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 Charlie No problem, glad you found the post helpful I saw your PM here and replied. WRT HMO financing, yes a buy cash and refinance post-conversion having operated it as an HMO for a period of time (say 6 months but check lender criteria with a broker) should release a large chunk of cash to allow you to go again. I normally budget on releasing something like 80% to 90% of my initial cash but sometimes it can be higher, depending on how much of an 'actual HMO' vs. a standard house just with separate bedrooms in it the property became. Things like ensuite bathrooms, licensing, planning and that kind of thing will improve the level of cash recycling potential (via a higher investment valuation) rather than just renting a 4 bed house with a bed also in the lounge to make it a 5-bed HMO. Best Richard
  2. Hi Charles A few things in your post caught my eye and are probably common among many starting out...passive investment, location, financing and returns in particular stood out. Starting with passive investing...that was the subject of my most recent article in YPN magazine, if you would like a subscription-free copy of the piece just get in touch. However, as a bit of a investment is truly fully passive, or should be not 100% passive I should say! See the attached graphic that I have prepared for another purpose...a single HMO sits somewhere along the Deck Chair (next-to-no time) to the Captains Chair (part-time) depending on a few factors including who is managing the property and whether it is 'ready-made' or not. Investment location is another factor as you mention...and what's wrong with Hull then? City of culture, a well-thought of Uni and new inward investment in renewable energy are just some of the reasons why it can be an excellent investment location. Always remember that property investing is first and foremost a business undertaking, based on the numbers. OK, so if you live in Bristol, then Hull is certainly a bit of a trek, but if by passive you intend to pass over the day-to-day to somebody else, then why not Hull? 9% net is VERY decent for a hand-off investment I would say. Liverpool and Manchester offer attractive propositions also, so I am sure you can make an investment work there too. That said, exactly where in Liverpool and Manchester is highly relevant indeed. Investing for income (as implied by your message), often comes at the expense of capital growth BUT strong rental demand, with a likelihood for continued demand (without supply saturation creeping in) would see a 'proper HMO' rise in value over time as it should be valued off it's net rental income. Lots more I could say here, but do your thorough homework not just on a city but also on the actual neighbourhood you plan to invest in. How many HMOs are there, what is the ratio of supply to demand, what tenant type, what long-term rental drivers exist, is there a barrier to entry of some sort, and so on? Financing - yes, this can be tricky for 'first-time landlords' especially with an HMO but it's not impossible. Maybe you won't have the whole market open to you on day one but there should be a solution of some sort. A good broker will be able to help you establish that for certain (I know a couple if you want a referral). That said, if you were to buy using cash, rent it for 6 months and then get a commercial mortgage (or BTL specifically for HMOs), then you will have a lot more options as then you will be classed as an 'experienced HMO landlord' Do not take a resi mortgage under any circumstances - that's the wrong tool for the job. Do not get a standard BTL mortgage for an HMO either, unless you do a conversion and / or fully disclose this to your lender from the outset...again a broker is key here. Investment returns - ah the magic 10% eh? Yes, it's possible if you are talking ROI on cash funds invested and that's my min criteria also. As an inexperienced property investor it may not always be possible even if you do lots of research on Hull, Liverpool or Manchester and pick well. Lots of factors have an impact on net returns, including voids, maintenance, finance fees, tax (these days), management fees, licensing and so on...But IF after taking ALL costs into consideration you land at 9% net, then that is a very healthy return indeed I would suggest. Of course, you could also take a closer look at some of the most passive investments in the Deck Chair column of my graphic and venture down one of those paths instead. We can and do get pretty close to a 10% net return on a passive investment in two of those options with the people we partner with, just ask me how in a private message / email if you are interested in that. I hope that helps...but if nothing else, don't give up on Hull just yet! Best Richard
  3. Hi A few things strike me in your dilemma here. First, using a residential mortgage for BTL is not the correct way to go about things, unless at least the person taking the loan also lives in the property and then lodgers are taken in. Later, a consent to let may be taken, but it would not be allowed from the outset most likely. Second, a debt pay down model can work just as effectively as an interest-only one, as long as you have no real requirement for the cashflow for income purposes in the meantime. A capital repayment (or interest-only with over-payments) mortgage reduces the level of debt and hence risk as well as increasing the income from the property once the debt is cleared. The drawback is long will it take to repay the mortgage? Equally, my point about cashflow and income is a short-term limitation - how important is that to you in the short to medium term? The tax issues facing BTL landlords may also play a part too. So, I would think carefully about what is important to YOU first and foremost. Do you need the net rental income in the short-term, what is your attitude to risk and what is your time horizon for achieving your goals? Can you comfortably adapt to align with your business partner (or can they to you?)? If not, then my next point is actually the most important one of all... Third, is all about shared values, goals and aims in a partnership. At present you appear to have different aims, goals and ways of looking at things. In my experience this is a recipe for disaster. So, unless you can both get on the same page (as you are clearly trying to do by considering the merits of your potential partner's approach...are they doing the same?), then it is best not to get into a long-term partnership is my advice. Shorter-term projects, it may not be as important (eg with a flip) but with BTL and it being a long-term arrangement, I would suggest that you do really need to have common aims, expectations and values. Hope that helps. Best Richard
  4. Hi Matt I would tend to agree that CD might produce the sorts of (gross) yields that you might be looking for. However, it probably will come with a compromise...or two. LHA is a distinct possibility (or a low pay worker with a benefit top up potentially) that such a bad thing though? The main reason that gross yields are potentially high here is that in many parts house prices are so low. In many cases well below rebuild costs in fact. This might be an indication that property is undervalued and could give rise to a future capital gain...but that will also depend on demand from homeowners. It might also be an issue with financing, with some lenders not offering loans at all and others wanting higher returns. I am aware of an investor that is buying a lot of property in that region and paying cash with a view to a block refinancing deal with a commercial lender after a couple of years. You could of course pay cash instead but this brings me onto another point... The other point of note here is; what is the correct measure to use to judge your investment? You mention yield (I assume gross yield), however, I would tend to look at a combination of ROI and net annual cashflow for BTL property. The reason for looking at these two measures is as follows. ROI allows me to compare different types of investment against each other, such as BTL, HMO, flips and even stocks and shares say. Both ROI and net cashflow strip out the costs involved in the investments as well. Take a high yielding rental property and then deduct for maintenance, voids, general operating costs (agent fees, insurance, mortgage, etc.) and then see what is left. There is little point having a high gross yield (i.e. high potential paper return) when it takes 2-3 months to let or re-let the place say. There is also no point in having such a low net monthly cashflow in case a major repair bill comes along to wipe it all you need a decent reward in both £ and % terms to make the exercise worthwhile. My conclusion is this...why go hunting for an elusive unicorn when there are plenty of Thoroughbreds and Welsh Ponies around that will serve you pretty well? You just need to avoid the Donkeys is all All of my single let BTLs achieve at least 10% ROI but I believe none achieve a 10% gross yield, I have very few problems with these properties. Go looking for the hiled yield by all means but remember...there is always some kind of compromise here. Best Richard
  5. Hi Dave Yes, I have used this feature myself in the past to reduce my cash input into an HMO conversion project. I talk a little about it and how Kevin Wright helped in this podcast episode here: I guess it is a bit of a niche really as it requires you to have a second unencumbered property (actually a low very LTV property may still permit this structure) and it clearly increases the total cost of finance and financial exposure on your project. It also requires a very certain exit to settle the loans...remember that bridging lenders can have brutal T&Cs. As a result, I think it's one for the more experienced and where the upside after works / conversion is assured. Hope that helps, message me if you want to know more. Best Richard
  6. 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
  7. 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
  8. 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
  9. 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
  10. 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
  11. 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
  12. 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
  13. 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
  14. 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
  15. 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