Advice needed - new to property

[RobandAlex]

Hi All,

We just wanted to introduce ourselves and a bit of background as we are keen to begin our property investment, networking, and achieve financial freedom through a passive income stream.

To cut a long story short our names are Rob and Alex and we have known each other since we were 10 years old (now 23 and 22). We also went to the same University in Birmingham together (Alex studying Business Management and Rob studying History). We then undertook a Master’s degree in Real Estate Management as we have always been interested in property both doing work experience at numerous well known firms.

Having both achieved a distinction we then managed to get on a graduate scheme to become chartered surveyors – which we are both currently working towards, approximately 18 months away from taking the APC.

However, being surveyors is not our ambition. We both see it as a stepping stone to learning more about property and enhancing our knowledge to give us a better chance of succeeding in our own business ventures of property investment – which we eventually aim to make our main source of income.

We both live in North London (Totteridge and Barnet),and living at home as we are trying to save as much as possible in order to invest. Together we have probably saved around £20k (£10k each),we also reckon that we could get our parents to also invest, maybe another £20-50k per family so £60-£100k to invest – allowing us to get property in the range of £240-480k with a 75% LTV, or several properties that are less expensive).

What strategies would you recommend for the sums above – we thought perhaps the best route would be to purchase and refurbish cheaper properties and sell on in order to raise our capital. Then once we had enough capital we continue along that strategy whilst adding BTL properties to the portfolio in the aim of substituting our wage with the BTL properties eventually, allowing us to do this full time.

Any views, advice and general comments are greatly appreciated. We are keen to meet with a talk with like-minded people and people that have been there and done that, as our main aim is to learn and we are always open to new ideas.


Apologies for the long introduction!


Rob and Alex.

 

[Lime Auction House]

Hi All,

We just wanted to introduce ourselves and a bit of background as we are keen to begin our property investment, networking, and achieve financial freedom through a passive income stream.

To cut a long story short our names are Rob and Alex and we have known each other since we were 10 years old (now 23 and 22). We also went to the same University in Birmingham together (Alex studying Business Management and Rob studying History). We then undertook a Master’s degree in Real Estate Management as we have always been interested in property both doing work experience at numerous well known firms.

Having both achieved a distinction we then managed to get on a graduate scheme to become chartered surveyors – which we are both currently working towards, approximately 18 months away from taking the APC.

However, being surveyors is not our ambition. We both see it as a stepping stone to learning more about property and enhancing our knowledge to give us a better chance of succeeding in our own business ventures of property investment – which we eventually aim to make our main source of income.

We both live in North London (Totteridge and Barnet),and living at home as we are trying to save as much as possible in order to invest. Together we have probably saved around £20k (£10k each),we also reckon that we could get our parents to also invest, maybe another £20-50k per family so £60-£100k to invest – allowing us to get property in the range of £240-480k with a 75% LTV, or several properties that are less expensive).

What strategies would you recommend for the sums above – we thought perhaps the best route would be to purchase and refurbish cheaper properties and sell on in order to raise our capital. Then once we had enough capital we continue along that strategy whilst adding BTL properties to the portfolio in the aim of substituting our wage with the BTL properties eventually, allowing us to do this full time.

Any views, advice and general comments are greatly appreciated. We are keen to meet with a talk with like-minded people and people that have been there and done that, as our main aim is to learn and we are always open to new ideas.


Apologies for the long introduction!


Rob and Alex.

Hi Rob & Alex

Simply there is not enough profit or opportunities for flipping like their once was.

Most properties now are not selling quickly so you don't want your capital tied up.

Have you thought about building up a BTL portfolio in places like Middlesbrough or Liverpool? Low property prices with high rental yields


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[RobandAlex]

Hi Rob & Alex

Simply there is not enough profit or opportunities for flipping like their once was.

Most properties now are not selling quickly so you don't want your capital tied up.

Have you thought about building up a BTL portfolio in places like Middlesbrough or Liverpool? Low property prices with high rental yields


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Hi Lime Auction House,

I understand you probably have a vested interest in stating the above; however, I was wondering if you really believe that if there is a way to create added value (new bedroom, upgrade the living conditions, extensions, loft conversion, lease extension etc) there is not a market and profit for it?

We have not considered these areas yet but undoubtedly the yields would be high - could you roughly tell me what Gross and Net yields you would expect depending on the property price?

Additionally, the logistics for us having a property that far away from where we live, especially as our first investment may be difficult. What is your take on this?

Thanks for your response!

Rob and Alex

 

[Lime Auction House]

Hi Lime Auction House,

I understand you probably have a vested interest in stating the above; however, I was wondering if you really believe that if there is a way to create added value (new bedroom, upgrade the living conditions, extensions, loft conversion, lease extension etc) there is not a market and profit for it?

We have not considered these areas yet but undoubtedly the yields would be high - could you roughly tell me what Gross and Net yields you would expect depending on the property price?

Additionally, the logistics for us having a property that far away from where we live, especially as our first investment may be difficult. What is your take on this?

Thanks for your response!

Rob and Alex

Why would I have a vested interest? I'm a developer by trade so was trying to give you an overview based on your budget

I turned a 1 bed flat into a 2 bed flat last year in E17 and made an additional £90,000 so the answer to your question, is yes at times.

Lease extensions can be expensive depending on how low the lease is, value of property. We have one for sale in Hounslow, as in a 2 bed ground floor flat with a low lease.

Loft conversions add value but after spending money on them, you rarely can make that money back. But again depends on area and how cheap you got the house for.

I'm not saying you can't make any money in flipping, I'm simply saying it's not as easy s it once was and there are too many people doing it.

Distance is not an issue anymore as most landlords use local agents to manage their properties.

I can't go into that much detail with yields because it can vary greatly dependant on what property you have, but most of our clients are achieving 10% - 30% gross yields.


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[RobandAlex]

It was not meant in a negative way - I presumed you worked for Lime House Auction and were keen to advertise your products - and with your customers achieving 10%-30% gross yields I am not surprised as this sounds great!

Agreed there is probably less opportunities in the market as shows like Homes under the Hammer etc have made everyone believe that it is easy to flip a house for big profits. Obviously, this isn't the case but as you say there are still some opportunities out there - there are just less than there used to be and its harder to achieve a profit.

In your opinion, with say £50k capital to invest now (and saving approximately £1k a month) what would be our best option to increase the capital we have to invest, accumulate a large property BTL portfolio and be able to do this full time? What strategy would you follow? (I presume the high yielding investments in Liverpool and Middlesborough as previously mentioned?

 

[totallyproperty]

Hi Lime Auction House,

I understand you probably have a vested interest in stating the above; however, I was wondering if you really believe that if there is a way to create added value (new bedroom, upgrade the living conditions, extensions, loft conversion, lease extension etc) there is not a market and profit for it?

We have not considered these areas yet but undoubtedly the yields would be high - could you roughly tell me what Gross and Net yields you would expect depending on the property price?

Additionally, the logistics for us having a property that far away from where we live, especially as our first investment may be difficult. What is your take on this?

Thanks for your response!

Rob and Alex

Hi Rob and Alex,

firstly, welcome to the forum! It sounds like you have an exciting future planned in property and I hope you find the forum a useful resource.

I do agree with @Lime Auction House in that flipping properties to make an attractive fast buck has become much harder to achieve. With the likes of 'Homes Under The Hammer' making it look relatively easy to make money, it's not just seasoned developers looking for good property deals any more, it can be anyone with savings in the bank, making it increasingly hard to not only source a good deal but to get it at a price you might have been able to a few years ago. That said, there are still deals to be had, it's a matter of networking and being creative.

Social Media (Linkedin in particular) is a great way to build a network of property sourcers and agents. If you are a genuine investor with cash, there are always plenty of independent sourcers and agents who would be more than happy to send you regular deal opportunities. I would recommend using Linkedin Groups to put out posts stating what type of property you are looking for and in what area. It is a relatively fast way to build a good network.

Traditional buy-to-lets don't sound as though they will build your capital as quickly as you may want to. Have you thought about HMOs? @Tracey Woods HMO should be able to add her experience here (our resident HMO expert on the forum If you purchased a property that needed updating, that had potential for an HMO conversion, over a 2 year period you would create a strong yield whilst adding capital value from the initial refurbishment you did. Do this with 2 properties up north you could be in a strong position in 2 years' time...

@Nicholas Wallwork could also talk you through re-financing options (allowing you to build your portfolio).

In terms of deciding on a strategy, I think choosing an area should be your first port of call. Manchester has seen strong and consistent rises in house prices over the last 5 years, and with the sort of budget you are talking about i would be tempted to start researching in an up and coming suburb. I wouldn't be put off by an investment being far away initially... you'd have far more choice for your budget further north and unless you were planning on being a very 'hands on' landlord, you'd probably use a Property Management Service anyway, so no difference from using it up north in my opinion.

We also have a resident expert on Mortgages here who will probably be able to add some helpful points to this post @The Mortgage Broker

Hope some of the above is helpful

 

[RobandAlex]

Hi Rob and Alex,

firstly, welcome to the forum! It sounds like you have an exciting future planned in property and I hope you find the forum a useful resource.

I do agree with @Lime Auction House in that flipping properties to make an attractive fast buck has become much harder to achieve. With the likes of 'Homes Under The Hammer' making it look relatively easy to make money, it's not just seasoned developers looking for good property deals any more, it can be anyone with savings in the bank, making it increasingly hard to not only source a good deal but to get it at a price you might have been able to a few years ago. That said, there are still deals to be had, it's a matter of networking and being creative.

Social Media (Linkedin in particular) is a great way to build a network of property sourcers and agents. If you are a genuine investor with cash, there are always plenty of independent sourcers and agents who would be more than happy to send you regular deal opportunities. I would recommend using Linkedin Groups to put out posts stating what type of property you are looking for and in what area. It is a relatively fast way to build a good network.

Traditional buy-to-lets don't sound as though they will build your capital as quickly as you may want to. Have you thought about HMOs? @Tracey Woods HMO should be able to add her experience here (our resident HMO expert on the forum If you purchased a property that needed updating, that had potential for an HMO conversion, over a 2 year period you would create a strong yield whilst adding capital value from the initial refurbishment you did. Do this with 2 properties up north you could be in a strong position in 2 years' time...

@Nicholas Wallwork could also talk you through re-financing options (allowing you to build your portfolio).

In terms of deciding on a strategy, I think choosing an area should be your first port of call. Manchester has seen strong and consistent rises in house prices over the last 5 years, and with the sort of budget you are talking about i would be tempted to start researching in an up and coming suburb. I wouldn't be put off by an investment being far away initially... you'd have far more choice for your budget further north and unless you were planning on being a very 'hands on' landlord, you'd probably use a Property Management Service anyway, so no difference from using it up north in my opinion.

We also have a resident expert on Mortgages here who will probably be able to add some helpful points to this post @The Mortgage Broker

Hope some of the above is helpful

Totally property,

Really appreciate such a detailed and informative response!

Deifnitly deals to find but they are harder - as the saying goes its not what you know but who you know and from what people are telling me that is most evident in property. We have joined a few LinkedIn groups, forums and have been trying to attend networking events too in order to expand our contacts. If you have any recommendations that would be greatly appreciated.

HMOs are something we have looked into - having lived in Birmingham student property we saw how much landlords were making (£95 per week per person, in a 5 bed property). These yields are great and if you can create added value then even better. The only issue with this is when I have gone to seek advise from mortgage brokers they have stated that lenders are less willing to lend on HMOs if the landlord has not had any previous experience. I presume this is the case? Hopefully the mortgage and HMO experts you tagged will be able to help with this.

Re-financing would be the best way to grow the portfolio allowing you to keep the buy to let properties and take the capital out to re-invest, so I appreciate you tagging the relevant person.

I did think that I would have to invest closer to me but the advise I keep getting is that, that is not necessarily the case and that my money may be better spend further north where it can go further. Have you any experience in investing far away from where you live? I am sure people will be more than happy to recommend managing and lettings agents as well as builders in whatever area we choose to invest in.

Thank you again for your response, it was really helpful.

Rob and Alex

 

[The Mortgage Broker]

Dear Rob & Alex,

Have you given any consideration to how these property purchases will be financed as it may not be as easy as you hope? When buying an investment property the mortgage lender will want to know if it is a long term investment as they will not lend for short term flips - and most Buy to let mortgage products come with penalties for early redemption which will cut into any profit.

Also, the choice of lenders is severely reduced if you are not residential homeowners at time of application, plus lots more criteria your broker will need to take into consideration.

May I suggest you look at the financing options before taking the plunge into the next purchase?
Regards
Darren

 

[Nicholas Wallwork]

Hi Rob & Alex,

Another finance option would be to talk to commercial lenders about lending on the income of the final product... you may be able to overcome the track record with Personal Guarantees too... worth trying this option certainly for the slightly larger HMO's where the income is higher and thus a commercial valuation could possibly exceed the "bricks and mortar" valuation method...

Keep us posted and happy to continue to help where we can...


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[Tracey Woods HMO]

HI both, Im based in Stevenage, Herts so not a million miles away from you. As someone who has lots of property experience and done the cheap end in low value locations and HMOs locally I feel that comments given are very valuable. Flips are definitely harder now and you will need to identify property where value can be added, however the finance of these is difficult so preferably you buy for cash. I have got a colleague who invests in Liverpool and is finding BTLs at good prices, buying for cash or bridging, financing the refurb and then financing out leaving very little in each deal. Happy to help if I can on your exciting journey.

 

[Lime Auction House]

HI both, Im based in Stevenage, Herts so not a million miles away from you. As someone who has lots of property experience and done the cheap end in low value locations and HMOs locally I feel that comments given are very valuable. Flips are definitely harder now and you will need to identify property where value can be added, however the finance of these is difficult so preferably you buy for cash. I have got a colleague who invests in Liverpool and is finding BTLs at good prices, buying for cash or bridging, financing the refurb and then financing out leaving very little in each deal. Happy to help if I can on your exciting journey.

Liverpool is really becoming a huge hub for investors from all over the UK and Overseas, especially London.


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[Kim Firmin]

Hi Rob and Alex

Nice to meet you (virtually). It sounds like you are in a great position to get started in property investing. As Tracey has mentioned, I invest in BTLs around Liverpool and St. Helens. I live in Stevenage, Herts, so I've built up a team in my investment area to make the process as hands-free as possible. I started property investment training when I was 27 (now 31) so I could learn as much as possible. My strategy is to buy 2-3 bed properties in need of refurbishment (often with bridging finance as they tend to be unmortgagable),add value through refurbishment, then I rent out and mortgage them after 6 months to recycle as much of my cash as possible to buy the next property. I've bought two properties this year from my local sourcing agent, who I'm now using to find the deals quicker than I can.

Last year I grew my investment pot by lending funds out to other investors for a high return, whilst I took a break from property to get married. I now pay for my refurbishments in this way, by borrowing funds for 9-12 months and giving 8-12% interest p/a. This might be something you can do to increase your pot if you can think of anyone that would be interested to invest with you, as it's very difficult to get good interest in the bank, so you can help them too. I repay the investors once the new mortgage is completed and the funds are 'recycled', generally 7-8 months after purchase.

To give you some rough figures, I tend to buy properties around the £43-50K mark, spend between £9-15K on refurbishments, rent for between £475-550pcm and add value to approx £70-95K. I chose this income strategy to replace my monthly income from working as I don't need large capital pots at the moment. Some friends are doing HMOs nearby in Warrington and Wigan, so there's lots of opportunities in the North West.

Good luck with your onward journey and if I can help with anything, let me know!

 

[RobandAlex]

Hi All,

Many thanks for your replies and apologies for our delayed response - we are new to the forum and couldn't understand where the original post had gone but it was moved to a new thread!

Rob and Alex.

 

[RobandAlex]

Dear Rob & Alex,

Have you given any consideration to how these property purchases will be financed as it may not be as easy as you hope? When buying an investment property the mortgage lender will want to know if it is a long term investment as they will not lend for short term flips - and most Buy to let mortgage products come with penalties for early redemption which will cut into any profit.

Also, the choice of lenders is severely reduced if you are not residential homeowners at time of application, plus lots more criteria your broker will need to take into consideration.

May I suggest you look at the financing options before taking the plunge into the next purchase?
Regards
Darren

Hi Darren,

We have given it thought - if it was a flip job then the most likely financing would be bridging finance. Buy to hold/BTL would be mortgaged. As you rightly point out our options are limited because we do not have a property in our name; however, we believe would also be able to get guarantors (our parents both own properties) which may open up some more opportunities for lenders?

We have sought some advise previously but the reason we are on these forums is to develop our knowledge by speaking to experts in their fields and investors that have been there and done it - we are always keen to learn.

We would definitely want to get more financing options - we are in the process of writing our business plan and in order to make it relevant we would need to know what sort of strategies and options our open to us in our current situation and what opportunities there will be in the future when we develop our portfolio so that we can effectively plan and have a goal to work towards.

I think it was mentioned that you are a mortgage expert? Would it be possible to set up a call/in person meeting with yourself to go through our options?

Rob and Alex/

 

[RobandAlex]

Hi Rob & Alex,

Another finance option would be to talk to commercial lenders about lending on the income of the final product... you may be able to overcome the track record with Personal Guarantees too... worth trying this option certainly for the slightly larger HMO's where the income is higher and thus a commercial valuation could possibly exceed the "bricks and mortar" valuation method...

Keep us posted and happy to continue to help where we can...


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Hi Nicholas,

Many thanks for this - we would be looking to purchased our properties as an SPV/Ltd as this seems to be the general consensus now. Evidently we would also get tax advise to confirm this is the best method for our situation and future portfolio growth.

HMOs are definitely one strategy we have looked at, specifically student property. However, our initial consultation with a mortgage broker we found online was that we would not be able to get a mortgage on this if we had not already had experience as a landlord. Is this correct? As such, we would need to get a single let property to begin with and show lenders that we are capable landlords? It appears that have a guarantor may be essential in the beginning and we believe both our parents (who each own properties) would be willing to do this for us which could increase our options/

We were under the impression that for BTL properties lenders look at the rental income as a proportion of the interest rates to decided whether to lend?

Many thanks for your response.

Rob and Alex

 

[RobandAlex]

HI both, Im based in Stevenage, Herts so not a million miles away from you. As someone who has lots of property experience and done the cheap end in low value locations and HMOs locally I feel that comments given are very valuable. Flips are definitely harder now and you will need to identify property where value can be added, however the finance of these is difficult so preferably you buy for cash. I have got a colleague who invests in Liverpool and is finding BTLs at good prices, buying for cash or bridging, financing the refurb and then financing out leaving very little in each deal. Happy to help if I can on your exciting journey.

Hi Tracey,

Many thanks for this it is very useful information.

That is exactly what we were thinking - buy properties where value can be added (either BMV, adding a bedroom, conversion, or light refurb or a mix of all) re-finance the release as much equity as possible and repeat the process. But ensure that we are not over-leveraged making us more susceptible to market crashes. Whilst we want to grow our portfolio as quickly as possible, we are young and have time on our hands to grow the portfolio sensibly and sustainably to ensure long-term growth and profitability.

That is the general consensus that flips are harder now caused for a myriad of reasons - however, there are still deals to be had, you just have to look harder. Then again flips are probably more risky on the whole as you are relying on a buoyant market after the refurb has been done in order to sell, recoup your costs, and make a profit on top.

What is your opinion on having property in Liverpool when you live in London, especially if you are a first time investor?

Rob and Alex

 

[RobandAlex]

Liverpool is really becoming a huge hub for investors from all over the UK and Overseas, especially London.


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Liverpool, Birmingham and Manchester seem to be attracting a lot of overseas investment and is something we have been looking at - essentially that there are a lot of opportunities in the Northern Powerhouse regions. Our only concern would be as first time landlords would it be a lot harder to control something that far away from London (where we live)

Rob and Alex.

 

[RobandAlex]

Hi Rob and Alex

Nice to meet you (virtually). It sounds like you are in a great position to get started in property investing. As Tracey has mentioned, I invest in BTLs around Liverpool and St. Helens. I live in Stevenage, Herts, so I've built up a team in my investment area to make the process as hands-free as possible. I started property investment training when I was 27 (now 31) so I could learn as much as possible. My strategy is to buy 2-3 bed properties in need of refurbishment (often with bridging finance as they tend to be unmortgagable),add value through refurbishment, then I rent out and mortgage them after 6 months to recycle as much of my cash as possible to buy the next property. I've bought two properties this year from my local sourcing agent, who I'm now using to find the deals quicker than I can.

Last year I grew my investment pot by lending funds out to other investors for a high return, whilst I took a break from property to get married. I now pay for my refurbishments in this way, by borrowing funds for 9-12 months and giving 8-12% interest p/a. This might be something you can do to increase your pot if you can think of anyone that would be interested to invest with you, as it's very difficult to get good interest in the bank, so you can help them too. I repay the investors once the new mortgage is completed and the funds are 'recycled', generally 7-8 months after purchase.

To give you some rough figures, I tend to buy properties around the £43-50K mark, spend between £9-15K on refurbishments, rent for between £475-550pcm and add value to approx £70-95K. I chose this income strategy to replace my monthly income from working as I don't need large capital pots at the moment. Some friends are doing HMOs nearby in Warrington and Wigan, so there's lots of opportunities in the North West.

Good luck with your onward journey and if I can help with anything, let me know!

Hi Kim,

Really nice to meet you and many thanks for your response it is much appreciated.

What you are doing/have done is exactly the type of thing we are looking to do - buy a property, add value, re-lease equity through financing/re-financing, hold for income.

The figures you have mentioned seem really attractive and very do-able with the sums we have available. The fact that you also have contacts in Liverpool which you trust is an added benefit for you and hopefully if this is an area we decide to invest it you could possibly make some introductions without us 'treading on your turf' if you like!

Our aim is exactly that, to replace our current income stream with property to eventually allow us to leave our jobs and have financial freedom whilst building our portfolio.

Promising high returns to investors could be an attractive way to raise capital and is definitely something we have looked into - especially as the interest rates given by banks are so low at the moment. However, we feel we would need a bit of a track record and some case studies for investors to be comfortable to invest with us.

Rob and Alex.

 

[Lime Auction House]

HI both, Im based in Stevenage, Herts so not a million miles away from you. As someone who has lots of property experience and done the cheap end in low value locations and HMOs locally I feel that comments given are very valuable. Flips are definitely harder now and you will need to identify property where value can be added, however the finance of these is difficult so preferably you buy for cash. I have got a colleague who invests in Liverpool and is finding BTLs at good prices, buying for cash or bridging, financing the refurb and then financing out leaving very little in each deal. Happy to help if I can on your exciting journey.

Lots of good agents now in Liverpool so it's easy for UK investors to buy there


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[RobandAlex]

Lots of good agents now in Liverpool so it's easy for UK investors to buy there


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If you have an recommendations please share - I am sure people who invest in Liverpool would be keen to know which agents to go too.

Rob and Alex