richard brown

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About richard brown

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    Obsessed member!

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Profile Information

  • Property investment interests
    Value-adding refurb
    Single let
    Holiday / short-term let
    Trading / Flips / Development
  • My skills
    Commercial & strategic approach
    Knowledge sharer & mentor
    Blogger / writer
  • My goals
    I have 3 principal aims (my SMART goals are more specific):
    1. Through property to generate an income stream that would allow me to chose my lifestyle, location and daily activities that would include fun-filled 'work', helping others to grow & develop and lots of travel, leisure pursuits and that kind of stuff!
    2. To write at least one book...more likely 3 ;)
    3. To coach and mentor others - enjoying thanks & 'likes' for the free content along the way
  • Interests outside property
    My family, sport, travel, music and occasionally throwing myself out of an aeroplane at 10,000 feet, free-falling for the first 7,000 :)

Recent Profile Visitors

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  1. Hi Victoria These things tend to help: Pet deposit in case of damage caused by the pet (chewed carpet and that kind of thing) Rent premium (which I personally prefer to a deposit anyway) Pet referencing - yes, such a thing does exist Meet the pets to see for yourself Pet-friendly environment, such as hard flooring on the ground floor in the case of dogs and lockable cat flaps for cats If tenants would ALWAYS seek permission in advance it would also go a long way to improving relations with their landlord Personally, I have no objection to people bringing pets with them, provided they are well behaved, suitable for the particular property and of course permission is obtained first. I agree with your sentiment that it opens up the rental market to more potential tenants as well. I hope that helps, Richard
  2. Hi Neil Honestly, I wouldn't get that loan personally. December 2018 isn't that far away and so it won't make that much difference to wait until then I would suggest. Remember that if you take a loan for a deposit that you increase your leverage or % debt on the property and these days it is more ideal to have some sort of equity cushion I would suggest...unless you have a 'burning platform' to escape! Using a loan to part-fund a BTL deposit is also frowned upon by the lenders in any case, so it may actually work against you...and you do need to declare the source of your deposit (failing to declare it is a loan could be classed as mortgage fraud). I also wanted to refer you to this podcast episode: as it talks about how to raise funds for property in different ways. I do in fact mention using additional borrowing BUT that was in the right context...if you have a clear, short-term exit strategy to settle it off..e.g. a sale or refinance. I would not necessarily recommend this option for a standard, long-term BTL property for reasons stated. There are also some additional links in the show notes that you might find interesting. All the best, Richard
  3. Hi Joe Lenders have been forced to tighten up on their lending criteria, application process, etc. by the FCA and others, perhaps that's why you have been asked so many questions. Some lenders may be rolling out these changes faster than others as well, so you may see a difference between lenders until the dust settles. Whilst a pain, none of the requests are overly onerous or excessive, although sadly not as simple as what used to be the 'we just look at the property' pitch as was previously the headline grabber for bridging lenders. In terms of fees, I would look at the fees in total and indeed look at what I call the 'total cost of financing), which includes ALL fees, lender legals and interest charges for the period you are looking to lend for. £600 for the broker to do the works is reasonable. The 1% of loan fee needs to be taken into consideration with any other lender fees. It is not uncommon for loan application fees to range from 2% to 3% in some cases...but this would include the fees due to the broker, aside from the £600 equivalent. 2% plus the £600 or thereabouts is probably par for bridging, so decide based on the total fees if you are above or below par in the end. Don't forget that your broker should be putting you into the best deal overall...that means a combination of the lowest overall cost of finance (includes all fees and interest charges), ease of application (including turnaround times) and likelihood of acceptance based on your personal situation. Hope that helps, Best Richard
  4. Hi Jo Probably both options! This is a tough call really, as they probably do want to channel you through their in-house broker to earn more fees. However, it does also allow them greater control of a sale if they have visibility of your mortgage application, so there is a practical benefit to them as well. You could of course stick with your existing broker, but then get cut from the so-called go-to list in that case. I don't believe they are legally allowed to do what they say they will in any event, but that doesn't mean they won't do it of course! If you are likely to be a one a year or so type of investor, then you could go along with it but just make sure NO applications are submitted without your express consent. How serious are you about using this agency repeatedly, they don't even have any suitable properties as you say? Personally, I have always stated that I have my own broker and that I have plenty of properties with finance attached already. I may even go as far as showing proof of funds / deposit and even an approval in principle / facility letter if need be to stick with my own financial team. Hope that helps, Richard
  5. Hi David Well, that's what you get when you prepare a forum response and use the back of an envelope to flesh out the all goes Pete Tong when a smart guy like you crunches the numbers to check OK, so I got my big guns out now and reworked the figures a little more accurately...the end result being that we land in the middle of one another lol. The explanation is quite simply that there are a few additional costs that you had not factored in when you double-checked my calculations and...well my envelope was not as good as my excel spreadsheet was in working things out correctly! To be fair to me...I was kind of using a short-term financing acquisition in my original numbers as well, but to simplify I am now assuming's better with low value projects as I said in the original response. The bottom line is as per the attached screenshot, bar some arguing about some of the details. What this does illustrate quite nicely is how you can increase your returns beyond vanilla BTL with a BRR variation or even by flipping. This is a very realistic deal I have to say as well. Right, hoping there are no more big holes in the numbers, besides whether you agree with me on contingency, holding, interest rate and so forth. Hope that clarifies and thanks for checking too. Richard
  6. Hi David Thanks for the feedback and the inquiry. Sadly, you have miscalculated...but it's not terrible news, as the real ROI is more like 13.3% before tax. £200 x 12 / £18,000 cash left in is the ROI calculation for the BRR version. By way of interest, the standard 'buy one ready done up' variation is more like 9.6% before tax (£200 x 12 / £25,000), which is still not too shabby if you can pull it off I guess? Still, it just goes to show how you can improve your returns using the BRR approach. In this example, the ROI has improved by around 38.5%...perhaps that's the calculation you were aiming at David. By way of interest, this post exchange inspired my latest podcast episode, which is available from 6am on 14th June (link won't work before then), available here: Enjoy!
  7. Hi Rafal Great that you actually have a plan...not everyone does! First, I like the fact that you have set a clear goal and also recognise your lifestyle / personal preferences as well...again that is really important to identify. You talk about the portfolio being hands-off after c5 years but you don't mention what you are prepared to do as you are building the portfolio...I am guessing you intend to be a little more hands on during this phase. Is it possible? Well, yes in theory it kind of is. However, there are a few 'buts' to consider. First is the type of property you will be getting at that price point - often it will need to have some work doing to it to either make it lettable or keep it lettable; in other words additional costs to start off and the works part to manage too. This might mean tying up a bit more cash than perhaps you were expecting. I would therefore have a look at the type of properties you could buy and see how much money you would need to spend on them to get them lettable and run the full numbers to get to your net cashflow position based on local comparable rent levels. I would also say that if you intend to be 'location-independent' of the properties in the future, then you also do not necessarily need to restrict the area they are on to start with either. Remember, if your primary goal is income, then you need to be looking in high yield areas. Finally, remember that older houses will need more money to maintain than say newer flats, although the latter have service's swings and roundabouts but both maintenance and service charges will eat into your net cashflow. The second, is the net rental income, which is also linked to the property type just mentioned, but also the tenant type. Have you done some analysis on rents and tenant type to arrive at your target £250 to £350 per month net income? £350 sounds high on a hands-off investment at these sort of price points based on vanilla single-lets. Let me give you an example from a deal we recently shared on our Deal Tips Service. It is in Liverpool, would cost around £45k to buy but would need around £25k spending on it to get it lettable (plus other acquisition costs etc.). However, it should be worth £85k or so once done and could potentially be refinanced to extract some of the cash required to get it set up. The local rent around there is c£550 per month and so after all costs and provisions it would net around the £200 per month mark in cashflow. The alternative to buying it cheap and doing it up would be to buy it ready to go, which would need around £25k or so as a deposit including the usual fees and other buying costs versus around £46k if following a 'buy-refurb-refinance' (BRR) model, leaving around £18k cash left in after refinancing. The reason for highlighting this example is twofold: first to show the type of net cash position and funds requirement you might need based on a real world example - buying this property done up would need £25k or so in cash, assuming the no works option and would net around the £200 per month in cashflow mark. The BRR strategy on this one would work best if you could pay cash and would result in a similar net cashflow position based off lower cash left invested, allowing your money to stretch a bit further. So, you could probably squeeze 3-4 of the these types of properties out of your full 5 year investment pot, assuming reinvesting your rental profits along the way. That's £600 to £800 in net you would miss your goal. You may be able to squeeze and extra property or two out of the pot by following a BRR strategy, taking you to £800 to £1200 per month and hopefully reaching your a bit more work to make your money stretch further is an option and my second point. Could you do better than this example? Potentially, yes you can - I certainly have done but I am trying to show you a fairly typical easy-to-find project that most people could locate alone and undertake without too much effort and drama. That all said, here are some things completely different for you to potentially also think about... Consider some higher yielding strategies, like certain LHA strategies and say HMOs, although the latter will need more cash going into the deal at the front end...but with a higher potential net cashflow per property too...think 1-2 HMO properties over the 5 years instead of 4-6 single lets. And...if you don't fancy a load of hard work for 5 years, try setting aside your money in a high-interest facility and then just go and by yourself a few low-maintenance flats / newish houses or a ready-made HMO or two with the funds when you are ready to invest / have enough set aside to buy one! This is the easy life alternative But don't forget to set aside funds for voids and maintenance, especially if this is your only source of income. Anyway, just a bit of food for thought for you and also to show an insight into the type of thought process and analysis I tend to undertake when working with people on a strategy review exercise to open their thinking to other possibilities and test their logic in a real world setting...I hope that's been useful for you and I wish you the best in putting your plan into action! Best Richard
  8. Update: this post provided the inspiration for my latest podcast episode, which you can listen to here: I hope that adds some additional perspective to the subject, after some further reflection. Enjoy! Richard
  9. Yes, I can share your experience to a large extent Janeen...possibly more so, as I have property in 5 countries let alone multiple UK counties lol It's one of the drawbacks of having a diverse portfolio and sadly you have to live with that. The are pluses there to offset this to some extent (diversification being #1), so it is just a part of the 'price' you have to pay to some extent. With a more localised portfolio, the general path is usually self-manage or outsource to different agents (1-2) then to appointing a sole agent then to setting up your own your portfolio numbers grow. Clearly, this is not as scalable when your portfolio is spread out far and wide. There are some 'national' agencies including online types but usually you are still left with a similar problem of local differences in one way or another. One of the best ways to overcome the problem is to systematise yourself and then track the differences between the agents you do use and / or to appoint a portfolio manager to do the chicken herding on your behalf Best Richard
  10. Hi Steve Yes, it is a's what many BTL investors already do! You must be clear that the loan will be for an investment property and not as your own home though. I would suggest speaking to a good mortgage broker rather than approaching lenders directly, try @simon allen If you want a whole bunch of resources for a newbie, then please check out my website, podcast and other resources as per the links in my signature below. Best Richard
  11. Thanks @Matt R B, much appreciated Here is the link to that particular episode: I also wrote a piece for YPN magazine around the same theme and if you don't mind seeing a proof copy, I have attached it to this message, feel free to subscribe to YPN magazine for more of the same from a wide range of writers, which I highly recommend. But, if you just want to see my articles subscription-free, then you can get them here: Best Richard RichardBrown_YPN108.pdf
  12. Hi Roberto I tend to favour the rent for a while and then sell option for what was your former home as I discuss here: However, it is now quite a tricky situation given the 3% SDLT premium that came into the mix since I recorded this podcast. If you are keeping your former home as an investment and buying a new home to live in, then you will have to pay the additional 3% SDLT on your new home. This would be different if you were selling your old home and simply replacing it with a new one. So, you will have a higher Stamp Duty bill to cover in the short-term. That aside, by converting your former home to an investment property, you would benefit from the next 18 months capital growth tax free (versus zero months for a new rental property), plus you will also obtain the £40k lettings relief and the annual CGT exemption(s) capital gains tax-free as well. You would have to try and find a way of getting the income into a company to avoid being stung for any mortgage interest relief on your former home, assuming you have a mortgage on it, or would have to factor that additional cost into the equation. So, as I's a bit complex, but if you can work out the overs and unders involved between SDLT, CGT (PPR, lettings relief and annual exemptions) & mortgage interest relief, it could still worth retaining for a time before selling at a low (or no) effective tax rate). Finally, you can should probably do much better than 3.5% ROI but it might be worth sacrificing some income return in the short-term to receive the capital gains you might be able to realise by deferring a sale until later. Given that you don't need the income for a time, perhaps looking at where your effective break even sale value / time is would be worthwhile and renting the home out would be a useful exercise. I have a spreadsheet to help with that...details in the podcast show notes Best Richard
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  14. Hi Ray Haf1063 is right when he says it really does! Traditional BTL requires a deposit for a mortgage and some extra to cover fees. Even if you buy a cheapy property, you probably will need at least £20k and that's assuming no refurb work. However, that may also not be the best investment either! So, there is an element of trade-off required and that's why raising more could be more beneficial. There are two challenges when it comes to traditional property investment through BTL - raising the starting capital and then raising the capital for the next one all over again! It is a highly capital intensive pre-occupation. There are some things that we could do to help raise that starting capital, although some may not be possible or even preferable, as follows: Aggressive saving - and I mean more than the 5% to 10% of earnings...some people here have managed to save 50% of earnings! Budget slashing - in harmony with saving, a severe review of our spending habits and potentially going on a spending fast for a time, no holidays, no meals out, no expensive TV subscriptions, no branded products, no second car, , no first car, etc. Additional income streams - second jobs and home-based businesses (eBay, car boots, etc.) Liquidating assets - selling off valuable or semi-valuable items to help raise some cash Equity release - accessing equity in our home by refinancing, downsizing or even switching to renting Additional borrowing - raising money by borrowing through unsecured lending, friends & family or other joint venture structures There are also some non-traditional property strategies that enable you to get going in property with less capital...but be warned, they are more like a job or a business in their own right, such as: From £1 to get in - lease options From a month's rent to get in - rent to rent From giving up your spare bedroom, parking space or garage - renting out space at home From giving up your time - deal sourcing or other landlord / investor services like project management, lettings management and so on The other approach is to make what you do have go further once you get started and here are a few ways of doing that: Higher yielding strategies - e.g. HMO, short-term lets, etc. Trading to grow the snowball - buy and sell to make profit and plough it back into the next deal before you start holding assets Value-adding strategies releasing equity to re-invest - the buy-refurbish-refinance model is a good example of a property, add some value and then release some of that extra value by refinancing and going again Buddying up - work in partnership with others to make your pot stretch further, but keep in mind the returns also need to be shared too! Joint ventures - a variation on buddying up but only where you borrow the funds from a JV finance partner and repay them a fixed rate or profit share In my own case, I sat stuck for 4 years wanting to get going again in property but I didn't have the funds available to do so. Then, I realised that I could work with others and adopt a value-adding strategy to get started instead. So, with just £10k of my own money from a bonus at work, combined with £50k from a JV partner, a £50k bridging loan from a lender and also a very rare £25k contractor loan to fund some works...I was able to get going on a refurb and upgrade project, refinancing to release the funds to repay everybody and then go again. It was not easy and in fact I left my £10k in that property, so I still had to start with the funding all over again BUT if I had bought that same property ready-made with a BTL mortgage I would have needed around £50k of my own cash to do that...and I simply didn't have it at the time. It was however, the start of my property journey in earnest and I have made great strides since that deal I am happy to say. So, finding a way to get started sooner rather than later is the key takeaway here. I have recorded something of a mini-series on this subject if you or others want to know what your options are based on a given starting are the two with the lowest starting fund requirement: and Hopefully, this gives you something to go on. Good luck! Richard
  15. Hi Naeem These further reports are a little more reassuring. I am less concerned about the flood risk...lots of properties would be flagged as having moderate or even higher flood risks...anything close to the sea or a river and at sea / river height for example. Great swathes of new build housing have been built on flood plains as well, so it is becoming harder to eliminate the risks. My next big question would be around insurance. As these units are flats, you will have two sets of insurance: buildings insurance with the freeholder / managing agent and contents insurance which you and / or your tenants would have in place. I would raise some queries around the type of cover and any exclusions or special conditions that the buildings insurance has in place for peace of mind there (may need to ask the freeholder or the management company via your solicitor for this). I would then get a quote for landlord contents insurance and possibly even tenant content insurance with a broker (not online as they don't always fully check all risks when they quote) to see if any special conditions, exclusions or restricted cover arise there too. If it makes you feel any better, I own at least 2 properties which have supposedly higher flood risks and they have not been a major problem for me...both were insurable though, so that's key. One is close to the sea...derr and another is toward the bottom of a hill close to a drain, which to be fair did flood in the past but the house is raised and away from the drain, so it did not affect it. The subsidence issue is also softer than it initially you reports identify any claims in the local area, or within the block(s) itself? The insurance queries suggested above may also give some extra peace of mind to you here though. If you wanted to go belt and braces then you could instruct a structural survey to be done...explain your concerns and they should be able to give an opinion. This would cost up to £1k to arrange however, but if you are intent on proceeding it could be worth it for peace of mind. Hope that helps. Best Richard