richard brown

Established Member
  • Content count

  • Joined

  • Last visited

About richard brown

  • Rank
    Obsessed member!

Contact Methods

  • Website URL &
  • Skype

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

1,459 profile views
  1. Hi Ben You have a goal, so that's a good start! Based on the £1,000 per month figure, you can effectively work out how much capital you want assuming different ROI targets. You would probably be left with around £200 to £250 per month from your former home, leaving a revised target of £800 per month say. Here are the funds requirements based on that goal and different return expectations: 5% ROI would require an investment fund of £192k 8% £120k 10% £96k Sounds like you would have around £65k (£40k savings plus £25k equity release), so you have what I call a 'gap to goal' of between £30k and £127k, depending on what sort of return you think you will achieve. Your existing home figures should give you some insight into that if you repeat that type of investment...I suspect it would realise around 8% or so depending on a few things, so that probably puts things into perspective for you. So, what could you do about it? 1. Lower your goal expectation 2. Increase your investment fund through additional saving 3. Use added value strategies like property trading to grow your capital base 4. Make your investment fund work harder for you by applying an added value strategy with a refinancing one, such as the Buy-Refurb-Refinance (BRR) model 5. Some people might say higher yielding strategies / locations like HMOs / north-east but with the former you ideally need a bigger pot and with the latter...well you would to achieve 15% ROI, which is not as easy as you might think. Given you are in the trade, you probably have some advantages such as doing the electrics yourself and knowing other trades that could get work done on better terms potentially, so I would suggest you look into 3 or 4 as options to help 'grow the snowball' and then add rental units to retain as you go. One example would be to flip one, then BRR the next say. I normally find I leave around £10k to £15k in a c£100k end-value BRR deal (thereabouts), so that would make your £60k stretch to 4-5 projects potentially...the property trades along the way would provide fund the £10k to £15k cash left in sums for the BRRs as you go, hence the mix and match approach. There are also plenty of other ways of skinning the cat, this is just a couple of suggestions for you. In conclusion, vanilla BTL probably won't get you to where you want to be, but you are not a million miles off and with a bit of tweaking and a smarter added value approach to investing, you should be able to get there OK. Hope that helps, Best Richard
  2. Yes, I see the different years now...this year on a pro-rata basis (year to date) is actually their best ever! If they have a decent last 4 months, they could get close to the 2014 booking days. Still, implies some work to be done but also does depend on the cost base. You should try and establish reason for sale too...genuine (e.g. retirement) or more motivated (e.g. not profitable, property issues, etc.). The link above was there but wasn't that clear...should be in bold and underlined now for you Richard
  3. Hey Ginger The qualification criteria from a tax point of view, which is important yes, is at least 105 days let per year not 150 as you have stated. It seems that in the last year that it was let for 167 days or 46% of the year. This beats the HMRC minimum and my 40% break even rule marker, so is worthy of further inquiry...and you may be able to improve on that by careful promotion and management. It also shows the reality of occupancy rates in such a business for those looking in. As for running the numbers and providing a more detailed review, that's probably taking us more into a formal assessment, which is something I can do through what I call a Deal Critique, which you can see more about at this link. You are doing well with your analysis already, keep it going and drop me a note if you would like some additional support or critical insight. Best Richard
  4. Hey Ginger How to get your post noticed? You write an eye-catching headline and the ask nicely for help, lots of friendly, helpful people in here OK, so FHL Firstly, NEVER make an investment decision based on 'personal use' - it is a complete me, been there, done that! Secondly, tax benefits are good to have but don't let the tax tail wag the investment dog. That means looking at the investment on its merits, sure post-tax returns allows you to weigh up different types of investment and tax can support some more than others...buttax rules can and do change, so...eggs...basket...and all that. Now that's out of the way, let's look at FHL... It is a hotel model essentially, so it is quite different to say BTL. The key financial drivers are: A. room rates (seasonal), B. occupancy level (seasonal) and C. operating costs (including finance interest). A x B / Purchase Price = gross yield & (A x B ) - C = net profit or / cash costs to invest (e.g. deposit plus fees) = know what your target ROI from an investment is and you can evaluate what it's worth to you.Remember that cashflow and profit are also different - e.g. if you have a repayment mortgage, the capital repayment part is not included in profit or income tax calculations. I usually run my numbers based on 40% occupancy to break-even (so 20 weeks per year), but some locations might not even achieve that! The big hotels average 70% occupancy, but that's a stretch unless you have a busy city centre location that has an all-year round appeal (say London or Edinburgh), so play it safe with your assumptions. The good thing about buying a going concern is that you can see what the actual occupancy level and room rates have been! So, assuming the records are good (check the back-end of their booking system, not just a spreadsheet), then you can simply crunch the numbers and work out what it is worth to YOU. It is a much more active management role - dealing with booking inquiries (and cancellations), people getting locked out / not working the TV, cleaning, laundry, repairs, advertising, booking systems, etc. Very hands-on, so if you have time on your hands that can be OK (equally how do you value your time?). But you can also outsource all of this to a specialist booking agency as well...for a fee, which should be included in your numbers too. I work on 15% of gross bookings for my management company, but that's before paying people like Booking dot com who take 15%, card processing fees 3%, cleaning & laundry, marketing and so on. This is usually why you NEED at least 20 weeks a year as your operating costs can get close to 50% of the gross booking income. Finance is trickier as it's a specialist area - fewer lenders and higher interest rates It can take time to build the business up and social reputation is EVERYTHING with FHLs and similar - so check the reviews of this place on TripAdvisor and all the other portals where it is advertised. If you do buy it, make sure you also inherit the existing channel management logins and aqcuire the ratings...unless they are more harm than good that is! Repairs & maintenance - don't forget that with FHLs you need to furnish the place and well, people just don't look after things as well as you and I you will have to repair or replace quite frequently. As for Grade 2 listed - it's clearly more restrictive and will mean higher repair & maintenance costs to ensure using the correct materials, etc. but it can still work...just means the annual R&M budget within your operating expenses needs to be higher. I would get a bricks and mortar survey done as a way to see what the building is worth without the business (also to see it's condition), which will give you some comfort and a possible fallback should the FHL business struggle. You can then decide if you want to pay a premium according to the profitability of the existing FHL. In conclusion, I think FHLs can be pretty good for several reasons (tax benefits being one), but they are also a completely different type of investment model at the same time. I have some FHLs in my portfolio, but not exclusively so, as a means of diversification. The main questions to consider are - why would people come to yours, how frequently and how much competition is there for it to beat? Hope that helps. Best Richard
  5. Hi Adam I counsel newbie investors all the time and there are a few common steps that generally help people to get their heads around things. Set your 'Someday Goal' - this includes £ and a date as a minimum. Whilst you have set a goal, you have not stated what that is in absolute terms, not here at least. So, I would establish exactly what that goal is and an 'ends' (i.e. in financial terms) rather than a 'means' (own x BTLs). Once you know what you are aiming at, then you can establish the right way of going about it (strategy). Outline your resources - the main resources are time, know-how and money, conduct a kind of audit on what you have. For example, you work, so you may have say a few hours per week to dedicate to property, you know what cash & equity you have now and how much you can save under normal circumstances and you know you are a newbie and have limited know-how. Identify your gaps - knowing the answers to 1 and 2 above will allow you to work out how much of a gap you have. You may need to do a little maths to assist with this, here is an example. If say you wanted to achieve an income of £25,000 per year through property within 10 years and you have a combined projected investment fund over this time (through cash, equity release and savings) of £130,000 (using your own example), with an expected ROI of 8%...then your 'gap to goal' would be £182,500. Calculation: £1,000 per month x 120 months = £120,000 + £10,000 starting cash (ignoring equity release right now). Then £25,000 / 8 * 100 = £312,500. £312,500 - £130,000 = £182.5k gap to goal. Plug your gaps - how to bridge the gap to goal from above? This is where you need to get creative, you have plenty of options but you need to work out which ones work for you and your personal preferences. For example, you could release equity from your home, you could trade property to 'grow the snowball' as you suggest, you could look at the BRR strategy to make your money go further, you could commit more to savings, re-invest your rental profits, re-mortgage your BTLs once their equity has grown sufficiently, start a second income stream (inside or outside property), up the ROI target, flex the timescale and so on and so on... Set your strategy - only after going through this sort of process should you decide on your strategy. By working through the above process first and then by considering your gaps and also your preferences of what you are prepared to do, can you decide how to go about your property investing journey. Set your personal development plan - now you know what you want to achieve, what your gaps are and your preferred strategy is, you can then decide how best to target your own knowledge acquisition and wider personal development in a more focused way. This could lead to specific training or mentoring, or to a self-directed learning programme, or even some kind of partnership to help you get the required know-how that meets your specific needs. Execute your business plan - most of the above leads to a kind of property business plan, so all you then need to do is...just do it! As I say, this is a common approach that many newbies can adopt to help distil all the noise and information overload out there. I tend to adopt this sort of approach when coaching new investors generally; it's amazing how things can become crystal clear just by zoning in on some key points: what do you want, what do you have, what's missing and how can you plug these gaps in a way that works for you personally? That's what I would suggest is he best use of your time over the next week or so, the rest is then all about execution of the plan really. Hope that helps. Best Richard
  6. Hi Andy I think the Birmingham reference is just an example - could be The Yorkshire Dales or The Lake District...although these are clearly not close to London. I like that part of Kent as well, with it's quaint villages and antique shops, plenty of reasons to live there. I guess it boils down to ambition, as you seem clear on the answer to the lifestyle question. How much is enough (your goals)? If you are content with a home of your own, with no debt on it, enough income to replace your current earnings and a little business that means taking in lodgers and the like...then, why look any further than your current plan? Life is too short to go chasing things that we don't really need after all. But if you have ambitions for greater earnings, then there may be other ways as has been suggested. On the subject of capital gains, let me show you an illustration... You buy your home for £250k in cash and it doubles in value in 10 years (more or less the long-term average). That's £250k of a tax-free gain as you already realise. You do still need somewhere to live, however, so keep that in mind i.e. can you access that capital gain in reality? The obvious ways to do that are either to downsize or to relocate to a lower cost area at that time. Now, imagine you buy that £60k studio and invest the rest in standard BTL properties using a 75% mortgage. That's £190k of that £250k invested into £760k of BTLs. Let's ignore income for now, as you will get rent from the lodgers and the BTLs, which may or may not equal but we shall keep it simple. If those BTLs also double in value in 10 years, just as the £250k house might, then they would be worth £1.52m, netting £760k in capital gain. Yes, you would have to pay capital gains tax, probably at 28% on that sort of gain, so you would be left with say nearly £600k in your hand after tax compared to £250k tax-free on the gain on your own home. This is why the saying goes...don't let the tax tail wag the investment dog. In other words, just looking at the potential tax savings can give a very misleading view. What I have just illustrated to you is the power of leverage and compound growth. They do come with more risk, for example, leverage can also magnify your losses as well as your gains...but I think that is the coolest thing in the world quite honestly...well, from an investment point of view that is lol. Like I say, it depends on your ambition
  7. Hi Andy I think David makes some fair points, in particular about what you want and how you want to go about things. If house sharing in a debt-free home in Kent, whilst you dabble a little with some BTLs on the side, sounds like the perfect life for you, then who are we to suggest otherwise? I start with two things: your goals and your lifestyle preferences. Your goals - how much do you want to earn or have in net equity and by when (or other goals you may have)? Your lifestyle - where would you choose to live and how do you want to spend your time? Will the above be forever, or just 'for now'? At 37, you still have a lot of gas in the tank hopefully If it helps some, with say £360k and it reasonably well invested, you should be able to achieve an 8% ROI relatively straightforwardly (some will fare worse, others better). £360k at 8% ROI is the equivalent to £28.8k per year before tax and that sounds like more than you are currently as a minimum, you can expect income replacement from this windfall. If you follow your plan, buy your own home for £250k, assume debt-free and rent 3 rooms, assume for say £350 per month each...that would generate an income of £12.6k, although £7.5k of that would be completely tax-free under current rules. Then, following my 8% ROI logic, the remaining £100k if invested should generate another £8k per year. So, you would in effect have a similar income to what you have now, possibly slightly improved due to the tax breaks but would have no rent or mortgage to pay on your own home and would have a bit of capital growth upside potential on the investment properties as well. I would ignore capital growth on your own home as you will probably always need somewhere to live. The property investor route might get you higher income on your money, so 8% would get you around the £29k or so mark as stated, but then you might still have to fund somewhere to live as well, which would bring the gap down a bit most likely. If invested very well, then you can beat the 8% ROI figures, I certainly do...but not everyone does! You could also look at switching your Kent home-rental model for say Birmingham instead, if location is not that important to you. This way, you could possibly free up more cash to invest in rental properties and have less tied up in your own home. There are loads of things that you COULD do, but you need to figure out the answer to those key questions to determine what you SHOULD do: goals and lifestyle...what's it to be for you? Hope that helps frame the decision slightly differently for you, Best Richard
  8. Hi Jeremy In short, I think your accountant is correct, as long as it is a single mortgage account and single repayment. Had you taken a further advance with a separately identifiable mortgage balance between the two AND could choose to overpay the A loan at a faster rate than the B loan, then I think you could apply your logic. Essentially, you are attempting to accelerate repayment of capital on your home loan to increase your after-tax profit on your rental loan income and essentially HMRC will think that's taking the proverbial p*ss to be frank Sorry that it's not what you wanted to hear, but it's probably fair and reasonable to adopt the method as your accountant is suggesting. However, if you want a tax break or two on your home and don't want to get too aggressive with HMRC looking over your shoulder, then take in a lodger (up to £7.5k pa tax-free) and then save up to convert your home to a BTL to receive Lettings relief (worth up to £40k) and the first 18 months of BTL CGT-free added to all of the growth when you lived there (at lesser tax rates than income tax) and your annual CGT exemption (c£11k per listed owner). OK, so you may spend a little more on Stamp Duty on your next home, should you buy, but do the maths and you might see that your home can be quite a tax-advantageous investment proposition to get you going! Best Richard
  9. Good stuff Jonathan - the increased size of the unit is likely to be taken into account by a valuer as a genuine reason to justify the uplift in value. If you can demonstrate to them the written evidence to support what you have said above it will also help. It may also be worth chatting it over with a reputable mortgage broker given what you have said. I am thinking about a further advance after say 6 months and / or taking a mortgage with very low exit penalties that may allow you to remortgage or release the additional equity sooner. Best Richard
  10. Essentially you cant Jonathan! The best alternative is to buy it using cash and then refinance in 6 months instead - I don't know many lenders that will lend above the actual purchase price. If any might, then expect them to charge you more for doing so. This at least reduces the timescale to refinance. You could also use bridging finance for this period but that's going to take a big bite out of any potential profit. I am also very sceptical as to whether what you say will be interpreted this way by a lender's surveyor anyway. If you did get a so-called 'BMV discount' (or are you implying the capital growth over the build period = 'BMV discount' instead?), then how does that persuade the valuer that the actual market value is higher than what you pad for it, especially if there are other examples where people paid the same for their units? That all said, a valuer will look at the most recent like-for-like sales comps to arrive at their valuation and so if there a bunch of similar properties all selling for substantially more, then you could get lucky but as said not when you actually complete on the purchase. Best Richard
  11. btl

    Hi Sid In simple terms, if you need to extract the net income from your property investment activities to live on (replace your wage / salary), then you will still have to pay income tax at some stage regardless of how you own the properties. So, this reduces the effectiveness of having a limited company to some extent. That said, having a limited company does allow you to offset all of your mortgage interests costs, whereas owning personally you will be capped at the basic rate of tax by 2020. Even so, it is more expensive to operate a limited company with regulatory / accounting charges and especially with more expensive lending charges if you use mortgages, which you suggest you will. As a result, the rule of thumb is that having a limited company is not worth it unless you have over 4 average value BTL properties (£200k each, so could be 8+ if £100k each). That leaves you with a conundrum...if you plan on building a substantial portfolio, then eventually a limited company may benefit you, but it will cost you more until you get to the 5/10 properties tipping point. One other benefit with a limited company is the ability to withdraw dividends without additional income tax to pay. However, this is currently capped at £5k per person per year and the plan is to reduce this to only £2k per person per year, although the Gov had to give that policy up prior to the last snap election. At £5k per annum and with say two people being shareholders, that could be worth a few bob to you...but if it drops to £2k, it is not a significant enough saving to justify setting up as a limited company on it's own probably (at £400 a year saved in tax per person). I guess it also depends on how big a 'wage' you want to replace. If it would still leave you as a basic rate taxpayer, then it is difficult to justify owning via a limited company. If you are or intend to earn enough to be a higher rate taxpayer, then it might be worthwhile yes...subject to what I said about the costs being higher until you reach a certain size. My recommendation is to forget about tax initially and just start making some money! If you do get yourself into a position where you have 5 x £200k properties or equivalent, then you can consider setting up a limited company for any new acquisitions going forward. People get very hung up about tax, but when we are operating a small portfolio, I usually find that keeping it simple is better than potentially saving a couple of quid in tax. Once you have reeahed a certain size, perhaps then reconsider it...and you will also have some money to cover professional tax advice then as well Please note: I am not giving any tax advice here and you should always seek professional advice before deciding on what's best for you in your personal situation. Best Richard
  12. Hi Tina Stop right there! Don't do a single thing until you know what you want to achieve from investing and why you want to do it a.k.a. your goals and purpose. Once you know the 'what' and 'why', then you can start to consider your 'how' or strategy (such as BTL, etc.) and 'where / when' / tactics (such as where to invest). I would strongly suggest that you have a listen to or read the transcript to this podcast episode, which rather conveniently asks the question of what to do it you happen to have £150,000 to invest: I can also suggest a whole bunch of resources to help demystify the fog for the newbie..that's my personal quest really; check out some of the links in my signature and feel free to get in touch if you want any further pointers. Best Richard
  13. Wow David - that's an incredible story you have there! I am very interested in hearing more...from an educational and risk mitigation pov; certainly not to have a laugh about it. I would like to connect with you as well...please see my contact info below and it may explain more as to why. I am a knowledge sharer and like to support the property investment community, especially newbies, early stagers and with turnarounds. Looking forward to how the story unfolds - could be a film script! Best Richard
  14. Hi again Carl I also saw your PM about the YPN subscription, which we will get sorted for you. Thanks too for getting a copy of the book...the royalty from KU is pennies, but I didn't write the book and price it as I have done to make a profit from it. I genuinely wanted it to be a resource for newbies and those looking to upgrade their property investing knowledge. It also helps to say you are an Amazon Best Selling Author at times too As to your own home - ironically, you could argue that paying off the mortgage faster is not the best plan when interest rates are low! I would agree that paying it off faster when your rate is 4.29% vs others in the market at 1% to 2% does make a lot of sense though. Possibly a sensible plan would be to remortgage in appox 9 months when your fixed-term expires onto say a 20 year maximum term mortgage to tie into your set retirement date...that will ensure you have no mortgage to pay by then. Then, as long as you have a mortgage that allows over-payments, you could potentially set aside the savings you made from switching and just pay down chunks of the mortgage each year...or you could then use it for additional investment instead. As I said, if your home loan rate is say 2% and you can make say, 8% from investing this money into new rental properties, then it probably makes more sense NOT to overpay the home mortgage and reinvest it instead, unless you need to become mortgage-free sooner for some reason. Great idea with roping in the mates-rates trades you are connected to - my personal favourite approach to property investing is where I can add value to it in some way. So, if you can buy a property that needs a little work and increase it's value through doing that work (costing less than the value uplift obviously), then you are onto a winner. Tip: if you can genuinely add value, you can then look at refinancing later at a higher valuation and pull out some of the costs of doing those works...this is known as the Buy-Refurb-Refinance (BRR) model by the way. If you follow a BRR strategy instead of a standard BTL strategy, you can make your money work harder for you and get to where you want to be more quickly! I agree on Birmingham being a growth area, I have noted the prices and conversions in the Jewellery Quarter and Harborne has been buzzing as well. Thee are also other areas with decent rental returns at a relatively affordable levels too. Best Richard
  15. Hi Carl A few things in your post caught my eye and prompted me to reply: the get on the ladder at any price mortgage you took (you will be able to get off that at the end of the fixed term I imagine), the second job commitment to your goals (love that), the willingness to give back a bit and the background you came from being some! In terms of your plan, might I suggest that you might be better served in waiting for a +/- £30k deposit property rather than a +/- £15k deposit one? It's not because I'm a snob or anything like that - it's more about your net cashflow being able to support any unforeseen expenses...which you might find better protection with in slightly higher value / higher net cashflow property to make it more sustainable. That said, if you can clear at least £200 a month NET of ALL costs and provisions AND have a property with low repair and maintenance needs, it could still work at the lower end. You will find JC more at home in the Property Tribes community, posting with his pyjamas on! I know it's crude to plug your own material, but I genuinely aim most of my material at new, early stage and turnaround investors. So, check out some of the links in my signature below...and besides plenty of free resources, you might just find that extra piece of reading material you are looking for on your holiday If you do happen to buy the book and don't find it helpful - let me know and I will refund you personally and also make a donation to charity as well! Equally, you don't have to buy anything, just ping me an email and I will add you to the subscription-free mailing list for all of my YPN 'New Beginnings' articles, which you can read on anything that supports PDFs. Good luck with your adventures! Best Richard