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 :)

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  1. Hi Max I have addressed this point, at least in part, before...have a listen to this podcast episode (or read the blog transcript) to give you some context without me writing it all out again. Remember that once you mortgage a property that it will be some time before you can realistically access the equity in it again. So, if you plan to use the funds to grow, I would raise as much as I could comfortably afford to repay as long as it meets my investment criteria. Remember to calculate the net return after tax and that the tax position on mortgage interest is about to change from April. If you are looking to grow, then only having a 25% LTV mortgage is probably under leveraging by a fair bit...but don't go too far the other way either! I would use return on investment (ROI) to decide which properties to raise money against and to what level...higher ROI suggests better use of funds in different investments. It could also be that you end up with a lower LTV on one property when compared to another if using the same me if that has just blown your mind and I will explain As for mortgages and remortgages - they are more or less the same thing yes, the only difference really is that with a remortgage you already own the property. Some brokers may offer you a BTL mortgage or a BTL remortgage on one you already own. As you already own the Cornwall property, technically the lender will see it as a remortgage application. It's splitting hairs here really...what of course you can't do is get a remortgage when you initially buy a property, however. Hope that helps, Best Richard
  2. Hi Robert Both...or neither! Let me illustrate... Think Altrincham vs. Moss Side or Harborne vs. Selly Oak...what are the characteristics of these suburbs and do they meet your investment criteria? Some people would make Selly Oak and Moss Side work for them (possibly with more of a rental play), whereas others would prefer Altrincham and Harborne (with a greater emphasis on capital growth). However, from a fundamentals point of view, Birmingham, Manchester and also Leeds have excellent prospects is the exact neighbourhood and your investment criteria & strategy that would make the choice right for you or not. But for the record, I am a fan of and invest in Birmingham...just not all of it This may help: and I'm sure the equivalent exist for both Manchester and Leeds if you do a search. Best Richard
  3. Hi Stoil One of my golden rules with auctions is: there is always a reason why a property is in an auction, our job is to discover that reason and then establish whether we can live with it or not. In this case, it seems that either the site did not sell at auction, or it did and is now being ditched. So my antenna would be highly tuned into the reasons why this is the case. The costs and conditions attached to the conversion may be a clue. You say the barns are derelict, so conversion may, in fact, be tantamount to rebuild in reality. Not to mention how to get basic services to the properties: gas, electricity and water and a road?. At face value £100k to convert 3 units sounds on the low side to me. The advantage here is that planning is pre-approved, so your job is to assess whether or not you can deliver a project to the approved plan at a realistic profit. One year may be a bit tight if you include selling times (Incl legals) for 3 units, I may be inclined to push that out a bit to be safe. You should ask yourself this: why would the seller be willing to let a development plot worth up to £380k go for £50k? The answer could be simple, but it could also be concerning as well. Happy to take a closer look at the site if you wanted to ping it across to me...possibly to even collaborate on it if it did actually stack up. Best Richard
  4. Hi JJ Selling a BTL property is similar to adopting a Buy-to-Sell strategy, which we do a fair bit of. Here are some quick tips: 1. Chose a locally-based agent as they do know the market and can take the strain with viewings etc. 2. Invite 2-3 around and get them to value the property and bid on rates etc. - you can then use the result to negotiate on fees. 3. Select an agent with good performance with your type of for you, flats of a similar price in the specific area in London 4. My preference would be to wait for the tenant to leave before selling as sale with vacant possession will sound more appealing than a potential complication around removing the tenant. 5. Do a light refresh and fix any issues that need attention. If aspects of the property are a bit outdated consider replacing them (eg grubby carpets). Micahel's point about a refurb is worth consideration BUT do the 'return on works' calculation on this, not to mention the time and management involved from overseas. 6. Use Zoopla to identify the top local a search for property for sale in your local postcode and then do an agent search and you will see the local agents along with their performance as per the image attached. Your eyes will be drawn into Hamilton Chess in this screenshot...average of 4 weeks selling time when everyone else is 18-22 is also worth paying a premium for! 7. You can also use tools like who do comparisons similar to the Zoopla one above. Note, this is a commercial operation and so will not include all local agents, especially if they did not agree to pay them a referral commission. 8. Negotiate a maximum sole agency period of 8-12 weeks extendable by agreement to ensure they are switched on to achieve a quick sale at a realistic value and don't come back to you every 4 weeks trying to chip at the high price they sold you on when they won the instruction! 9. Don't be too greedy your own assessment of local comparable values and aim at the top 20% range of that...assuming you present your property well. If you want a high price for the property, then be prepared to wait longer to achieve it BUT time on the market stats make would-be buyers feel there is something wrong with the property and works against you. 10. Have professional photos taken and a floorplan in your property details That should get you going hopefully Best Richard
  5. Hi Mimi I think your returns are being compromised in a couple of ways potentially: 1. If you are assuming no / low capital growth, then whilst the gross yield is quite high at c9.6% based on your total cash investment, your tax rate is taking quite a big bite out of the resulting rental profit. Higher-rate taxpayers might be inclined to look for a combination of capital growth and rental income, therefore. An alternative could be to consider a company structure to limit the income tax deduction BUT this is not always the case, especially if you need to extract the net profit for living expenses as it would then attract a personal tax charge. If you invested through a company then at least the first £5k pa (under current rules) deducted as a dividend would be tax-free, though. Tax treatment and legal structures can be a tricky business however and so it is best to set things up based on long-term goals and plans, see this podcast episode for more insight on that: 2. You are not using all of the potential 'leverage' available to you here. I guess this is because you are effectively borrowing money to top up your cash funds. However, you could probably buy two of these same properties using a BTL mortgage, with no additional borrowing i.e. no (loan or money from Mum), with a far higher net yield after tax. I estimate c£5kpa on £70k cash funding or 7% ROI versus c£3.6k on £73k (3.2% ROI) personal funding but here you also with a high repayments loan and debt to Mum to settle off at some stage. Technically, the personal loan and money from Mum would be available to fund a third project similar to this in fact, but I am not sure a lender would allow you to fund a deposit through a personal loan (money from Mum could be a gift). I have lots of resources and also good value training that walks you through this kind of analysis on my website, see here and in signature below: if you would care to take a particular iKickstart springs to mind as we share all the analysis tools I used to do this analysis above in that. In conclusion, look at a more tax-efficient way to invest in property and look into how best to use leverage to your advantage...there is good debt and bad debt after all Hope that helps, Best Richard
  6. Hi Steve The big question to me is this: is the property genuinely worth the extra £100k? You need to assess the current local benchmarks/comparables - I would speak with local agents as well as doing online research for this. If it does stack up, then consider using bridging finance and then refinancing soon after purchase. This will allow you to complete quickly and also to potentially refinance at the higher value sooner than 2 years in. It will, however, cost you more money to do this...which may be better than tying £100k up for 2 years at what sort of ROI is acceptable to you (e.g. 10% p.a. is £20k). An alternative could be a further advance from the existing lender, but it sounds like they are a bit spooked. If the price does not stack up, then walk away as you will be lumbered with an undervalued property with all your money tied up and with little prospect of recovering this in the short-term. I am bearish about the London property market right now myself tbh. I think the only way to potentially renegotiate on the price is based on a realistic assessment of the market value based on where I suggested you begin above. There is a reason for the lender restricting their offer by the way... Good luck! Best Richard
  7. Hi Tristan You are referring to the second property SDLT premium of 3% and being exempt from this with your first purchase if made personally. So, notionally it would save you c£3k to do this. That's the first point. The second is that often finance is more expensive when buying through a company than personally, although I am not clear on whether you could use the existing company you are a director of or a new one. If the former, you may well find that affords you better finance terms. So, check into the relative costs and do some sort of 'total cost of ownership' comparison between the two finance routes. TCO means looking at the full term of ownership assuming different purchase find that an extra 0.5% on the mortgage rate adds up to quite a bit over the long-term. Next, the after-tax position. This can get VERY complicated and is very personal but I assume you are aware of the new mortgage interest offset rules being brought in from this April that will affect a large number of investors using their own name. I attach an article, where I shared the essence of these changes and what I call the 'Danger List' to give some insights here. For example, if you are a higher-rate taxpayer, then you will effectively have to pay more tax on your rental profit (or even if not making a profit!) going forward. Finally, what is your end-game and exit strategy? If you foresee yourself following in your father's footsteps and having a reasonable-sized portfolio, then you should consider how you hold your properties. However, this is not always a straightforward exercise as this podcast episode illustrates: My advice is this - don't let a short-term gain of around £3k cloud your longer-term judgement. If you only plan to have one property and will remain a basic rate taxpayer, then buy in your personal name. But, if you plan to grow, or if one day you plan to buy yourself a large home to live in (and then have the SDLT premium to pay), then make your decision on your long-term objectives and ignore the £3k short-term temptation. Best Richard RichardBrown_YPN96.pdf
  8. Hi Colin Wow, what a big question that is! At my last count, there are at least 40 different property strategies you could follow (some claim over a hundred). The possibilities are therefore close to endless BUT are probably more realistically governed by 3 main components: 1. Your goals & purpose - what you want to get out of this, by when and why? 2. Your resources - usually a trade-off between time, money & know-how. A shortage in one will need to be compensated for in the others...or leverage other people & systems instead! 3. Your personal characteristics - your lifestyle, skills & competencies, personality and preferences. Attached is a sneak peak into my upcoming article for YPN magazine, discussing passive vs active investing. This image captures the essence of the points above. To answer your specific much money...could be next-to-nothing (e.g. rent-to-rent, deal sourcing, etc.), several million (e.g. large developments, large portfolio landlord, etc.) or somewhere in-between (BTL, refurbs, flips, conversions, etc.). Typical BTL would probably require a minimum of around £25k to get going, which implies buying a rental property costing around £100k, using a BTL mortgage. You can buy for less in many parts of the country, although there are still costs associated with any property purchase, so budget £2.5k-£5k for the associated costs of getting into pretty much any deal. We have developed a strategy selector tool that could help give you some better direction, which picks up a lot of the components from above. Just drop me an email with TPH Strategy Selector in the title and I will ping that across to you (or anyone else that would like it). Also happy to share a subscription-free copy of the article once it goes to press using the same email mentioned. There are also loads of blog posts and podcast episodes on my website that would help you...check out the mini-series on what to with £x for example. So, I guess what I am really saying is this: get as much info on property investing as you can and then choose your direction based on YOU and what YOU want rather than the particular fad of the moment. Best Richard
  9. Hi Conor Interesting intro and a very neat spreadsheet I have to say! Tip: look into mortgage options for lower value property, as this could impact how realistic the 75% LTV & mortgage fee figures are for a low-value property (Investment 1) You will also find plenty of property resources at my own website if you want to gain more knowledge... Best Richard
  10. Hi Michelle & Greg You are in a strong position for sure. As to whether to sell or continue to let out your current home will depend on a couple of variables... Your goal is income, so refinancing your existing home and using the proceeds to fund additional rental properties will allow you to 'leverage' your existing asset to fund the growth in a similar way to selling and doing similar. If you sell, you realise more actual cash to reinvest now. However, if you refinance you have less cash but retain the original asset obviously. As this was your former home, one very interesting tax break becomes open to you that is not available with say a rental property. Gains (profit through house price growth) made on your home are of course free of Capital Gains Tax (CGT) and even if you retain the property for a time to let it out, you may find that the CGT gain is minimal due to the various allowances open to you. I have recorded a podcast on your home being a very tax efficient asset here: and there is an accompanying spreadsheet that I produced to calculate the sums involved if you would like that. So, if the value of this property is likely to continue to rise, holding for a time and then selling later could be quite tax efficient in terms of CGT. There is a slight bugbear with this strategy now though in the form of reduced mortgage interest relief, so doing the sums could get a bit complicated. Of course, if you believe the price is likely to flatline or even fall, then waiting before selling would eliminate this tax advantage. The other big factor to take into consideration is Return on Investment or ROI. This is a measure of how well your cash is working for you. You should calculate the ROI on retaining the current home after refinancing and letting it out versus what you could do with the equity you end up leaving in. In simple terms, if you can get an ROI of say 8% by keeping the property, versus say 10% by reinvesting the proceeds elsewhere, then the decision would be to sell and reinvest elsewhere. Obviously, if the returns were the other way around would suggest refinancing, letting and then reinvesting the mortgage proceeds instead. Here is a blog post on measuring our returns in property: Some other thins to consider are capital growth (ROI usually excludes this), non-financial criteria (e.g. having a footprint in a certain location), attitude to risk, comfortable debt levels and so on, and of course your after-tax income is the important thing, especially if it is to be a major / sole source of how you fund your lifestyle. Hope that helps, Best Richard
  11. Hi Nikki We flip a lot of property for ourselves and JV partners. Here are 3 simple steps you can take to validate a sales area: 1. Check the average time to sell in the area using 2. Check the average listing length by agent using Zoopla. Go in two stages, though as follows: search for property for sale in the local area and then search for estate agents in that area - the agents will be listed along with the average property listing times in weeks. Tip: this also helps to identify the best and worst agents! 3. Consider using one of the agent search listing service such as Get Agent Note that these services get paid by the agents that agree to work wth them so they are not 'whole of market' or fully independent, they are free to you, though. However, they have some additional useful data such as average % of asking price achieved, which gives some insight both into how hot the local market is and of course of effective the agents are at achieving their promised selling prices as well. For flips, there are three main strategies to realise a decent outcome: 1. Buy in a hot market and rely on the wave carrying your buying premium into a selling premium as well (buy high / sell high). 2. Buy in a cool market and rely on a combination of added value & patience to realise your profit (buy low / add value / wait for sale). 3. Buy in a luke-warm market and rely on added value alone to make your profit (rely on 'forced appreciation' / remove large market fluctuations & time factors) Option 3 should carry the lowest risk as there is less chance of the market eating into your returns. I call this option the 'Goldilocks approach' as it is just the right temperature to make a flip strategy work...not too hot and not too cold either. Some people do make options 1 & 2 work as well but these carry greater risk, such as the market cooling (option 1) or the property sticking for too long (option 2). Remember that with a flip strategy there are 3 ways to make money: through the purchase price, controlling the works / conversion phase and then on maximising the sale value. So, when you do look into your area, try and narrow down what type of market you are looking at and adopt the correct approach to your flip project to suit. Note that Kent is a very big area and so you will need to narrow down to city/town, neighbourhood and possibly even street level to best identify what type of market you are working with. I hope that this post if it does, please Best Richard
  12. Hi John To some extent, I think you have identified one of the consequences (intended or otherwise) of current Gov policy. Certainly, the aim is to raise more tax from landlords and to discourage the more casual / amateur property investors by reducing the attractiveness of BTL. Is it still worth it, well I discussed that in the June edition of Your Property Network magazine...if you (or other Hubbers) would like to receive a subscription-free copy of that article, just request access by sending me an email with YPN subscription in the title. If you prefer the audio format, here are a couple of podcast episodes from a mini-series I recorded covering the options for investment with different sized starting funds: Whilst you have set aside a considerable sum to invest, you will note that property investing can be a very capital intensive activity! Often, people realise that they need to grow the investment fund in one way or another to achieve their goals. You have identified the different tax treatment between investing personally and via a company. However, there is a third way. This is best left to a recent guest on my podcast to explain, so have a listen to Tony Gimple to understand his 'hybridisation model': As for CGT and the various reliefs available, this can get complicated… Owning personally does allow you to claim capital gains tax on property if it is sold after being rented out for a period of time. How long it needs to be held for is not clearly defined but the intention must be that the property was bought to rent out and not sell on. If it is held a reasonable period, then a challenge from HMRC is less likely. What is reasonable? It is difficult to say but I tend to work on around 3 years personally, but that is not tax advice Owning through a company does allow a form of CGT but it works differently. Companies are taxed based on taxable profit, including asset disposal, with corporation tax paid on the profit. Indexation relief is used instead of a CGT personal allowance and this essentially allows an inflation adjustment on the purchase price of the asset to be offset against the profit before tax is calculated…it works in a similar principle to the personal allowance but is a more variable deduction to calculate. You are right that when you withdraw the remaining profit it will also be subject to personal tax in some way. One option would be to pay annual dividends of £5k per person until the profit has been used up. Assuming no additional dividend income from elsewhere, this would then be a tax-free distribution of profit from the company. This works for lower levels of profit and trading / disposal activity as the dividend allowance is now quite small. Of course, much of the discussion here revolves around tax but that should not be where the thought process begins. It should begin with your goals, timescales for achieving them and your exit strategy. If you have a modest goal to top up your pension decades down the line, that would suggest a different approach to generating a significant primary or secondary income stream in a year or two. That is why this point is mentioned quite a bit in all I write and speak on this subject…we need to begin with the end in mind. So, to conclude…what you can or should do can vary quite a lot, but should be based on your goals, timescales and exit strategy rather than tax-saving per se. Once you know what you want to achieve and when, then the most appropriate structure(s) will fall outside of that. Hope that helps. Best Richard
  13. Hi Jenny Thanks for sharing the article, which I have social-shared and agree that it's an important topic. The article talks of residential and BTL mortgages, but what about commercial lenders such as Shawbrook and Cambridge & Counties? Also, are you aware of any lenders that would potentially allow permission if sought despite the terms and conditions, in a similar way to consent to let for resi mortgages? Thanks Richard
  14. Hi Sam So, there is essentially one big risk that you are concerned about - being able to recycle some / all of your funds in the event that you cannot refinance at the value you want post-works. The two main drivers of this are 1) house prices and 2) lender's appetite. Related to both are valuations. To be frank, this is always a risk with this type of strategy, Article 50 or the market can change during the project for any number of reasons. If the outcome of a negative shift in the market really would be 'devastating' for you, then I would suggest you adopt a different approach instead. You should always look at a BRR deal in a worst case scenario and ask yourself...what if I can't refinance at the value I would like to...can I live with it? If you can't afford to live with leaving your money in for an extended period of time, then this strategy is simply too risky. What are your options should a downswing occur? Extend any short-term finance (expensive), finance/refinance at a lower valuation (leave some money in the deal), sell on (lower profit or even potentially a loss). As Haf said, people will always need somewhere to live, which translates as...the rental market should remain strong, even if it takes a short-term hit. This also means it should help to drive prices back up again should there be a short-term shock in house prices, as yields will become higher and attract investors back into the market again. There will always be swings in the housing market and as investors, we need to be able to accept some of the risks that come with these swings. There could be opportunities as well though don't forget! I won't make a prediction about Article 50 but whatever happens, be it house price / valuation falls or lender withdrawal...over the long-term it is hard to imagine a repeat of the 1990s given our structural housing shortage. Short-term there could be a blip, but over a long period of time, bricks and mortar should still be a good investment. Best Richard
  15. Hi Ryan MS Excel should be sufficient for most straightforward projects and that's what I use still...lo-tech but simple and easy to run Gantt charts. MS Project is a proprietary project management tool, along wth several others. Personally, I find these to be a bit OTT with smaller and straightforward projects, however. Best Richard