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.

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