It’s not someone who wears designer suits and likes fine wines!  If you’re getting into the property market it can be tempting to get someone with money to invest in your property purchase, to help to get your portfolio moving.  But any joint venture (JV) partner who is investing cash MUST qualify as a sophisticated investor - according to the FCA.

This is also known as Directive PS13/3.

It covers a range of categories of investment - and includes property deals.  So, before you consider getting into a JV, you need to be sure that your potential investor qualifies as a sophisticated investor or falls into one of the excluded categories.

What is an Unregulated Collective Investment?

Any financial deal that offers a split of the profits and, by definition, a split of the losses; and you cannot guarantee that your project will make a profit.

The FCA’s viewpoint is that an unsophisticated investor can’t do an accurate analysis of what is - or is...

Property investors need to use the F words frequently to get the results they want.  And I’m not talking at swearing at the tradespeople who are getting behind with the refurb!

When you’re an inspired investor you operate with a cash buyer mind-set - and if you’ve heard me speaking anywhere you’ll be familiar with my take on this.  It’s all about breaking out of traditional ‘mortgage-buyer’ thinking.  You need a strategy to set you and your money free from being trapped in mortgage deposits so you can’t use it to buy more properties.

That’s where the ‘F’ words come into play.  There are 5 of them and they stand for:

FIND

Track down a good deal - where the property is vacant and needs a refurb.  An ideal property needs to be structurally sound, but is probably pretty run down otherwise and needs the bathroom and kitchen stripping out and replacing and a serious paint job throughout.

FINESSE

...

THE QUESTION

We’ve been searching for a property to flip for several months, consistently doing viewings and putting in offers.  But, our offers are always rejected.

We’ve done our due diligence so know what our maximum is to make a decent profit.  We follow up properties that we’ve offered on and have broadened our area with no luck.

How do we get vendors to accept our offers? We viewed over 50 and made offers on many without having any of them accepted by the vendor.  Any help/advice is gratefully received.

THE ANSWER

You are doing nothing wrong and plenty right, but an understanding of human behaviour will enable you to get a better perspective.   It’s human nature to over-value what you own already and under-value what you seek to own.

Whilst your calculation of what you need to pay for a property is probably accurate, it is not matching seller’s expectation of the sale price that they can achieve.

If your offers were being...

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...

Most mortgage lenders require a 25% deposit, based on the amount you’re paying for your property.  If you’re planning to get into property that can be a big hurdle to get over.

The days of no-money-down mortgages are long gone and are unlikely to return.  Leveraging credit cards is a decidedly dodgy way to raise funds, so where does that leave you?

There’s a strategy I call the 90% flip.

This strategy blows apart the preconception that a 25% deposit is required to buy an investment property.  Better still it works in a variety of situations. 

• It works great for smartly presented houses where no refurb is required, but the owners are motivated to sell.
• It also works if you want to buy a repossession.
• It also works if you want to buy at auction.
• Interestingly, it works if you want to sell at auction too.
• Lastly it will work if the vendor won’t go for the 100% refurb strategy covered in the next section.

This strategy can turn around a...

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’...

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...

THE QUESTION

I am looking for some inspiration on a potential property.  It is a lovely property that is presently mixed use as a business and flats.

It can be converted to five flats that will fetch a premium price due to the location. The person selling is prepared to listen to options and is prepared to let us develop out the property while she still owns it, therefore, minimal cost to us at purchase.

 I have a few ideas myself but am looking for a bit of inspired creativity.

THE ANSWER

One creative solution was suggested by one of my students who recognised that this opportunity fits one of the strategies I teach on my Ninja Investor Programme workshops.

Through our brokerage, we have financed a number of projects funded exactly this way. So this is not just theory, it works and works well when the number are right.

If you have the current owner’s agreement and permission to enter the property and do the required works to do the conversion, then the delayed...

Some people will warn you that buying a property that you can’t get a mortgage on is madness.  If you listen to them you could be missing out on some great opportunities that may be unmortgageable – but are still very profitable!

Traditional lenders have a long list of types of property they won’t touch.  These include:

• Derelict properties or properties that are in severe disrepair
• Properties without a kitchen and bathroom
• Properties that have more than one kitchen
• Properties with structural defects, damp, mould, wet or dry rot, wall tie problems
• Properties with Japanese Knotweed
• Non-standard construction properties – like the Wimpey No-Fines homes built after WWII.
• Properties where there’s a boundary dispute
• A house to flats conversion that has been done without proper planning permission (or planning permission has been applied for after the fact)
• Properties under £50K in value
• Properties with fewer than 70 years remaining on the...

For most people property deals require a substantial wad of cash to get into the game, but that isn’t always the case.

Typically a mortgage requires 25% down – and that’s before you start doing the refurb.  Then there are the properties that are basically sound, but aren’t in good enough condition to live in – and which no mortgage lender will even consider.

Properties that need a serious facelift are unmortgageable – but they also offer the investor an excellent deal.  Once the work is done they’re worth much, much more than the purchase price and the return on investment can be substantial – but without that essential cash they tend to be the preserve of cash buyers.

However, there are ways around this challenge – and they’re legal and are very profitable for the investor.

Two of my clients came to me for help with very different outcomes.

Not enough cash for a deposit and refurb

The first client –...