richard brown

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About richard brown

  • Rank
    Obsessed member!

Contact Methods

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Profile Information

  • Property investment interests
    Value-adding refurb
    Single let
    Holiday / short-term let
    Trading / Flips / Development
    Selected overseas markets
  • 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

1,932 profile views
  1. Refinance first or set up LTD company first?

    Hi James I think the questions you are asking are more like detailed tax planning advice rather than general strategy advice Your identified strategies are more BTLs and adding in some flips too, which you seem to have settled on. The real question is how do you fund these activities, which is the tax planning point! The general rule for flips is that setting up a trading company is more tax-efficient generally IF you plan to roll over profits and not withdraw them. If you plan on withdrawing the profit each year, then it probably ends up costing more, not just in tax but in compliance, reporting and finance charges. The general rule for BTLs seems to depends! But essentially, higher-rate taxpayers and those looking to build a long-term portfolio of multiple units / value (say more than 4 / £800k), should look into investing through a limited company or potentially explore what is known as a 'hybrid structure' if you wish to be a little more sophisticated. People with an existing portfolio in a personal name have some choices to make as to what to do with their existing and future portfolio and to be honest is best to get some professional advice on that. However, here are some general thoughts on your situation: 1. It is only residential property that is caught up (so far) with the S24 mortgage interest relief changes. In other words, you will be penalised for holding residential property but not commercial property in personal names. So, why take a hit on transferring the commercial property into a company right now? 2. Raising money in a company presents some choices as to how to get it into the company. Usually, directors and inter-company loans are the most tax-efficient methods if you want to pull the funds out again. So, cross-lending from BTL co to Flip co or directors loan into flip co are tax-efficient way to invest yes (notwithstanding what I said about "24 mortgage interest relief on resi property). 3. Some lenders will lend to an entity (individual, company, etc.) and take security against an asset owned by a different entity. The benefit of this is that the transaction will be taxed against the borrowing entity rather than the entity that owns the security. So, you could retain certain properties owned in individual names and take a loan in a company name, just using the property owned personally as security...then you have funds in the company to an interest-bearing rate to the company, however. The snag is that you transfer the tax-relief on the loan interest repayments to the company and leave the income minus the tax-relief with the individual, so it's only worth doing if the net result is beneficial to you...which very much depends on your personal circumstances and the results of your investing activity! 4. Accrued tax benefits (e.g. income tax losses) remain with the entity that earned them and cannot transfer to another entity, unless the entity itself (eg company) is sold rather than the underlying property. In other words, if you have tax losses personally, you can't transfer them to a company. It also depends on the nature of the offset: capex or opex. It sounds like your new roof is being claimed as opex (i.e. against income), so the relief will remain as a tax-deduction in your personal name even after you sell / transfer the property. If it was capex, then those costs would be a deduction against any CGT bill. 5. Finally, you pay both SDLT and capital gains tax USUALLY when transferring property owned personally into a company, so two tax hits to consider. I say usually, as there are exceptions and ways to structure accordingly, but only really if you have several units and / or have been operating as a partnership for several years. By the way...I am NOT a professional tax-adviser, so I am only giving you my understanding and opinion and definitely not tax advice! I tend to give general strategy advice to other property investors, but your situation peaked my interest and I got carried away in response lol. If you need an intro to a professional, ping me or get in touch and I will point you in the right direction, or for more general property strategy advice...well, maybe I can help. Best Richard
  2. The best way to invest £200k

    Hi Paul To save me writing it all out long hand, this should help you out: I did something of a mini-series answering the question of 'what should I do with £x to invest?'...the one above fits into your 'x'. Tip: turning £200k into £120k p.a. post-tax is going to need plenty of time and a 'grow your investment pot' strategy Best Richard
  3. Difficulty letting a property in December?

    Yes, it's quite common in some places. Try and offer a 'winter incentive' of letting fees paid or half a month initial rent paid to get it filled before Christmas, otherwise you are probably looking at 4-6 weeks void potentially. Also, try and line up your ASTs so that they don't end just before the summer holidays or Christmas and the New Year...better to renew tenancies than leave them rolling on month-to-month to avoid the natural void periods Best Richard
  4. Flip Project Hertfordshire

    Hi Stu Do you really need to tank the basement to realise the £300k end-valuation? You would only do this if you wanted to turn the basement into a living space really. Needless to say, if you strip out £5k for the tanking and £5k for contingency, at £20k that does not leave a massive budget for a refurb unless you have n angle, such as mates rates, doing some of the work yourself or the level of work required is quite minor. The last 2 up 2 down that I refurbed (including most major services and some damp protection, not taking) cost me around £28k. Granted, this did include a full rewire, full replacement GCH, new kitchen & bathroom, flooring throughout, damp-proof course and plastering across the entire ground floor, redecorating throughout, some light landscaping, a replacement door & window or two and fixing some floorboards that had wet rot from the damp we discovered (why contingency is necessary!) and project management. It should have cost around £25k all in for a good standard of finish and we had around £3k in contingency, which clearly we also needed! Refurbs are generally lower risk and hence lower return than smaller development projects such as the extensions and loft conversions that Half1963 mentions...but the latter often offer better return opportunities as well. It is extremely rare to see net margins in the upper 20%+ region for a simple, small refurb project these days but they should be quicker and so you can get through them more quickly, barring the extra sales time that we have cautioned you to take into account. Feel free to get in touch via message here (if open to you) or using one of the contact methods below. Best Richard
  5. Rate my deal

    Hi Too many gaps to provide a full 'critique my deal' (the area in the forum you are looking for probably). If you include all the running costs, such as letting fees, insurance, voids & maintenance, any finance-related charges, plus any additional up-front costs like redecorating, repairs, furnishing, etc. I can provide a better insight. However, with a rent multiple of 150, this would put the max purchase price at c£78k for an approx 10% ROI, which is one of my personal rules, so it pretty much ticks that box. Flats come with extra costs like service charge and ground rent but should also come with lower maintenance and insurance, so these can trade-off provided the ervice charge and ground rent are reasonable. Check into the ground rent and service charge terms carefully though. Looks promising though. Best Richard
  6. Flip Project Hertfordshire

    Hi Stu I like deal reviews! I have attached my quick and dirty numbers review here for you to see. The main omissions seem to be: works contingency, holding costs, sales fees and possibly some legal / finance costs but that's tricky to tell based on what you said. It's also optimistic to be fully in and out within 6 months, which is why I usually plan on 9 months on average, mainly to allow a mortgage-buyer to overcome the CML 6-month rule and so open up the whole of the buyer market. You should look at your cash-on-cash returns, which if it were a 6-month project is a tidy 22% over the 6 month period, falling to a potentially more challenging 16% if it were a 9-month project. Even so, 16% net profit before tax over 6-9 months is not too shabby, but this does not provide for any form of contingency really. The uplift in value at c40% is about right to make a flip work, so you are right in thinking that your cost of finance is taking a big bite out of your profit! If you can secure private finance at c10% or better and just cover some extra legal fees, you will probably still make the 6-month profit figure on a 9-month project, so it would be worthwhile if you can source the private finance at 10% pa or better, as you identify. This is just a review of the numbers in a quick break. Let me know if you need any more help with a formal deal review. Best Richard
  7. Hi Cecilia That looks like a clear no to me, as she fully intends to rent the flat out in full from the outset. The only way that I can see this working, would be if the flat had more than 1 bedroom, so letting out a room (clearly with effective free use of the rest of the property) and / or it was rented out for only part of the year under a short-term letting / license arrangement rather than under an AST, with the significant majority of the year it not being let out. Your daughter will need to be seen to be living at the property, which means having things like banks, doctors and such like registered at the address, be on the voter's roll there and be the named bill-payer. She may also need to nominate the property as her primary residence formally to HMRC to avoid any claims on CGT later. You are essentially looking at a loophole here, so the safest option is to not claim the first-time buyer SDLT saving (in fact, she is probably liable to the SDLT 3% premium) given that she probably does not meet the rules as presented. Best Richard
  8. Buy outright or borrow, strategy advice?

    Hi Gareth (I presume) I really enjoy undertaking strategy reviews, as it is interesting to weigh up the choices available against people's resources, know-how and personal situation. In your case, the options presented are almost polar opposite from a risk point of view, which makes comparison slightly difficult. Option 1 is more risky as it increases your personal outgoings and increases your personal debt. But it does turn this into an investment, which offsets this significantly. Perhaps a better variation on this option would be to use the £100k raised and buy 3 investment properties instead at c£30 deposit plus fees per property...and maybe still save to buy another in a year...also save your net rental income and buy another every 5 years or so to have around 10 properties or more by the time you retire. Option 2 is the safe and steady option as it risks little from your personal assets and keeps your personal expenses low and manageable. You might be able to save and but additional BTLs every x years of so, however, you are unlikely to grow at the same pace as option 1. You could also mix and match a little, maybe increasing your resi mortgage by say £30k or £60k and using this as BTL deposits, for a kind of hybrid between your option 1 and my option 1 with a twist. So, if you have a modest to high tolerance to risk, then option 1...with my twist...could work really well...provided the investment selected genuinely does cover all costs (including your increased resi mortgage) comfortably. If you are a bit of a Scaredy-Cat when it comes to risk exposure, then option 2 is the safer, although less rewarding bet. The option 1 at a lower level of additional borrowing and using the funds as deposits on BTLs using a mortgage is somewhere in the middle. If it were me at your age, and assuming I could comfortably afford the increased mortgage payments without relying on the rental income, I would go with option 1 with my twist and probably be set up for life...but I also have a medium-high tolerance to risk too! The final choice is down to you to make as it needs to align to YOUR goals, preferences, risk-appetite and so on. I hope that helps. All the best, Richard
  9. Lacking fundamentals, but...

    Hi Paul I guess this highlights the need for everything to be written down when working with a JV partner, which effectively you are here. It looks like you would end up with nothing for a sale once the real sale price, costs and the mortgage settlement are factored in. This compares to you having to throw in some money now to take over the property, in what looks like a poor area for fundamentals as you have identified. Hobson's Choice then! The thing you say is incidental is actually one of the most relevant points to me though! If your partner has been paying £300 a month to the vendor for 7 years, then he has given them £95k out of £100k already! You say you are not sure what the £300 represents i.e. rent or contribution to the purchase price, but that's the thing I would seek clear confirmation and evidence on before finalising my decision. It sounds like you are not in direct contact with the vendor either and perhaps I would change that. The reason I say this is that at face value you are being asked to buy a property for more or less what your partner originally bought it for some 7 years the same sort of price and the £25k in monthly contribution has not been taken into account! Oh and £300 a month would represent an effective interest rate of 12% on the original £30k balance to pay, which sounds high. It doesn't sound right to me, apart from the fact that you have received a bit of income along the way...but I assume this has not been very much if the £300 and mortgage payments a month came off the rent first and it's seen some rent arrears now too. Needless to say, I had a quick sniff around and reworked your numbers, which suggests whilst you have the very good mortgage in place you should see an ROI on your c£20k cash investment of around 13%. But assuming a more conventional and current mortgage rate of around 3.5% that would fall to around 7%. I agree that you would reduce your cash investment by taking on this property, but at the same time, what else could you buy for this sort of money, or what else could you buy with a £20k deposit and why go into debt to buy a poor investment? Personally, I wouldn't pay £20k for a property in this location. Having looked at some similar priced property for sale and the local rents (£500 seems generous), the most anyone should pay for this property would be £100k assuming a 6% gross yield on a £500 gross rental figure. But as a savvy investor I would want a better deal than that! I believe what's going on with these offers is that your partner wants something out of the deal himself. As I say, the vendor has seen £95k over 7 years, so theoretically they only need another £5k to see them right. If I were you, I would not be offering more than you already have done to be honest, I would have stuck at the £10k to £15 mark as 'see you right money' for the JV partner and clearing off the vendor's £5k. So, £17k to them plus a few legal fees would return you around 10% ROI at a more realistic mortgage rate of 3.5% and so that would be my bottom line. It seems like you are the only show in town if the property has been on the market for 18 months already, so I would stop trying too hard to buy this property and instead back off. Psychologically, they think you are really interested because you keep upping your offer. I would now do the opposite and say £17 is your best and final offer and you want a response within 7 days, otherwise you wait out for a sale. In the meantime, the partner is paying the mortgage and other costs (please make sure that's the case!) and so it should be costing you nothing to sit it out, so why push? I have a few other points I could add, but for a forum posting deal critique that's hopefully given you something to go on. I do full deal critiques regularly for investors, details of which are on my website. Hope that helps. Best Richard
  10. Student architect wants money for help...

    Hi It is usual for commercial arrangements to be agreed in advance, of course. The fact that no fee was discussed or agreed potentially leaves your acquaintance exposed here. Equally, did you explain that you expected the layout for free? However, was there a 'value exchange'? I would say definitely yes. You have your plans and the person you worked with provided their know-how (or at least managed someone that had it) to produce them. So, it seems only fair that they should be paid for that. How much pay is probably down to interpretation, should it be based on time and if so who's time? Should it be a fixed price and if so, what's fair? Should there be a discount for the errors and likely delay? I honestly don't know what the right answer to those points is as it's a specialist area. However, I do think you should pay for the plans / layout you received, so I suggest you negotiate fairly with them to establish a final fee. Always remember: what goes around comes, if you take without payment, someone might do that to you too...and if you act fairly and reasonable, the same should come back to you in other situations as well. Next time, it is a good idea for you to confirm the commercial arrangements and for them to stipulate them in advance Good luck! Richard
  11. Mortgage & Exchange deposit

    Hi Will Think of it this way... The exchange deposit is a down payment to the vendor to buy the house. The mortgage deposit is how much of the property value you will have to find with the rest coming from a bank. The exchange deposit counts towards the mortgage deposit, so they are not duplicated. In your example: Exchange deposit is £17,000 Mortgage deposit is £8,500 Technically, you would pay the solicitor £17,000 on exchange, then the bank will pay in £161,500, which adds up to £178,500. Ignoring solicitor fees, you will have overpaid by £8,500, which would get returned back to you after completion. Clearly this does not make sense, so you would normally negotiate a reduced exchange cash deposit down to 5%, which would be the same as your lender requires you to have. Your solicitor should be switched on enough to suggest that without asking. Another alternative is what is called a simultaneous exchange and completion, so you don't have a gap between exchange and completion and so no exchange deposit applies then. Hope that explains it for you. Best Richard
  12. Hi Sally Paul is right - it rather depends on your goals and also your objectives I have calculated that your ROI on the equity left in the property if you refinance to around 7.8% but this ignores other cash costs that you incurred, which will in effect bring that ROI down further. What is your target ROI? You should have a minimum ROI objective, which helps to assess this sort of decision as an investment choice ideally. Can you achieve better than .8% elsewhere...hint, I know you can!...see here to find out how and ironically, we just found a flip deal in Bradford-on-Avon with a 12% ROI: If you refinance, you get to retain all of the cash released, which I imagine your will reinvest (I would). However, if you sell, you will most likely have a CGT bill to pay, which will reduce your net cash to reinvest elsewhere. If you plan to reinvest the profits into other properties and hold for the longer-term, then why sell this one at all? You will still be able to release some cash for further investment by refinancing without giving up the asset and of course you will retain more of your investable cash by refinancing than selling (although getting more actual cash by selling of course). However, if you plan to take the cash and spend it or invest it elsewhere eventually, then you may as well sell now to minimise the CGT deduction, which will no doubt grow over time. So, your goals and strategy do play a major part as said. If you sell and buy somewhere else, you will incur 'transaction costs' with the sale of this property and the purchase of the new one, which will eat into your retained profit. A studio has limited rental appeal and as noted has some challenges with financing, but it is still a cashflowing asset and if you have rented it consistently with minimal voids and tenant issues, there is a lot to be said with holding an asset for the long-term. You might want to diversify into a different property type next time and a bit of diversification by property type is a good thing. If you do decide to sell, you will have changed your mind and will have caused the buyer to incur some 'abortive costs' through no fault of their own. You probably know what the right thing to do is in that situation. £750 is not a lot of money when you have effectively made an equity gain of £40k is it? Of course, you are not obliged, but how would you feel in reverse? Personally, I would pay them the £750 if I simply changed my mind, but I also know that I am not normal All the best, Richard
  13. Hi Chris The CCJs won't necessarily stop you from undertaking BTL investing or flips, however, they will narrow down your options and add to your costs of doing so. I recommend that you speak to a decent whole of market broker who can take a look at your situation and let you know the score, try @damien fogg to start with. Meanwhile, we have access to some non-status financing on high-yield (15%+) properties in the USA at the moment, so if you want to get going sooner whilst waiting for your UK credit file to tick back into the black, get in touch and I can share the details with you. We have done a few of these already and have been able to locate certain properties where they are fully paid off in around 5 years using this source of finance. Best Richard
  14. Ready or not?

    Previously, would have 'liked' James' post as I think he's spot on! So instead, I will just have to write the words out in full
  15. Question about funding a project

    Hi Andy I hope that I fall neither into the camp of [self-proclaimed I presume you mean] expert or wide boy I was looking for the 'I have this much in savings' line, but it's omission suggests there aren't anyway right now? If so, this does put you in a riskier situation, as it means you will probably need to fund the new purchase with 100% borrowing. That's the bad news out of the way. The good news is that you do have an option to raise the additional finance against an asset. The equity in your own home is unlikely to be sufficient even if it were at 50% LTV due to the extent available, so it makes me look towards the flat instead. Clearly, you will not want to risk having your Mum's 'home' repossessed if the project fails, but under the right conditions it could work. I have previously purchased a property and used my home that I owned debt-free as additional security to the lender to raise effectively 100% LTV borrowing. It was bridging finance as the project was short-term in nature, as yours should be with a flip. So, you could probably raise c70% LTV on the property you are buying and the 30% deposit secured on the flat. To release the charge on the flat, you would sell the flip property and clear the debt and charge from the proceeds...just makes sure you do! This does come with some risk as I alluded to, you are effectively 100% leveraged, with an high-rate bridging finance product and we haven't even got to the cost of works and fees yet. However, with the right project i.e. one with solid and provable upside potential it is a way for you to get going now. The loan on the flat is likely to be a regulated loan due to the occupancy of your mother, so there are only a small number of lenders that will do that for you, if you drop me a message I can probably suggest one or two places to go and check. A variation could be a second home mortgage, which you would need to be able to demonstrate affordability to keep up the repayments from your income. As strange as it might seems, I actually favour the bridging loan to the second home mortgage in any event. Whilst you should see a lower interest rate on a second home mortgage, you will by definition leave the mortgage on the flat for longer than the flip project and this means you will have a higher personal monthly fixed outgoing and of course the debt remains on the flat past the project duration. If you were to lose your main source of income, this could still jeopardise your Mum's home. At least with a bridge on a flip you clear the debt and charge each time you sell and eventually you should be building a deposit / works investment pot so to do away with using the additional bridge in the future, which I would strongly recommend you do. Yet a further spin on this would be to tenant the flat and put a BTL mortgage on it or even sell it, although that clearly means finding somewhere else for Mum to live, but perhaps you could rent a place for her. I would imagine this is not really an option you would seriously consider, but thought I would mention it all the same. In addition, I would encourage you to start saving at least some of the funds to cover works and fees, which places a kind of discipline on you and also helps avoid the potential for the investment bias of 'mental accounting' arising. If you want to know more about what that means, then have a listen into my podcast released just today! Here's where you can find that: Another possibility is to do a joint venture, ideally with friends and family to help raise the funds, although you will either have to share the profit or offer a fixed interest rate to the JV partner and potentially some tangible security also (probably a charge on one of your existing properties). A variation of this is to discuss an early inheritance or a gifted deposit from a relative, although not many people like the idea of raising that topic! You could also explore the two main ways of raising a deposit: additional income / saving and disposing of unwanted valuable items. Additional income can come from aggressive budget cutting & saving, overtime / bonus / commission, a second job, taking in a lodger and buying and selling new items on eBay / Amazon for example. Selling unwanted items could include clearing out the garage and loft to sell older yet valuable things at car boot sales and eBay for example. Please don't scoff at these; I have done them ALL of them in my quest to generate funds for investment in the early days and the process is actually quite cathartic and rewarding, as you really value the money that you raise this way. It is also a form of delayed gratification and positive mental accounting that I referred to earlier, which are success principles. Anyway, I have found myself writing a fair bit more than I originally intended to...again! I also had in mind other people that might read this with a similar requirement, which is why I elaborated a bit. But I hope it gives you some ideas of how you could go about things also. Best Richard