Dominus

1 4 5 6 7 8 11

Diary of a Property Investor

Day 1

You are joining me in the middle of a journey to build a successful property portfolio.  This blog will give you the chance to see how I do it and hopefully pick up useful tips along the way. I could give you a long explanation of who I am and where I am but instead I am just going to start and hope that you will stay with the blog and pick up the full details as we go along. I also hope that my thought process about how I deal with things that happen on this journey will give you some helpful tips as to how you should approach your investing strategy.

So let’s start with the property I am currently looking at. It is a mixed use commercial property with 2 flats and 2 shops below.  It is on a nice plot of land and comes with 6 parking spaces which are always useful. It is located at the end of a local high street. The asking price is £175,000 and the rent potential is £20,000 per year. But at the moment only the shop is let for £5,000 per annum.

I believe that this represents a good deal.

I start with a rent of £5,000 from a Tenant who has been there for 4 years and has a further 6 years on his lease. I have been into speak to the Tenant and he is keen to stay. The shop is not great but it works for him.

The other shop will need some work to make it presentable for renting. Shops in the North of England are never easy to let but this one is in a good location and I think a rent of £5,000 per year is doable.

The two flats are interesting   One is a 3 bed the other a 1 bed. They are very large with high ceilings.   Again they need some work but not a lot to make them rentable. There are a number of possibilities but I would certainly expect to let them for a total rental of £10.000 per annum so £20,000 is a reasonable potential rent.

The Building is ok although looking at the roof and gutters they probably need some attention

Assuming I spend say £10,000 and my expenses are £2,000 then the total price will be say £190,000 to leave some contingency funds available. So the yield will be 10.5% Not bad.

But I hear you ask you have forgotten stamp duty. Surely under the new rules you will have to pay the extra 3%  so the stamp duty will be £6,250  But that is not correct. The stamp duty will actually be £500. Why?  Because interestingly mixed use properties do not count as residential and so are governed by the commercial stamp duty rules. Here you only pay stamp duty if you pay more than £150,000 and for £175,000 the duty is only

This is definitely worth considering

 

The legal bit
All views expressed are those of the writer. The essential facts are correct but some of the details have been altered to make sense of the blog. You should take all appropriate legal accounting and professional advice in respect of any matters discussed in this blog. In particular you should not rely on any legal or accounting or other professional points made by the writer but should check them with your own professional advisors  The writer can accept no liability or responsibility for any actions you may take in reliance on matters contained in this blog

Is Investing in the North a bad idea?

There was a comment on Facebook in a group called UK Property Traders that it is very unwise to invest in the North remotely. The exact words were

“There’s a lot of bad advice flying around about investing remotely. Low yields, London, tax changes, Brexit etc. all making people think & opening them up to ‘investing up north’. Frankly this is some of the most dangerous advice being bandied around”

This provoked a flurry of comments till eventually the administrator turned the post off.

I pointed out that we act for Investors who invest remotely and it had been incredibly successful. I was then asked “Could you define incredibly successful portfolio?” My reply was

“53 Properties in one portfolio with a cash flow when fully rented of £240000 plus achieved with an investment of about £750,000 (now down to 650k) now being repaid over a 3-year period starting with a final remortgage that should net 250k to take off the loan. As you can imagine this investor wants to keep investing so we are starting a new portfolio”

One response I got was:

“If those are the right figures, wow!”

As someone who comes from London I can understand that comment “If those figures are right” and I take no offence at them

They are right but the reason why people from outside the North cannot believe them is because they just do not get this market. I have had the privilege of working in the North for 4 years. In that time, I have spent my whole time researching and buying properties with my team so I guess I have become a bit of an expert in finding the right properties to buy and the right areas.  I would like to claim our results are entirely down to my special skills but actually these figures are not as extraordinary as you might think if you “get” this market so I thought I would give a simple example of how they can be achieved.

We are buying a mixture of terraced houses and small to medium sized blocks of flats. The key is we buy for cash and then remortgage. Let us assume we buy for an average of £35,000 per property and that all monies are spent on expenses or reinvestment. And we remortgage for 60% of value (because we go for very low interest low loan to value mortgages as we value yield over capital).  Let us ignore that we buy and remortgage as we go along and assume we had £750,000 and invested it in one go. That would buy 21 properties. We remortgage them for say £500,000 and buy 14 more properties and remortgage them for say £300,000 and buy 10 properties. So we have 45 properties. With an average rent of £4,800 per annum then the income will be £216,000.  That brings you close to our figure of 53 Properties with a gross income of £240,000.

This is a very general set of figures It ignores many pluses and minuses you would find in practice. For example, that when we started 4 years ago buying properties sub £30,000 was not that difficult. It is not so easy now at those prices. It ignores costs of refurbishment. But then it ignores the income from the properties which usually starts coming in from week 6 after purchase on average. It ignores “jewels in the crown” we have found where we got 15 % to 20% yields on flats in a block which are well below £35.000 each

The point I am making though is that just taking a simple look at the figures I hope you can see that to achieve our figures is NOT genius or completely impossible. Because what people from London do not factor in is the very high yields because you just do not get them in London. And they do not factor in the effect of having a high yield investment especially if like us you achieve it by simple lettings with no HMOs or multiple lets so that relatively speaking your management costs are low.

In the same way people in the North find it very difficult to grasp the capital growth you get in London because it just does not happen here. So if you said to people up here you purchased a property in Leyton for £100,000 in 2000 and it is now worth £1 million (this happened to a contact of mine) then people up here would also be saying “if those are the right figures wow” But actually as Londoners know it is not a completely exceptional event. Ask Nick Ross from Crime Watch who it is reported purchased a house in Notting Hill  in the 1990s for £950,000 and sold it for £35 million (OK that was exceptional)

The opportunity to do what we have done are here if you have initial cash to invest and either do as I did and move here or find the right partner to invest with as our Investors have (we think and they think) done with us.

Where I might agree with the original comment is this market probably does not work if you remotely purchase one or two properties and then run them from London with any old local Agents. This is a volume game and you have to have portfolios of properties to make it work and have initial cash so that most if not all your purchases are for cash (But then as you can start with properties as low as £40,000 even today that is something which is feasible for many Investors in  London and abroad)

And you have to have the right team or partner with the right person to make it work and you do need to pay some attention to how your investments are going and perhaps make the occasional visit and monitor your investments on a regular basis. Do that and investing up here can be a very good move in my view.

MERRY CHRISTMAS AND A HAPPY NEW YEAR FROM INVEST IN THE NORTH WEST

It has been an exciting 3 months since we launched Invest in the North West

It was part of creating an online presence which included our new website

www.propertyinvestorpartners.co.uk and our blog Diary of a Property Investor

At the same time we began to post on facebook and linkedin.

We did not have a specific objective in mind. Our main purpose was to establish links with those who might be interested in what we are doing and how we do it. Those who do not live or operate in the North of England but who might be interested in what is happening here.

Our USP is not just that we create high yielding portfolios of properties. It is that we have developed a unique specialised knowledge of where to invest and how to invest. A knowledge based on practical experience that has seen has go from 1 property just over 3 years ago, to 140 today ( and growing). Properties spread from Carlisle to Liverpool, Manchester to Sunderland. Properties which prove our expertise in picking the right property in the right location for the right price.

There are so many reasons why we believe the North ( and in particular the North West) as an area of great interest. We cannot set them all out here. You will have to follow our Blog, newsletter and social media posts to understand our reasons in detail

But what we are also seeking is the best way to expand on the base we have created. That might mean taking on new major investors. Those who have cash resources that they want to convert into high yielding assets to create substantial portfolios. Or it might mean taking on lots of smaller investors who want to buy one or two properties each. Or it might mean creating a crowd funding site to bring together those not so much interested in property assets but in investing their money and getting a high rate of return with a property based security. Or it might mean another path we have not thought of and which we find by exchanging ideas with you our readers and those who interface with us via our social media presence.

That is why we want to be as open as possible to share our knowledge and experience and to get feedback from you with your ideas and experiences. Do contact us and let us know what you think about what you read

Next Year we will expand on the start we have made and we hope you will join us on what for us has been a very exciting and successful journey.

Whatever that year may bring (our predictions are below) now is the time to stop to eat drink and be merry with your family. To enjoy yourself and then come back in the New Year refreshed and ready for the fray.

So, let us take this opportunity to wish everyone a Merry Christmas and a Happy New Year.

NEW YEAR PREDICTIONS

You read and hear a lot of doom and gloom in the Property Industry at the moment. And for good reason. Monumental changes are taking place. A concerted attack is being made on small buy to let Landlords.  The uncertainty created by Brexit and the possible loss of the millions of Europeans who have come to the UK over the last 8 years may well also have a major downward on the market

Those who purchased properties using the old structures may well suffer. They may have stretched themselves too thin in order to benefit from the massive rise in capital values created in some areas of the Country.

They may have low yields and high mortgage costs and suffer if they lose their tax relief.

That could be compounded if like many of us (including myself) they are also seeing substantial falls in rents for their London Properties. See my posts about this by following the link here

Is the London Rental Market about to crack? One Landlord’s experienceAlthough my main focus of activity today is the…

Posted by Marcus Selmon on Thursday, 29 September 2016

The perfect storm would be created if the net effect of these changes is to cause the London and South East market either to stall or even worse to fall.

That could be disaster because London and the South East only make sense as an investment if capital growth continues to rise.

But the real sting in the tail would be if those who cannot afford to carry on also cannot sell at the right price because the flow of new entrants into the market dries up as they realise London no longer makes sense.

Could that happen?  My view is it could.

I predict that next year for the first time in 20 years we will see prices either stall or fall in London.

I also predict that confirmation will come through that rents have fallen and are falling. I know the consensus is that because Landlords are being forced out of the market and /or having to pay more in tax, rents will rise. However, I think market forces will cause rents not to rise but to fall because the number of people looking for accommodation will fall while at the same time a new stream of properties already in the pipeline will increase supply

However, I do not believe either rents or prices will fall in the North of England. I predict they will either stay the same or rise.  This is because the situation in the North is completely different. Here factors that will impact on rising rents will be the minimum wage and the impact of the substantial sums being invested in new industries and infrastructure in many different areas. This will mean more people will be coming to the North to take up the opportunities available in terms of jobs and a better quality of life. it will also mean wages start to rise.

Remember wages, rents and prices have NOT risen since 2008 In many cases they have fallen so there is an awful lot of ground to make up.

I do accept you might think he would say that wouldn’t he because I am based in the North but then it is because I am experienced in both the London and Northern property markets that I have the knowledge to make these predictions. In any event time, will tell if I am right or wrong and if I am wrong I will be more than happy to admit it next December

ABOUT THE NORTH WEST

When we invest, we like to buy Properties with a high yield and in areas with strong rental demand. However, we do not entirely ignore capital growth and if we can we try to invest in areas where there are things happening that could improve the area and cause prices to rise. Here are two examples of developments in the North West that we think will have that effect.

Preston: Ikea to be flagship store in major new retail park in Preston

A major new retail park / office and new homes development is to be built near Preston

The flagship store will be a new Ikea in a project known as the Cuerden Strategic site which is a partnership between the local County Council and two Developers. The project will include a 120-bedroom hotel, 860,000 sq. ft. of industrial space, 280,000 sq. ft. of office space and 210 new homes.

There would also be space for five national retailers, leisure/gym facilities, car showrooms, family pub and restaurants

Interesting that this store is opening even though their original store in Warrington is not that far away and also not that far away is their store in Ashton under Lyne. The fact they would want to open a third store in the North West is surely a sign that they can see the growing potential of the area to provide them with business as affluence begins to improve in this area.

Preston is not a town where we have purchased properties to date for a variety of reasons but we will be definitely looking again.

We will also be looking at another area where we have not invested namely Rochdale because of the Development planned there.

Rochdale shopping centre to be known as Rochdale Riverside

Rochdale is a town in the Greater Manchester area which is one of those towns well known as a name but which has been going nowhere over the last 30 or 40 years and longer. Famous as a mill town, it was a boom town in the 19th Century. The home of Gracie Fields she was the straight forward no nonsense type of person who represents many people’s idea of the North. It was also the birthplace of the Co-Operative movement again a movement symbolic of what the North stood for.

Now there are plans afoot to regenerate it so it can both benefit from and contribute to the developments going on in Manchester. The announcement of a major new shopping centre and new transport links to go with it will give this development a massive boost

The plans are for around 200,000 square feet of mixed shopping and leisure uses. The Rochdale Riverside development scheme extends the existing centre down to meet the new Metrolink and bus interchange. This will create a pedestrian friendly gateway into the Town Centre.

This is the type of Development that can transform an area and bring in new investment and new people to live in the Town

We will be watching events carefully and again considering if we should be buying here.

1 4 5 6 7 8 11