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DIARY OF A PROPERTY INVESTOR – DAY 6

As the rental market has grown inevitably it has come in for its fair share of criticism. Not surprising when it is housing over 5 million people. It is clearly a very important part of the housing market and I for one would be the first to support action against bad Landlords. I am sure there are some and it benefits all of us including Landlords if they are removed from the market. But often you see assertions from those pressure groups that seem to just be against the Private Rental Sector in principle which make you stop and think Can that be true?  Recently I did a post about one such assertion by Shelter that 40% of Tenants are in substandard properties. Can that be true?              Click on this link to see my post and some of the response and judge for yourself.

https://www.facebook.com/groups/UKProperryTraders/1796914283886839/?comment_id=1797078103870457&notif_t=like&notif_id=1476904128763292

Meanwhile getting back to my own business I get some more details about the portfolio of properties for sale in Manchester. There are over 22 properties for sale in two lots. They are located in a number of towns to the North West of Manchester in and around Leigh and are in two lots.

They look interesting. The price for 12 is £650,000 so an average price of £54,000. They are not in areas I am very familiar with but doing some research they seem to be better areas than some we are in. The rents are about £5,000 to £6,000 so again not the returns I like but they are all fully let and are said to be in good condition so that you would simply purchase and start collecting rents I am interested in exposure to that market because Manchester is the one area in the North West that seems to be moving. Many areas at the moment are firming but few are moving up significantly. There is a huge amount of investment going into Manchester which will reflect in the suburbs where these properties are. The metro link has been extended to Leigh which is a good sign.

So again showing that it is good to have a strategy but bad to stick to it too rigidly I decide to have a look in the hope that these will be properties with not only a fair yield but capital growth potential.

DIARY OF A PROPERTY INVESTOR – DAY 5

I am called by a property broker who has a 9 flats available for sale in Sunderland. They are flats above a parade of shops. They catch my attention for a number of reasons.

But wait I hear you say?  Sunderland is not in the North West. Do you not only Invest in the North West as you state in your newsletter?  Well I do not ” only” invest in the North West. I primarily invest in the North West but we can access properties in any area across the North from Liverpool to Sunderland.  I am focused on the North West for reasons that will become clear if you follow this blog but if the right opportunity comes up then we will consider it.

So the flats in Sunderland.  Why do I like them so that I am prepared to go outside my normal investment area? What has caught my attention about these flats?  Here are my reasons:

  • There are 9 flats with 7 one bed and 2 two bed. The price is £275,000 with rents of about £28,000 a year So it is a good return but not exceptional. But there are some flats unlet so there will be potential to increase that. Based on the average current rents if all the flats were let out then the rents would be £33,000 which is better
  • They are in a bad state of repair but close to the centre of town.  That could be an advantage if you could upgrade the flats.  Having said that they do seem to be in a part of town that is not particularly salubrious.  One thing you quickly learn is that In the North of England there are many towns and villages where being in the centre of town is a  minus and not a plus (as in London) for the local population so that the properties are lower priced than those in the outskirts of town. They are therefore dominated by DSS tenants.
  • It is above a parade of shops which means it will be a leasehold which is a disadvantage because we do not like leaseholds. You always have the problem of dealing with the Landlord and we prefer to control things ourselves.
  • It is good that there are 9 flats because if you are going to move into a new area it is useful to have a few properties rather than just one. One property on its own is difficult to justify if it is not in an area that you access regularly.

So far so unspectacular.

However, our research shows a critical fact. The DSS rate for a one bed flat in Sunderland is £390 per month. So it would seem that the flats are occupied by DSS tenants who are paying far less than the going rate. That is not entirely unusual. Sometimes Landlords will have tenants in situ paying rents which the landlord does not increase in line with the increase in DSS rates

The point is though that the potential rent for these flats should actually be more in the region of £40,000. Now that should catch your attention as a property investor who focuses on yield.  It certainly catches mine so I decide to go and have a look.

DIARY OF A PROPERTY INVESTOR – DAY 4

I am back in the new office I am creating in one of my commercial properties. I am taking the first floor which I am converting from an open space into 4 offices a kitchen and toilet.  The work is progressing but somewhat slowly because of the demands of other jobs but the basic office is up and running and I have just had broadband installed so I can use it.

To day is when I do my accounts. Boring but essential. I have a bookkeeper who helps me remotely. We can do this using an online accounting package called Xero.  Our system involves me inputting in the accounts data and then the bookkeeper tidies it all up in the correct manner. We can do this because as an online system it can be accessed by anyone anywhere. I have to say I have found it a very good system to use.  I could put the receipts in the post to the bookkeeper but I do not do that for two reasons. The first is that I am nervous to have the receipts going backward and forward by post in case they get lost. The second is I like to put the figures in because it helps me understand what we are spending.

I  have been round to have another look at the mixed us shop and flats. I have noticed some cladding on the walls which may hide problems. I have had further discussions with the Seller and he is keen to sell so I make an offer for £140,000.

Later on during the day I get a call from the Agent to say that this offer has been accepted. Good news.

DIARY OF A PROPERTY INVESTOR – DAY 3

Day 3

I have two investors who I work with. We work as partners. So we own properties 50/50. They put in the finance and my team do all the work. Why does that work for them you may ask?  Because they live in London in one case and Germany in the other and have no interest in taking the time and effort required to invest in what for them is such a remote location. However, they can see the advantages of investing in the North West particularly the yields and by partnering with someone on the spot can benefit from their knowledge, expertise and hands on involvement. They also know that I have an existing successful track record but that their finance enables me to bypass commercial lenders and move quickly to secure the many deals available. In addition, all money they invest is in the form of a loan and a day will come when their loan is released and they have a 50% share of their portfolio and no money in

I have a skype call with my German Investor. He is wanting to put more funds in to our Company.  He wants to try and focus on larger deals such as small blocks of flats. I agree to have a look for something suitable.

I have a look at some possible opportunities and see a company advertising a portfolio of properties in Manchester that looks interesting. I give them a call to get the details.

Diary Of A Property Investor – Day 2

Day 2

I have been to meet the Seller of the mixed use shop and flats I am interested in.

It is always helpful to meet the Seller of any property and find out why they are selling. Of course that will not work with Auction Properties but for private sales it should be. Then consider if what they are saying makes sense because if a deal is too good to be true it may be. What you do not want to do is inherit a property with a major problem.

Many Sellers do have a genuine reason for selling at a low price and those are the deals you want to do. Here the Seller tells me his main business is in Devon and that he only had this property as an Investment because his wife came from the area and they used one of the flats as a base when they came to visit.  Now he is divorced and wants to move back to Devon and wants to off load the property as soon as possible. He does not have the time or the inclination to keep it and manage it as an investment from Devon.

I now have a detailed look around the property .  As I do I see that there are possibly more works than I originally thought.  I have also looked up the rateable value for the remaining shop and the Council Tax for the  flats. They are not cheap. Of course if I get a Tenant they will pay but if I do not then I have to pay . The shop in particular may take time to let out.

I also have to consider what I could buy for £175,000 in this particular area. That would probably buy me 3 to 4 houses which I could let out for £15,000 to £20,000 per annum and with possibly greater capital growth potential if the market ever recovers.

I need to have a more detailed think about the whole proposition.