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Buy as a company or as an individual?

strategic planning Oct 10, 2019

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...

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Refurb and flip

buy to let Oct 05, 2019

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...

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100% finance – too good to be true?

buy to let Sep 25, 2019

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...
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Self-build project finance

development finance Sep 20, 2019

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...

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Why bridging finance?

bridging finance Sep 10, 2019

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...

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100% Refurb - a Ninja Strategy

ninja learning Jul 30, 2019

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...
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Bridge-to-let finance - one lender or two?

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...

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Language, language!

mindset Jul 10, 2019

When you’re negotiating with either vendors or estate agents, one of the key negotiation skills is to choose words that hit their ‘hot button’.

If you’ve studied sales you’ll know that there is a process to successful sales transactions.  That same process can be applied to any situation where you want to persuade or influence someone to things your way!

The simplest formula (and it’s been around for a very long time) is AIDA.  This stands for:

Attention:  You can’t sell anything if the other party isn’t paying attention, so that’s the first step - get them to listen to what you’re proposing.  This can be achieved by making eye contact to ensure their attention is with you.

Interest:  Nobody will buy if they’re not interested.  This means you need to know what’s important to this particular person.  What will make them prick up their ears?  Ask the questions to find out...

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3 Myths About Bridging Finance

bridging finance Jun 30, 2019

You couldn’t describe bridging rates as ‘cheap’, they are significantly higher than mortgage rates.  You could pay three or four times the interest rate that you’d expect to pay on a BTL mortgage.  BUT, that doesn’t mean you should run away from bridging as a funding strategy for your property investments.

Understanding how to make intelligent use of bridging will move you from the fog of the mortgage buyer mind-set to the clarity of a cash-buyer mind-set (and you don’t need an abundant bank account to get started).

While you’re focusing on the cost of bridging you’re missing the profit opportunity.  Sometimes such opportunities can be substantial, even massive.

If you could make a profit of £40K, but bridging finance cost you £10K, is that a deal you would do? 

These are the three biggest myths about bridging:

  1. A bridger will foreclose and take your property

With a reputable bridging lender (and I only...

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A great deal, but cash tied up

bridging finance Jun 20, 2019

THE QUESTION

I viewed a property last week and negotiated from £85k to £73k, but unfortunately my funds are tied up in another deal.  HOW ANNOYING!

I was wondering if there is another way to fund this as would be ideal for the list of tenant buyers that I have.

THE ANSWER

Certainly there is another way to fund this - bridging finance.  

This is one of the aspects of bridging that I teach to investors, what I like to call 'no hard cash down' funding.

Let’s just say your cash is tied up in a property you bought for £100k.  Now you could get this second property for £73k, but you can’t do it because all your £100k cash is tied up in the first property.  So here's where bridging comes into its own

A bridger would give you one loan over both your first and second properties, often up to 75% of each property, but you won’t need to borrow that much.  They would typically lend 75% of the £73k and the balance of...

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