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Going full time in property too quickly can spell trouble

strategic planning Mar 05, 2015

“I am full time in property” is a pronouncement heard frequently at property meetings. My question is, are too many people in too much of a rush to get to this nirvana like state, without fully realising the adverse effect it has on their ability to raise mortgages? Would they not be better to slow down and take their time reaching that pivotal moment in their lives until the ability to raise Buy To Let mortgages in particular was much less relevant?

Being full time in property is one of the most commonly voiced goals in property circles. To be able to create enough passive income from property to be able to give up the day job and become a ‘full time property investor’. It is frequently taught and encouraged on property courses and at meetings. It is held up as the definitive status symbol, to be worn almost as a badge of honour. Speakers will spit out the term ‘wage slave’ as a form of derision almost.

There is undoubtedly great merit in finally...

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Why HMO’s don’t value up at 10 x income

I can see people are puzzled as to why HMO’s aren’t valued as a simple multiple of income by commercial lenders when commercial properties usually are.

I would suggest it is because there are some fundamental differences between the two…

Commercial

  1. leases are long, up to 20 years
  2. lenders take comfort from the lease providing an increased likelihood that the loan will continue to be serviced
  3. leases are often fully repairing, meaning the tenant is responsible for the upkeep
  4. leases have built in break clauses and rent reviews
  5. the value of the property reduces considerably when vacant, in some cases by 50%
  6. the property has a designated commercial usage with the local council i.e. A1, C1
  7. the property cannot be used for a domestic dwelling if not occupied by a commercial tenant
  8. commercial tenants runs a business of whatever sort and can therefore be viewed as generally more financially aware

HMO

  1. leases are rarely longer than 12 month AST’s
  2. sometimes licences...
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