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property investment Apr 20, 2019

Most investors think that the only way to finance deals, when their bank account hasn’t got enough in it, is to joint venture (JV).  To maximise your return on investment there is a JV Pro-Fit Retainer strategy.

Stop giving away 50% of your deal’s profits when you joint venture and, if you do decide to set up a joint venture stay on the right side of the FCA.

  • PRO = Professional – the way you approach your joint ventures
  • FIT – Fit for purpose – ensuring your JV agreements are legal and can’t come back to bite you.

The key thing to remember is that the Financial Conduct Authority (FCA) states that you must only joint venture with someone who is categorised as a sophisticated investor.  That means you need to know about PS13/3 and what constitutes a sophisticated investor and there are seven main criteria for these.

  1. An annual salary of £100K+
  2. Independent assets of £250K+ (not including equity in their main residence)
  3. Employed...
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One building, five flats

property investment q&a Apr 10, 2019

THE QUESTION

If I buy a property with five flats and then split the titles and try to get 5 BTLs mortgages for the flats: would there be an issue with mortgage providers not being willing to provide mortgages in the same building?

THE ANSWER

Simple answer - yes. This issue confuses a lot of investors.

  1. You cannot be both freeholder and leaseholder, so the freeholder must be a separate entity to the leaseholder/s. Often this means using/creating a Ltd Co to own the freehold
  2. BTL lenders have over exposure rules. This means they restrict lending in any given block to 20/25% of the total number of flats. In this case, five flats means you will need to find five different lenders
  3. BTL lenders don’t like the same entity owning all the leases in a building.  So having all five leases in the name of the same leaseholder will cause problems.  You may not need five different people on each of these leases, but you will need a minimum of two each owning two or three leases....
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Bridging finance for beginners

property investment Mar 30, 2019

Even at property meets people run in the opposite direction if anyone suggests that bridging finance might be the solution to their financial challenges.  

Other well-meaning investors will advise you not to touch it because it’s too expensive.  They’ll warn you that you’ll lose your shirt - or try to frighten you off with other prophecies of doom.

So here’s a question for you:

Does bridging finance live in your ‘scary box’?  

If you’re an investor that’s never used bridging it probably does.

We all have a scary box and what is in mine are professional people, i.e. solicitors and mortgage advisors who advise people not to use bridging finance.  I find it amazing that people who should be knowledgeable about property don’t understand that, in the right circumstances, bridging finance should be your first choice, not your last choice.

What is it about bridging finance that’s so scary?

It’s perceived...

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The Calculator Close

property investment Mar 20, 2019

When you’re negotiating with the seller of a property you are interested in, don’t forget to prepare properly.  That means being ready with your persuasion strategies. One of these is the Calculator Close. This is how it works.

Rule 1:   You must give control of the calculator to the other party.

Rule 2:   Any figure punched into the calculator must come from them, never from you.

Start with the asking price – get them to enter this in the calculator. Then break down all the costs involved in getting it to the ceiling price, one by one, including:

  • The cost of the needed refurb; you’ll add credibility by breaking down the cost into separate component parts, materials and tradesmen or room by room.
  • Any buying and selling/refinancing costs (including Stamp duty land tax)
  • Maybe borrowing costs
  • Definitely the profit you need to make from the project to make it worthwhile taking on.

Don’t allow them to use ‘bargain basement’...

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Financing conversion of an HMO to serviced accommodation

q&a Mar 10, 2019

THE QUESTION

I’m seriously considering converting my HMO into serviced accommodation (SA).  How easy would it be to refinance it as SA?

THE ANSWER

Buy-to-let (BTL) lenders invariably require a minimum letting term of six months and a maximum of 12 months in the terms and conditions.  That makes short-term lets a no-go area for the mainstream lenders.

Commercial lenders see serviced accommodation as in the same category as B&Bs and guest houses as it uses the same business model.  These lenders fall into two group:

  1. Those that are OK with both SA and B&B and are happy to lend
  2. Those that don’t like SA because the whole building isn’t used for the same purpose i.e. one flat in a block.

Due to the lack of a certain income lenders are nervous about the security of their loan and want some assurance that the income from the property will cover the mortgage payments comfortably.

If you remortgage an HMO lending is straightforward as you have the...

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Unmortgageable properties – hidden treasures

property investment Feb 28, 2019

Unmortgageable properties represent a gold mine of opportunities!  But before you jump in you need to understand why they are unmortgageable and which ones have profit hidden in them – and the deals to avoid.

Unmortgageable properties are valuable because:

  1. There is significantly less competitive buyer interest
  2. Vendors are already resigned to accepting below asking price offers.

The vast majority of property investors are mortgage-dependent and when a property can’t be mortgaged they walk away.  This leaves the field clear for the few investors that have the knowledge of how to buy this type of property.

Better still, not only do mortgage-dependent investors walk away from unmortgageable properties, they often don’t even spot them; they’re not on their radar.

Why is an unmortgageable property such a good deal?

The owners of an unmortgageable property are usually aware that it’s unmortgageable.  Often this is because they’ve lost...

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Get better deals

When you’re trying to negotiate with vendors to bring down the price of your property, you need some smart strategies to reduce the price (and increase your profits).  The Calculator Close is one of these strategies, this is how it works:

The Calculator Close

  • Rule 1: You must give control of the calculator to the other party.
  • Rule 2: Any figure punched into the calculator must come from them, never from you.

Start with the asking price – get them to enter this in the calculator.  Then break down all the costs involved in getting it to the ceiling price, one by one, including:

  • The cost of the needed refurb; you’ll add credibility by breaking down the cost into separate component parts, materials and tradesmen or room by room.
  • Any buying and selling/refinancing costs (including Stamp duty land tax)
  • Maybe borrowing costs
  • Definitely the profit you need to make from the project to make it worthwhile taking on.

Don’t allow them to use ‘bargain...

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BTL mortgages for HMOs

Uncategorized Feb 10, 2019

THE QUESTION

What method of financing do you use to purchase a property to convert to an HMO, before re-financing to an HMO product?  I'm being told by a broker it won't be possible to get a mortgage, (not due to the fact the house is not mortgageable, but due to the fact I’ll be carrying out ‘extensive works’) and that I have to use bridging.

Are there any mortgage lenders who will allow you to do works on a property?  What are the parameters for this?

Or is bridging my only option?

THE ANSWER

Your broker is correct in so far as no mortgage lender would allow you to do the level of work required to convert a property to an HMO, whilst you had a mortgage with them.

It’s not so much that lenders don’t allow you to do work to improve the property, they do, but converting to an HMO and then filling it with multiple tenants breaches the T&Cs for that type of mortgage, which usually allows only one AST for the property.  The result is that...

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Honey, I shrunk the deposit!

Uncategorized Jan 30, 2019

When it comes to investing in property the big challenge, especially for newbies, is getting enough money in the bank to pay that all important 25% deposit.  Depending on where you are buying property that can run to many thousands of pounds.

So what if you could trim that 25% down to nearer 10%?

Here’s the strategy:

Step 1:  Complete the purchase – using bridging finance rather than a BTL mortgage.  Some properties won’t be mortgageable anyway, but that doesn’t mean they’re a bad buy.

Step 2: A quick exchange of contracts.  This can be done as soon as your loan is approved and as soon as your solicitor is able to arrange it.  We should be talking days here, rather than weeks and certainly not months.

Step 3: Quick completion.  Again, that will be as fast as your solicitor is able to do it. Often this will be in 28 days or even quicker.

Step 4: Execute your exit strategy from the day of purchase.  This means if...

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Does flipping after three months affect mortgage potential

q&a Jan 20, 2019

THE QUESTION

I’m flipping a house after three months,  I’ve heard most lenders won’t lend against a property unless I (the seller) have owned it for at least six months!, is this right?

THE ANSWER

That’s true to a point, but it depends on the lender.  A number of BTL lenders impose this restriction on the seller.

However, you shouldn’t really be selling to other investors as they view it as a logical rather than emotional purchase, often not wanting to pay full market value.

Main residence lenders are different, to a degree.  There are some that still impose the same restriction on sellers, but it is not across the board by any means.

So your buyers will not have access to all lenders (subject to their circumstances) until you have owned the property for 6 months.  The net result of that is they may be excluded from some market leading deals.

The key here from people who successfully sell within 6 months is - transparency.  You...

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