It’s nearly the end of another year and the time when that ‘quiet’ time between Christmas and New Year is an excellent time to reflect on your year and make plans for the year to come.

So how was 2019 for you?  What did you achieve that made you feel good?  What was in your plan at the beginning of the year, but somehow didn’t get done?

What would you like next year to look like?  And more importantly, what will you need to do to make reality match that?

If you’re reading this, you’re probably either already in property or you’re seriously considering getting into it - and you must be aware that it’s one of the industries where the people outside it are known for being negative about it.  In order to succeed, you’ll need to be able to combat negative input.

To overcome the challenges along the way, you’ll need to develop a positive attitude to dealing with these.  It’s all about seeing a...

THE QUESTION

 I am looking at a mixed use building currently fully let.  It consists of:

• Ground floor let to a barbershop at £300PCM
• 3-bed flat above (over 2 floors) let at £495PCM

My question is:

• How would you put an indicative value on this type of unit when making an offer? It currently has a guide price of £96k and is going to auction, but didn’t sell at last auction (not sure if it didn’t meet guide or reserve)
• How willing are commercial lenders on financing such a property?

THE ANSWER

• Properties like this are based on a multiple of the rental income and that is influenced by based on the quality of the tenant and strength of the lease. i.e. a Tesco Express on a 20 year lease would value significantly higher than a barber on ‘whatever length’ lease.

So you have an annual rental income of £9,540. The guide price is therefore based on 10 x income and that is not unrealistic for this type of property.  If it...

We have brokered hundreds of bridging loans, I also run the UK's best established (only?) training programme (the Ninja Investor Programme) to educate investors in the intelligent use of bridging.  But the minute you mention the word ‘bridging’, people who haven’t learned about it tend to say, ‘that’s expensive!’

Bridging interest rates are higher than most mortgage rates, BUT if the difference is not doing the deal or paying a little bit more and making a good profit then bridging isn’t expensive at all.  I’m always surprised that people prefer to borrow money from a Joint Venture partner rather than from a bridger - and then give away 50% or their hard-earned profits.  No bridger will take 50% of your profit.

The interest rate for your bridging loan depend on a number of factors that you don’t have much influence over.   When you find a deal, you want to bridge that specific deal.  The rate depends...

THE QUESTION

I have a restaurant business, which is a limited company.  A couple of our sites are in places where finding staff can be tough, so offering live-in accommodation could really help us.  I’d like to buy a property to use as staff accommodation, what kind of mortgages are available and how much will I need for a deposit?

THE ANSWER

Staff accommodation seems to be a sensible solution to restaurants in remote places.  There is a prestigious restaurant on the Isle of Skye that does exactly that; and staff accommodation is an attractive perk in the hospitality industry.

Buying a significant asset (especially property) in the name of a trading business leaves the asset available for any potential future creditors of the business to go after.  

The smarter options would be to buy in your personal name or set up a new limited company for owning property.  Deciding which is the smarter of the two is, essentially, a tax question because you will be...

Many property investors focus on buying property, adding value by refurbing and then reselling or refinancing as a buy-to-let.  It’s the core of most property investment.

Of course, there are many other strategies, but let’s look at how you make finance a refurb and flip effectively.

1:  Find a suitable property

This might be a property with a motivated buyer where you can negotiate a deal below market value.  This will benefit you in reducing the amount of capital you will have to invest.

2: Calculate refurb costs

It’s important to do this exercise carefully - no guesstimates.  The refurb needs to improve the value of the property too or you’ll lose money on the deal, especially if you plan to resell right after refurb. 

Getting your money out and repaying your loan should leave you with a healthy profit.  Work out what you want to make on the deal, then work out exactly what your refurb will cost.  When you’ve got...

If you’ve been in property a while you may remember the halcyon days of 100% finance for buy-to-let mortgages.  Sadly, all long gone, since the credit crunch sent the banks running for higher ground where deposits are required.

I’ve just discovered that there’s a new player in the field offering 100% finance for development projects. 

This is a finance opportunity for new build or conversion projects looking for £500K upwards.  They are offering 100% finance in return for a 50:50 share of the profits for the right deals.  It’s virtually a JV, with a sophisticated investor who understands property.

Usually a developer needs to front up between 30-50% of the land purchase to get the project going, but this new finance option will lend 100% - with a few criteria.

Do you qualify?

• The loan can be from £500K upwards.
• There’s NO INTEREST – but the profit on the gross development value (GDV) of the project must be at least...

THE QUESTION

I have just applied for planning permission for a house that I'm going to live in.  The question is where is best to get a development loan?  I have several houses that I rent out already but I’ve never built a property before.

THE ANSWER

Development loans are for commercial projects that will be sold or rented out.  When it is for a house that you intend to be your main residence, that all changes.  What you need is a self-build mortgage.

What it is different is that it becomes an FCA regulated loan because you intend to live in it and that is a game changer for several reasons.

Only lenders that have been regulated by the FCA to lend on main residences are allowed to lend to you.  Development finance lenders, by and large, will not have gone through the process of regulation because they only lend on commercially based projects, those that are built for profit.  This means all such lenders are prohibited by the FCA from lending to...

Some people think bridging finance is expensive and costs more than it’s worth.  Actually, the returns on your investment far outstrip the costs when the deal is right – and it makes it possible to do things that mortgages don’t allow you to do.  That’s where the profits are.

It is always pragmatic to keep an eye on costs, but not to the degree that you become blinkered to the profitability in a deal.  If you were looking ta a £40,000 profit to be made in a deal, but a bridging loan would cost you £10,000 in fees and interest, reducing your profit to £30,000; what would you do?  Would you walk away or, having overcome your fear of bridging, take the £30,000 profit?

Using other people’s money, joint venturing, often referred to as JV finance is one way of accelerating your property journey, but that usually comes at a cost.  JV finance predominately involves giving away 50% of your profit to the person...

This is the Cash Buyer Mind-set at work – and it’s a technique very few investors use.   Most of them wouldn’t even consider this kind of negotiation – leaving the field free for the Ninja Investors who have the knowledge and know when and how to use it.

This Ninja strategy lets you buy properties with a minimal deposit and leaves your cash free for refurb, simply by delaying completion.  

Delayed completion bridging is also referred to as ‘Exchange, with delayed completion’ (EDC).  The objective is to have no money left in on the day you complete – or at least a lot less than the 25% deposit plus your refurb money.

Here’s the strategy in a nutshell:

• Find a vacant property that needs a refurb
• Exchange quickly
• Get the keys on exchange and permission to enter the property to carry out work
• Do the required refurb between exchange and completion
• Get the lender to lend on the post-refurb value, rather than the purchase...

THE QUESTION

I’ve heard that if you use the same lender for the refinance on a buy/refurb/refinance project you can get down-valued.  Does that mean you should always use different lenders?

THE ANSWER

There are very few lenders offering bridge-to-let products, essentially it requires a mortgage lender who is also happy to offer a bridging product and lenders like that are a rarity among mortgage lenders.

The advantage is that for a buy/refurb/refinance project, you can move seamlessly from bridge to mortgage without extra fees or needing to wait 6 months to apply to for refinance.

Bear in mind that, compared to a true bridger, the initial underwriting can take longer (massively longer with one B2L lender) because they are underwriting the mortgage at the back end to begin with, not just the bridging part. 

Also the mortgage rate at the back end may also not be as competitive, depending on the work you are doing to improve the property, as you could get by separating...