong return on investment.
The Assisted Flip is perfect for properties in need of work to realise their true potential. It can range from those stuck in the 70’s, sporting avocado bath suites, obsolete kitchens and colourful carpets, to unmortgageable wrecks.
The ideal opportunity is one that will struggle to sell on the open market in its current condition, where the seller is motivated to break inertia and maximise their sale price.
Moreover, it should not have an outstanding mortgage, be chain free and vacant.
How does it work?
In reality an Assisted Flip is a joint venture between the seller and investor(s), governed by a contract setting out each parties’ roles and terms.
Key steps:
1. A price the seller is happy to accept is agreed, when their property is sold
2. The investor carries out refurbishment at their own cost
3. The property is put on the market and sold for a higher value
4. On sale, the seller gets their agreed price and a profit share
5. The investor takes the remaining profit
Where does it work?
If your numbers are sound, then this strategy can succeed anywhere in the UK. However, it is especially powerful in expensive and competitive markets, such as the South East.
In these areas, investors often find it hard to sustain strong margins from traditional flip investments, due to relative rarity of true below-market-value opportunities. The Assisted Flip reduces the need for finance and avoids stamp-duty (where the investor does not eventually buy the property), keeping investment costs low.
Benefits
So long as all due diligence has taken place and the deal is correctly structured, this should be a real win-win situation for all involved.
The Seller
▪ Their problem is solved. Their property is sold.
▪ They will often receive a higher price than they’d get from a normal flip investor
▪ They receive a share of the profits
▪ In some cases, the investor may cover their legal and any agent’s fees to sweeten the deal
The Investor
▪ Invests in a property without the associated buying costs
▪ Invests a relatively small amount (as low as £20k for a 3-bed house refurbishment)
▪ Achieves a high return on their investment, quickly (as fast as 3 months)
▪ Gets a solution to a tricky property
▪ Benefits from a higher fee than they expected
Investing in an Assisted Flip – what you should be aware of
Like any investment you need to do your due diligence and understand any risks involved.
You need to be comfortable with the numbers and be satisfied that there is enough local evidence for the end price the refurbished property could achieve. The opportunity must be governed by a watertight contract and a dependable contractor should be used for all works.
Want to get involved?
Our local investment specialists are actively sourcing Assisted Flip (Sale) opportunities for our clients. Please get in touch to hear more.
Author
Chris Kirkwood
