I had a heart scan today!

arteriosclerotic calcium plaques

For reasons I won’t bore you with, I was in Liverpool Heart and Chest Hospital today for a CT Cardiac / Coronary Artery Calcium scan (don’t worry, it was nothing serious).

Basically this uses a CT scanner to scan the heart and its arteries to look for calcium deposits. Calcium deposits in the arteries are a significant indicator of Coronary Heart Disease, Atheroclerosis and a major predictor of Heart Attacks. Eek!

Getting a bad calcium score would lead to an angiogram to determine the full extent of narrowing of the arteries due to atherosclerotic plaques, which are the things that kill you when they break off in your blood stream and find somewhere nice and narrow to get lodged in, like a key heart artery (heart attack) or your brain (stroke).

At this point I possibly should remind you that for about 8 years I’ve been following a very high cholesterol diet: I eat red meat every day; have 15+ whole eggs a week; drink full fat milk every day; have full fat cheese 5 times a week at least; use butter to fry things, like bacon… oh the cholesterol horror! 😉

Oddly as some may think it though, my cholesterol is fine. In fact it’s better than fine, it’s fantastic:

My Results After 4 Years on a High Cholesterol Diet

So it was with some trepidation and some morbid curiosity, I was kind of looking forward to this test. Here are what the coronary calcium scores mean:

  • 400+: Extensive atherosclerotic plaque. High likelihood of at least one significant coronary narrowing.
  • 101-400: Definite, at least moderate atherosclerotic plaque. Mild coronary artery disease highly likely. Significant narrowings possible.
  • 11-100: Definite, at least mild atherosclerotic plaque. Mild or minimal coronary narrowings likely.
  • 1-10: Mild identifiable plaque. Risk of coronary artery disease low (<10%)
  • 0: No identifiable plaque. Risk of coronary artery disease very low (<5%)

I don’t really know what I was expecting. I’d kind of girded myself against bad news and decided that I’d be ok with anything less than 50. Anything more than that, and I’d really have to have a long cold think about whether my diet was really such a good choice after all.

And what would that mean for my family, who at my encouragement, have similar diets to my own? Getting 100+ for example would definitely have rocked my dietary world.

So there I was, lying on the CT scanner bed, when the Doctor came back in with my results: “What was my score Doc?”

“You scored zero.” He said with a smile. “You can go, there’s nothing to see here.”

ZERO?!? WOOT!!! I hopped off the bed and skipped out of there. I confess in a small dreamlike moment, I had thought it would have been cool to get zero, but didn’t really give it much credence as a real possibility. I am a realist after all.

So there you have it. First the cholesterol and now the calcium tests have shown in my own completely unscientific sample of 1 solitary Colin, a high cholesterol diet DOES NOT cause high blood cholesterol and DOES NOT cause heart disease (when coupled with a low carbohydrate diet of course, as I believe it’s carbs that are the real cause of heart disease).

Happy days. 😀

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April Property Update – Deals are like Buses…

April Property Update – Deals are like Buses… post image

I know, I know, it’s been some months since my last update (maybe this should be called a Quarterly update?). Why the delay? Well firstly that’s because I had nothing much to report having spent another month at the auctions, then like buses 3 deals came off all at once and I was too busy to get round to it. Welcome to the roller coaster that is the property business. 🙂

In this update I’ll detail another auction cycle, buying a house in Telford, structuring a Joint Venture, “selling” 3 flats in Bury, some interesting points about lease options, a thought tax no one tells you about (yes really), buying 4 flats in Bristol, and finally how to save £thousands when buying flats.

February Auctions

Back in January I said that the December auctions cycle had prove
d fruitless, and I was expecting the February cycle to be super busy because of the 3% stamp duty hike. I was right. So I wasn’t going to bother because I figured there’d be too many buyers pushing prices up, however what also happened was loads of sellers rushed to sell too, realising the 3% stamp duty will have the effect of dragging prices down. Pughes for example reported their biggest auction for a decade. I figured increased supply would balance the increased demand.

And so I got sucked into the auction cycle again in February. It’s hard not to. I guess it’s the girlie equivalent of shopping. What’s not to like about hunting for that property bargain and going round viewing properties? It’s something that I quite enjoy, and so I was pleased to come out with a shopping list of 7 properties to bid on.

Sadly I should have stayed at home, they all went for too much. I should have stuck to my original thoughts that demand would push prices up too much. However I did get to take my daughter to one of the auctions as she was on half term, which was an interesting experience for her. Just couldn’t quite get her to raise her hand. 😉

Another month wasted *sigh*. You have my permission, if you see me walking round with an auction catalogue under my arm, to punch me in the face and steal it, you’d be doing me a favour!

Telford Flip

I mentioned back in January that of the 10ish deals I’d looked at I’d agreed to do a JV with my friend Nathan McIntosh in Telford. It’s a simple 2 bed semi, owned by a lady who’s gone into a home now. It was an unregistered property so there were months of delays whilst Land Registry registered the title. A one point we thought we were going to get the unregistered land behind the property too, but sadly after a title dispute, that was kept of the title.

We completed on the purchase in March. It needs a full refurb, which has already started, and it should be back on the market next month. I’ll give numbers as a case study when it’s all done.

How to Structure a Joint Venture

Just as a side note, here’s how I do a JV. Have 1 person buy the property in their name. Have 1 person responsible for the work/refurb. Have a Joint Venture document that describes who does what, what costs are shared, how profit is split, and what to do if things go wrong etc. There are lots of reasons for doing it this way, but the main ones are:

1) It keeps your credit files separate. You don’t want your credit file linked to someone else’s, in case in the future they have an issue which affects your credit rating.

2) It keeps lines of responsibilities clear. 2 bosses on 1 job is not a good idea. So for example, the solicitors, and builders, etc know exactly who their boss is, and aren’t getting confused with conflicting instructions.

Selling 3 Flats in Bury

Regular readers of my blog / newsletter will recall I’ve mentioned the 3 flats in Bury that I acquired on lease options many times. I’ve been joint venturing with Trish McGirr on this deal and we’ve finally sold them on to another investor on a 7 year lease option with all flats tenanted. We are now just sat in the middle of the deal, taking a profit as cash passes through. Here are the rough figures:

  • Our costs so far are about £4,000 in repairs, council tax and bills.
  • We’ve taken an up front option fee of £10,000, so are currently £6k up.
  • The monthly option fee we’re charging the investor is £132 pcm more than we’re paying the owner.
  • The option price to the investor is £10k more than the option price to the owner.

This is a true Win, Win, Win scenario.

Win 1: The owner has washed his hands of the flats, is getting his mortgage paid and will have the balance paid off at the end.

Win 2: We make £6k up front, £1,584 per year for 7 years, and £10k on the back end. This makes it a £31k profit (less solicitor’s fees), from 3 flats we don’t own.

Win 3: For the investor, for £10k up front, they basically get a free flat for 7 years (their monthly fee is paid by renting just 2 of the flats out, which are already tenanted) and 7 years’ capital growth less another £10k at the end.

Lease Options Worry

I know some people worry about Options (or Leases with Options if you prefer) on properties. Just to be clear, that’s where you have the choice to buy a property / some land at a fixed price, within a certain time frame. The seller must honour that agreement or face legal action, but as the buyer you don’t have to. It’s an option to buy, not an obligation to.

If you’re only used to the normal purchase process of a home or buy to let, they can seem alien, but they are a very normal process. The whole futures stock market runs on them and they’ve been very commonly used in commercial property deals for centuries.

It was interesting then when I was going through the conveyancing pack for the Telford purchase (at 7am on a Sunday morning of course!) and noticed it contained a copy of HMRC’s Land Transaction Return form (the Stamp Duty form). On the very first page, question 8 asks:

> “Is the transaction pursuant to a previous option agreement?”

It just goes to show that HMRC acknowledges that options are an established part of the property landscape, and so common it’s one of the first questions they ask. So you should not feel concerned about using them, if the opportunity presents itself. If you come across something where you think they might be useful, I’d be happy to talk you through the issues, just get in touch.

Lease Option Stamp Duty Tax

It’s actually not obvious at first why HMRC is asking this question though. Why on a Stamp Duty tax form are they asking about options, which is a property transaction that hasn’t actually happened yet?

The reason for this question is that Stamp Duty is actually payable on the option fee, at the time the option is taken out… I know, they’re taxing you on something you haven’t done yet! In may ways an option is just a formal way of saying “I’m thinking of buying this property, if I did, what would the price be?” So in many ways it’s actually a “thought tax”, you’re being taxed on something you’re thinking about doing. Shocking huh?

What’s more interesting is that in 4 years of reading, listening to and attending property training courses I’ve never heard a single person mention that small but potentially important tax.

Fortunately it’s not something that normally comes up with my line of work, as the option fees tend to be small. In my Bury flats example, I paid was just £1 option fee for each flat. 🙂 But be careful if you’re ever doing a bigger deal, on some prime land before planning say. If you want to know more, HMRC even have an example showing someone using an option to purchase a property and the tax due at each stage:

So don’t be worried about options, because you know when something’s being taxed, it must be completely normal. Haha.

Buying 4 Flats in Bristol

You may or may not recall that back in July 2015 I agreed to buy 4 flats in Bristol with my very good friend Alex Venables. Well 9 months later and a conveyancing nightmare, we finally got them over the line, at 16:15 on the 31st March, literally hours before the 3% stamp duty rise kicked in.

That was a definite roller coaster I can tell you, especially when at 3pm the bank called to say that the insurance I’d taken out the day before didn’t have subsidence cover. WTF? What kind of buildings insurance doesn’t have subsidence? I called the my broker to be informed that because we were planning on a quick refurb and flip, the appropriate policy was a short term refurb policy, and they never included subsidence, because they’re typically measured in months.

But she pulled a blinder, got on to the underwriter and got subsidence cover added to the policy within an hour. It was a bit more complicated than that, but that’s the gist of the story.

Back to the flats then, 2 are empty and 2 are tenanted with 9+ year tenants who aged 60+ and may well stay in till they die, so we’re looking for 2 home owners (probably) to buy the empty ones, and 2 investors who want modestly discounted flats with existing great tenants, in a definite capital growth area… Bristol property went up 12.5% in the last year according to HomeTrack. If that’s you, get in touch ASAP. To be honest I’d prefer to keep them myself, but that doesn’t help hit my business plan targets, so I’m selling them on.

How to Save £thousands Buying Flats

Ok, confession time: I actually quite like Tax law. Why on earth would I like something so dull you may wonder? Because if you know what you’re doing, you can save a fortune just by knowing you have to tick a different box.

“But that’s what I pay solicitors and accountants for.” I hear you cry. Well if I’d taken that approach, I’d be £4k poorer now. Here’s why:

There’s something called Multiple Dwelling Relief when it comes to calculating Stamp Duty. It comes into play, you guessed it, when you’re buying multiple dwellings in a single transaction, and means that the Stamp Duty you pay is based on the value of the individual dwellings (flats in this case) not the whole building, subject to 1% minimum.

Here’s the rub: my solicitor (who in all other matters was exemplary) either forgot this or just didn’t connect the dots, and sent me the Stamp Duty form based on buying a single dwelling at the full price, not 4 smaller dwellings added up. For these 4 Bristol flats, the saving by claiming Multiple Dwelling Relief was over £4k! If I hadn’t known about it, and I hadn’t checked the form, I would have just signed it off assuming he was right.

My point is, it pays to educate yourself in property tax, as boring as you may find it, as at the end of the day you’re the one who’s paying and other people will never be as careful with your money as you are.

 

So that’s it. Maybe I’ll get back to a monthly update in May, maybe this will become quarterly now, that all depends on if I’ve got something to say, and how busy I am. If you have any questions on any of the things I talk about, feel free to connect, I’m happy to help if I can. 🙂

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January Property Update – A Box of Roses…?

January Property Update – A Box of Roses…? post image

Happy New Year! Oh, it’s possibly a bit late for that. Where did January go?!?

Not to worry: all my properties are full, there are no rent arrears, all my tenants are happy, life as a landlord is a box of roses…

Haha in my dreams! But that’s the public face of being a landlord and property investor isn’t it? That’s the rosy picture that many of the gurus portray. Someone even told me this month: “When someone asks how business is going, the answer is always: Awesome!” That might be good PR, but sadly reality is somewhat different, and I have no appetite for sugar coating the truth. It’s the Engineer in me, I call a spade a spade, as you’ll see:

January Woes

January has been a nightmare month of fire fighting, particularly with the Christmas effect: I’ve got several tenants in arrears, 3 of whom have had their housing benefit suspended by the council for some infraction or other, I’ve got a couple of voids (empty properties) and whilst I’ve had plenty of interest I’m being picky about the tenants I take. You soon learn as a landlord that it’s better to have no tenant, than have a bad tenant.

Additionally 2 other tenants have handed their notice in and will be moving on February; whilst it would be lovely if tenants stayed for life, tenant churn is a fact of landlord life, particularly when you often deal with single housing benefit tenants as I do.

To compound that the agency I’m using in Liverpool are being a right pain: with staff going off sick and others having to picking up their work; not noticing issues over housing benefit; not chasing arrears well; and some of the staff crazily claiming they’ve never heard of legal subletting with the owner’s permission (what’s effectively happening with my lease option properties) and getting very confused as to who’s name to put on the housing benefit claim for direct payment from the council.

This is the “broccoli” of being a landlord as Susannah Cole would say. It’s all very well going after the shiny new deals, but it’s vitally important not to take your eye off the ball over your current portfolio.

Goals

The major impact of this has been that I’ve not yet managed to formulate my goals for 2016. To be honest I didn’t quite meet my goal for 2015, the primary reason being that the main flip deal I have in the pipeline hasn’t come off yet. It’s been frustrating to agree to do a deal, ring fence the money for that, only to suffer now 7 months of delays, with more to come. If it had completed in a timely fashion I’d have comfortably hit my 2015 target, but that’s just the way it goes.

Auctions

The December auction cycle proved fruitless. There were 4 properties I was seriously interested in and all went for more than my top bid. One 5 storey Georgian grade II listed building in Liverpool L1 that I was particularly interested in went for a shocking 60% above its guide price!

As I said in December the 3% stamp duty change (the details of which still haven’t been finalise) is likely to make the auctions ridiculously busy, February 2016 most so I think, but that’s not going to stop me keeping my eye out for that cheeky little deal.

Pipeline Deals

The last 2 months I’ve listed many of the deals that had arrived on my desk. The purpose of that was not only to demonstrate what’s going on, but also to show that much of property investing is looking at things that never happen.

Out of the 10ish serious opportunities I’ve looked at, I’ve only agreed to do one: a JV with someone on a property in Shropshire, I’ll provide details when the deal is done, but it’s a simple buy, refurb and flip.

Refurbs

Of the 2 refurbs I mentioned last month, 1 is finished and I’m currently advertising for tenant buyers. After 1 week just advertising in the window of the property, I’ve had 12 calls from 5 different people.  I’m expecting a lot more this week.

The other refurb has started after I eventually agreed a fixed price with my builder. I always get fixed price quotes based on detailed specs. Yes it’s more work up front and creates some delays, but it creates certainty on both sides, you both know where you stand, and there are general no nasty surprises.  And as happened with the last refurb, if it over runs, that extra cost doesn’t come out of my pocket.

That’s all for this month, hopefully the fog of January’s turmoil will have settled by the end of Feb and I’ll be back to growing the business.

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December Update – Sourced Deals and Auctions

December Update – Sourced Deals and Auctions post image

This last month feels like a whirlwind as we’re in the auction cycle again and I’ve been hitting the auction listings heavily looking to buy before the end of the year.

The “possible deals” pipeline seems to have changed up a gear too as I’ve been approached with another 5 possible deals.

Having just got back from the Property Investor’s Awards night in London, (which wasn’t all play, I did some good business there) I’m a bit pushed for time, so this may be briefer than normal… lol, who am I kidding?!?

Auctions

I did have a theory that the Nov/Dec auctions would be a good time to pick up a bargain as I suspected that many people would be too busy with planning for Christmas, and not wanting to start a project in winter. Sounds reasonable right?

However I wonder if our new public enemy #1 George Osbourne has put paid to that idea with his announcement of an additional 3% stamp duty on buy to lets (more on that below), as it’s going to create an artificial surge of interest before it comes in, in April 2016. Conversely April/May 2016 auctions will probably be dead!

So over the last month I’ve been pouring over auction lots, 569 to be precise, looking for that special something. Out of that lot (pun INtended, haha) there were only 4 that really caught my eye, I’ll let you know how it all went in the next update.

More Deals That Didn’t Happen (Yet)

In addition to my list of possibly deals last month, I’ve had several more pass my desk. Obviously I can’t go into much detail with these, as they’re all live deals that are yet to come off:

Another block of 10ish flats, in which we’re negotiating for 25% Below Market Value (BMV) from an independent RICS valuation.

A whole row of 10ish houses, again which we’re negotiating for 25% BMV from an independent RICS valuation. This one is much more tricky, as if we were to actually complete on the houses at 25% BMV, because “market value” is heavily dependant on what’s sold nearby, we’d have reset the market value down 25%!

What’s likely then is we’ll go for something like a Lease Option on these properties, and sell them on slowly at the full value, obviously pocketing the difference between the option price and the sales price.

Another block of 10ish flats being sold by a developer. Given the location these flats really do lend themselves for immediate resale, so the idea here is to do an Exchange with Delayed Completion on the whole block, split the titles (on behalf of the vendor), and sell off the flats individually. But we never actually complete, the end buyer slots into our contract and completes with the vendor, and we take the difference.

It’s a great question as to why would the developer would do this? Basically he needs some liquidity quick to do another deal and doesn’t want to wait the 3+ months it will take retail buyers to get their mortgage cash together and wait for their chains to complete, only to have typically 1/3 fall out of bed.

I’ve also been approached by a fellow investor who has done a great job sourcing a couple of simple house refurb deals at a good discount, he’s looking for a JV partner to supply the cash to purchase these deals as bridging finance is expensive and adds extra hoops to jump through that he doesn’t need. Besides it’s always more fun to work with people who have a similar mindset, than faceless financial institutions.

Finally I’ve come across a couple of properties that would be excellent large HMOs, but to be honest I’m struggling with the brain capacity to think about them whilst auctions are looming, so we’ll just see what happens to them in a few weeks I think.

Industry Updates – 3% Stamp Duty!

You probably can’t have failed to hear that George Osbourne’s war on buy to let is being ramped up with the announcement that a 3% premium on stamp duty is going to be applied to all buy to let (and second home) purchases.

It’s not yet clear how this is going to be implemented, and there’s some rumours around that it won’t apply to properties below £40k (like that’s going to help much!), and won’t apply to corporate institutions that own more than 15 properties. However the HMRC press release that added detail to the Autumn Statement, didn’t mention either of these details, so we’ll just have to wait and see.

I used the phrase “war on buy to let” deliberately, as that’s what it is, or rather it’s a war on “small time” buy to let investors. George wants to protect his corporate mates from the hit.

I’ve also been told just this week some shocking news about mortgage interest relief which is being cut to the 20% basic rate… our man in number 11 wants to scrap it altogether! Basically the reduction to 20% is just the first step. :-/ I won’t reveal my source, but it’s one of those “friend of a friend” sources, maybe it’s true, maybe it’s not, read into that what you will.

I expect more and more people to be incorporating into Ltd companies moving forward. The banks will no doubt milk it for all its worth by charging a premium on corporate mortgage rates, but eventually as more lenders come into the market, competition will drive rates down to current levels I think.

Property Investors’ Awards

It was a great night at the black tie (well mine wasn’t black) Property Investors’ Awards in London last weekend. I was particularly pleased that thanks to a decent diet (you’ve read my book right?), I was still able to fit into the tux I bought when I was 20 years old! One of these pictures was taken 20 years ago, one was taken last weekend, see if you can spot the difference!

Colin McNulty Tuxedo 20 years apart

Colin McNulty – Same Tuxedo 20 years apart

Refurb Nightmares

I have 2 properties that required refurbing, one which I’m renting and one which I’m flipping. It seemed like a good idea to me to do the renter first, as that would then be producing an income whilst we refurbed the other. For both the refurbs were light, just a tidy up really, and expected to take about 3 weeks each.

Well that was the plan. We’re currently into week 8 of the first 3 week refurb! Everything that we’ve touched has broken, snapped, disintegrated, wasn’t screwed on, or just fallen apart. Not only has this cost me in extra time for the builders, but also the loss of earnings because of the delays is hurting, so I’m currently in the hole for several £thousand more than I expected.

It’s annoying but these things happen, you just have to keep on swimming, until it comes good. So that’s what we’re doing.

LHA HMO

My ever entertaining LHA HMO has been mostly quiet this month, thankfully. I’ve had 1 tenant leave, he’s the chap who nicked 2 months housing benefit and blew it. He still owes me £800 but to his credit, he’s offered to pay £5 per week and work the rest off as an when I have work for him to do. Time will tell if he’s to be believed.

I’ve got another tenant lined up to take his room, this chap has just come out of an 8 year stint in jail. It’s been suggested to me that such long term prison leavers do actually make good tenants, particularly older people (he’s nearly 50) as they often have realised that life is passing them by, and have resolved to behave. Again time will tell if that advice is sound or not.

 

That will do for this month, and in fact this year. Have a great Xmas and New Year, here’s to 2016!

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November Update – Tenant Nicked My Fillet Steak!

Fillet Steak Blue

It’s a lovely time of year with the autumnal colours and piles of leaves, well so people tell me. Personally when I see those leaves blowing about, it just makes me worry about blocked and overflowing gutters!

The observant amongst you will notice there was no October Update. Actually this is the October update, but as I’m putting it out in mid-November, I decided to change the title to November Update. Radical huh?

Whatever it’s called, this update covers deals that didn’t happen, deals that did happen, and more hilarious stories from my LHA HMO.

Failures Part 2

Building on the surprisingly favourable praise I received for publishing some of my failures last month, I thought I’d start with more stuff that’s gone wrong. Everyone likes a bad news story right?

First up is the pub to 6 flats conversion that I’ve mentioned several times: that’s fallen out of bed. It turns out I wasn’t talking to the decision maker, and when it came down to an offer, the guy I’d been speaking to had to consult with the guy holding the purse strings: he said no.

Lesson 1: When doing any kind of business, not least negotiating off market property deals, make sure you’re talking to the decision maker. A nice phrase to tease out any other decision maker that I learned from Rick Otton (but clearly completely failed to use!) is this: “Is there anyone going to help you make this decision?” So this deal goes back in the hopper: once a month I’ll call the guy and see if things are moving or not.

Second is missing out on a cracking deal: 12 flats came up in auction with a guide price of £400k and an annual rent of £50k. I figured they were worth a bit over £1/2M, but they are a fair distance from me, 2 hours in rush hour and I wasn’t that interested, as I figured they’d go for £450k ish in the aution.

When I checked for unsold lots after the auction, I discovered they hadn’t sold and were available for £400k. Now (stupidly) I did some proper due diligence and realised that a realistic valuation based on selling each flat indivually was £600k, plus the freehold which would be worth about £30k. Also the £50k rent was low, and could be bumped up to £55k without too much trouble.

With possibly £230k ish equity in the deal, £400k was suddenly looking very attractive. I called the auction house… it had been sold that morning, argh!

Lesson 2: Invest the time in doing proper due diligence *before* the auction, and go and bid anyway, you never know, occasionally things don’t sell for what you expect.

Other Deals That Didn’t Happen (Yet)

9 Bed HMO: This was a deal that was brought to me by a sourcer as a 90% finished conversion of a 9 bed HMO. Why was the owner selling? Because he needed cash for 2 other deals that were more lucrative, allegedly. A bit of research revealed that there was no planning permission for this large (sui generis) HMO. As it was over 3 floors it would require a mandatory HMO license, which hadn’t yet been granted. Worse though was that it was listed building and there was no consent from them either. One to avoid, unless the price drops significantly.

The 4 flats in Manchester have gone cold as the vendor isn’t replying to messages anymore.

The vacant building I’ve been trying to buy for 3 months and turn into a couple of 1 bed bungalows, is still ongoing as they company that owns it has yet to make a decision if they want to sell it or not.

The 4 Bristol flats are still waiting the grant of probate so are still months away.

Another deal that came my way is a large 5 bed semi that’s been derelict for 14 years; I was contacted by the owner’s son. A long story short: I’ve put an offer in and am awaiting a response, however the council have been maintaining the premises for the last 10 years and have put a charge on the property at the Land Registry for their costs, which currently amount to nearly £25k!!

I also walked away from another lease option deal for 8 flats. I won’t say anything more as they’re currently still on the market.

Industry Updates

The world of property is aghast at the Chancellor’s surprise reduction of Mortgage Interest Relief, and I’ve already had small time landlords call me asking if it’s worth keeping their properties. I expect there to be some correction in the market as landlords with 1-3 properties AND high earning jobs, are likely to sell.

New landlord legislation came in on 1st October, making it harder again to evict tenants by serving a section 21 notice. There’s more red tape to do at the start of every tenancy too, with more paperwork to hand out. Also the rules on smoke and CO detectors has been tightened. I won’t bother repeating it all in detail here, if you’re not aware, remember even if you use a letting agent, it’s YOU as the landlord who are responsible.

Some people will be aware that there has been temporary office to residential Permitted Development rights that were due to expire in May 2016, well it’s been announced that these are going to be made permanent.

LHA HMO

I’ve evicted my heroine addict and prolific shop lifter tenant who is currently serving his 3rd jail term this year. His parents and sister came round to collect his things, such as they were. They were hugely apologetic about him and his behaviour, but most interestingly his sister is a medical doctor at a local hospital! It just goes to show that kids from the same upbringing can go in completely different directions.

Some of his more colourful moments were when he stole all the fillet and ribeye steak at the local supermarket to sell for drugs. The annoying thing was I went that very day to buy some to cook for valentines day and they didn’t have any. That’s right, my tenant stole my fillet steak! Another time he tried to sell his drunk and unconscious girlfriend’s father’s S-Type Jaguar keys to me for £1,500! Comedy gold.

Another tenant has gone AWOL and not been seen for a month now, nor has his mother heard from him, and worse now his housing benefit has been suspended. Annoyingly however there is evidence that he’s coming back, but is not replying to texts and every time I call his phone is off.

What Went Well

Despite all that doom and gloom, there have been good bits (not that looking at deals and deciding not to do them isn’t good, it is).

The 3 lease option flats in Bury have finally been signed. It’s taken an unbelievable 10 months to get this deal across the line, but we’re finally there and I’m in the process of taking over the mortgage, insurance and council tax payments. In comedic timing, the week the signed paperwork turned up, 2 windows were smashed by local oiks which we’re now on the hook for to replace; don’t you just love property?

Wigan Flat Completes

OMG how can a simple no chain purchase of a 2 bed flat from another landlord possibly have taken 4 months?!? I’m never using that solicitor again; utterly shocking.

However it’s done now. It was a recently build flat, less than 20 years old, with a tenant who’s been there 5 years already and will continue. All paperwork has been done and the first 6 months rent has been paid in advance, which is nice. The numbers on that are:

– Realistic value: £68,000 (23% BMV)
– Purchase price: £52,000
– Rent: £5,100pa
– Gross yield: 9.8%
– Net ROCE* after all costs*: 18.1%

*All costs = deposit, solicitor’s fees, broker’s fees, lender’s fee, sourcer’s fee, and annual: insurance, ground rent, service charge, gas safety cert
*ROCE = Return On Capital Employed

In cash terms, there’s £12,177 equity after costs, cash left in the deal of £16,823 and it’ll make me £3,047 per year in positive cashflow. The plan is to refinance in a couple of years to see if I can get most of the deposit out.

Liverpool Lease Options

I’m most of the way through the refurb of one of the empty properties in liverpool, and possibly have a buyer lined up for the one I want to flip. If not, I’ll just refurb that next and flip it, probably in January now. The handover of the 4 tenanted properties has started with Venmores, though the jury is still out on how that’s going.

Helping Mates

Lastly I was pleased to help a friend save a deal that has £40k profit in it, by giving him advice on how to solve the major problem with the lease that was looking like it was going to derail the whole deal. I’m bored of writing now, ask me about it next time we meet if you’re interested in the details.

I’m not sure if there’s going to be a December update, depends on what happens in the next 4 weeks I suppose! If not, have a great Xmas and see you in the New Year, I’m quite looking forward to looking back at how things have gone this year.

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September Property Update – Dead Ends & Lease Options

September Property Update – Dead Ends & Lease Options post image

I hope you had a pleasant summer. I’m not sure I can say I had a pleasant one, as once again summer has passed me by without a holiday, but it’s certainly been a busy one. One day I’ll make it up to the family and we’ll have some nice family holidays, but at the moment there’s far too much to do. (I should point out that the wife and kid have both been away, just not me.)

Given that so many people are away over the summer I didn’t bother with an August update email, so this one covers August and September.

Failures
One of the interesting things about listening to people in property, is you mostly only get to hear about the success stories. I’m trying not to do that and detail the failures too, because behind each success story are a dozen+ failures. Well failures might be too strong a worried, I’m talking about deals that didn’t come off; dead ends if you will.

Take the 14 flats I mentioned last time. I spent several days on that deal, viewing the properties, researching their use, talking to the planning dept and a planning consultant, talking to the agent, talking to the vendor several times, and in the end… I walked away from it.

The issue was, they’d been converted into flats with no planning permission just 2 years ago, the vendor was lying and saying they’d been flats for at least a decade, but there were several bits of evidence suggesting otherwise. The most compelling of which was the Valuation Office Agency (VOA) who are the gov’t body that sets the Council Tax list. Here’s a great tip: call them up and they’re happy to tell you when a property was first registered for council tax, June 2013 in this instance, certainly not a decade.

I considered going for retrospective planning, however unlike other properties along that road, these had double yellow lines out the front and no parking of any kind, nor any space for bike parking. The conversions were also very poorly done with no thought to building regs. As soon as the council come round, they’d slap an enforcement notice on them for sure.

Dead Ends
The reality is, property life is full of these dead ends. Take Susie Cole’s excellent sourcing business: The Good Property Company. They sourced/bought some 55 houses last year, about 1 a week. Sounds great right? But their sourcer Ash views and offers on 25+ properties a week, plus bids for 4-6 properties at auction each month. So they are only buying about 4% of what they go for. Or put another way, 96% of his work turns out to be a dead end!

I’ll be honest, it’s taken me some time to get used to this. I don’t think anyone likes doing work and investing your time into something that comes to nothing, and it can get disheartening when days and weeks go by and nothing seems to be coming off. But then perhaps that’s what separates the hobbyist from the professional? What was that pearl of Rocky wisdom? It’s in the picture at the top of this post.

Bristol Flats
And so I’d better mention the 4 Bristol flats, which have also fallen through, well kind of. Long story short, the vendor dropped down dead the day before Exchange and Completion of the purchase. It’s terribly sad for his family. Worse, it seems he didn’t have a will, so the estate has to go to probate, which is likely to take to next year now. I know, you couldn’t make it up!

We’re still confident that deal with come back, but it’s created a cash flow issue for me, as I’ve got the cash earmarked for that deal in the bank… what do I do with it in the mean time and how long do I wait for a deal that may not come off? There’s a cost to keeping underutilised funds, but if I sink it into another deal and these flats suddenly come back, I have to go off and raise that cash again. Oh decisions, decisions.

Property Sourcing
There are other deals that I’m looking at, I’ve been to see another small block of flats in Manchester that are all tenanted and look interesting, it’s early days with them still. Every week other possibles come in, e.g. yesterday I picked up a lead on an unmortgageable property that got a zero valuation by a mortgage company. Perhaps that’s a good purchase for someone with cash in their pocket doing nothing… oh, hold on! 🙂 I’m going to arrange a viewing as soon as I can.

The direct to vendor stuff has taken a back seat over the last couple of months and that’s something I definitely want to improve on towards the end of the year. One main reason is that January is a monster month for direct to vendor deals, simply (and sadly perhaps) Christmas is the time most couples decide that they’ve had enough and they want to split up.

Also allegedly December is a slow month for repossessions as banks are more reluctant to evict little Johney just before Xmas, so January sees a bumper set of repossessions too. As a result, I want to start getting my signs and marketing out in the run up to Xmas, so they’re already in the public’s subconscious come January.

LHA HMO
The LHA HMO continues to be a high yielding pain in the backside. New for this month is one of my tenants getting beaten up and stabbed with his own screwdriver in what I suspect was a drugs debt related beating. So an hour before showing a potential new tenant round, I was cleaning the blood splatter off the landing walls, stairs, hallway and front door! Ah the glamorous life of a landlord; they don’t tell you this stuff at landlord school, hoho.

Lease Options
The 3 Bury flats deal is *still* dragging on, for some reason the vendor just can’t quite seem to commit and sign the contracts, which is highly frustrating to say the least. That’s another deal that’s had weeks of my time in since January and if that all falls apart, I’m going to be mightily annoyed.

On a brighter note I’ve taken on a small portfolio of 6 lease option properties in Liverpool. I had to buy this deal so it’s cost a pretty penny, but there are 6 decent houses, 4 with long term tenants in (3, 7, 10 and 15 years respectively!) and 2 that are vacant and need minor refurbs before letting / selling.

The Return on Capital Employed (ROCE) is in the region of 40-50%, plus there’s built in equity on day 1 of about twice my investment, so I’ve doubled my money from the start, on paper at least. It’s been quick to seal the deal: just a few weeks, and I haven’t had to go through the hassle of getting my own mortgages.

Happy dayz!

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July Property Update – Flat, Flats, Flats!

Eviction Notice

July has seen been a good month with some good progress and some great prospective deals. I’m buying my first flat in Manchester at a genuine 23% discount off it’s market value; have agreed to buy 4 flats and their freehold in Bristol, and getting close to 3 other deals.

1) Lease Options – The 3 Bury flats I’m acquiring on lease options are progressing. We’ve had some remedial work done (damp proof course and wood worm treated) and have started interviewing tenant buyers, with one interested in taking all 3 flats for his extended family.

2) LHA HMO – I’ve finally got read of my most troublesome tenant so far. He was a pleasant and intelligent enough chap… when sober, which wasn’t too often sadly. However I used some of the techniques taught by Jim Haliburton (the HMO Daddy) from his DIY Eviction course which I went on last year, and the tenant left without any issue and without the need for expensive and time consuming court action. Marvellous, thanks Jim!

The tenant who intercepted 2 months worth of housing benefit has started to pay that back by earning his keep and I’ve put him to good use cleaning up after the tenant who left and painting his room. So far, that’s working well.

Now I need turn the same eviction techniques on my second to worse tenant. As I’m writing this I’ve just had a call from one of the local bobbies asking for access to the HMO as one of the neighbours have called the police due to his arguing with his girlfriend. *sigh*

3) Property Sourcing – The repo properties I mentioned last time haven’t come off. It’s a long story but unbelievably, 3 houses within 20m of each other have all been repossessed within 2 months of each other. The insider info I had was that one of the houses splitting them had been sold setting a new sealing price for the road, which was what I was basing my post-refurb value estimates on. Sadly that property has fallen through, so I’m no longer confident of the end value and have withdrawn my offer… just as the bank were saying they would accept it next Thursday when they dropped the price again!

Last month I was hoping to try a rent 2 rent / lease option, with advanced LHA strategy with a local landlord I’d contacted. However my powers of persuasion are clearly not yet perfected as I’ve been unable to convince him to go for the deal. Which was a shame as a fake ad on GumTree has resulted in about 15 possible tenants, of which 4 or 5 were serious possibilities.

It’s taken some looking but I’ve finally found a property sourcer who’s doing things what I would call “properly”. There are many wannabe property sourcers out there, many of whom are really nice and earnest people, but who aren’t able to come up with the goods. This guy can and is though and I’ve already bought 1 deal off him: a cheeky little flat. I’ll give you the full details once we’ve exchanged but it’s a genuine 23% BMV (Below Market Value) deal, from another property investor how just wants a hassle free and quick sale. Perfect.

4) Flats, Flats, Flats – You know it’s funny, I never had any intention of buying flats, but like London buses, 3 deals seem to have all come along at once.

As well as the flat above, I’ve agreed to buy 4 flats and their freehold down in Bristol as a JV with a southern investor friend of mine. I’m putting up the cash, he’s doing all the work and we’re splitting the deal 50:50, nice and simple. Hopefully I’ll be able to give you more details next month. This deal also has the benefit of leveraging my friend’s previous relationship with Shawbrook for the financing, which gets me an “in” with them for future deals.

I’m also looking at a block of 15 flats in the NW that I’ve come across, which I think I can pickup for less than £20k per flat! It’s early stages at the moment but I suspect there’s a planning issue, so I’ve booked a call with a planning consultant; if I can fix that problem, that’s a game changing deal for me. It’s been helped by using a bit of internet sleathing to get the phone number of the vendor directly. 🙂

5) Pub to Flat Conversion – Yet another flat deal is a pub that I’ve found that’s half way through a conversion into flats, but the project has been stalled for several years. The developer who owns it just hasn’t got the time & resources to finish it, so I’m negotiating with him on a price to take it off his hands. The tricky bit is working out how much it will cost to finish the job, as he’s a thumb in the air kind of guy, so there’s no schedule of works to go off.

6) Direct to Vendor – As I mentioned last time, I’m still working on improving my patter for direct to vendor negotiations, and it’s improving. One deal I’m working on for example is a divorcing couple, however the relationship has broken down and they’ve both said to me that they’d be happy for the property to be repossessed before they see the other half benefit from it!

As June was, July has been another good month, with some real progress and some tantalisingly large deals within reach.

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June Property Update – 3 Lease Options Agreed

Lease Option Deal

June has seen some good progress, having all but signed up the lease option deals on 3 flats in Bury, and had offers of a couple of others through approaching local landlords. I’ve also started a direct to vendor campaign and have been calling leads about their properties.

1) Lease Options – FINALLY! The 3 flats in Bury are a go. The vendor has agreed to everything and has signed the Head of Terms, and that’s now gone for formal contracts. We’ve also got the keys for 2 of the 3 flats (the other is still occupied by a tenant).

The down side is the flats are in a worse state than I originally thought, with leaks from the roof, a failed damp proof course, woodworm, and a broken fire alarm being the main issues. However, we’re off in the right direction, so I’m looking forward to some very good progress on this in next month’s update.

2) LHA HMO – The LHA HMO is now running at full capacity and bringing in £2,000 per month, although every fortnightly payment is still a faff, as payments regularly stop for one reason or another. E.g. just today I was chasing up the housing benefit (HB) for another one of my tenants that’s in jail.

He got 6 weeks inside so the HB was suspended, but should still be paid once they get confirmation that their release date means they’ll only be away for less than 13 weeks. Despite getting this, the benefit was still suspended and I had to appeal to the Housing Benefit Area Manager to get it correctly released.

I’ve also had to give my most troublesome tenant his marching orders. Being woken up at midnight on Monday by the neighbours moaning about the noise, because the police had been called to a domestic and were throwing people out, was the last straw.

Another tenant has been given his final warning, also for anti-social behaviour including noise arguments and more seriously, buying drugs on the drive!

3) Property Sourcing – There are 2 repo properties that I’m close to buying, as I’m offering exactly what the estate agent believes they’re worth, and slowly the asking price is coming down. I’m fortunate in that I have a bit of insider info as to the real value of them, but I’ll share that with you if one of them comes off.

I was lucky that the local council had sent out an email and accidentally exposed the email addresses of 160 local landlords… so it seemed churlish not to take advantage of this and email them all myself to say hello! 😉 From that I’ve had 5 good leads from landlords that are thinking of selling up, and negotiations are proceeding gently that may present some opportunities.

One such opportunity is a rent 2 rent / lease option, with advanced LHA strategy. I’m just holding off until next week’s summer budget, to see what the Chancellor does to housing benefit before I decide.

4) Private Finance – I’ve received a £100,000 payment from an investor this month, which is always nice, as it bumps up my ability to move quickly on bigger deals.

5) Commercial to Residential – I spent several days this month looking at an office that’s been empty for 8 years! The asking price has halved in that time and is down to approx £1,000/sqm. What got my attention is that the residential properties in that area are going for £2,000 – £3,500/sqm, so there’s a chance to sell for double – triple the purchase price, after a major refurb (£100k ish).

So on paper, the numbers really stack up, as there’s probably at least £100k profit in it. The issues with it are: it’s not in a great location; there’s no outside space; and the parking is a nightmare. I consulted someone whose opinion I trust and on their advice was:

“Who’s going to spend £1/2M+ on a property with no garden, poor parking and in a bad location, even if it is a large property, when there’s a very nice semi 100mdown the road that doesn’t have any of those problems for the same price?”

Well when you put it like that, it seems obvious! 🙂 As Susannah Cole says, always start with the end in mind: who’s your buyer and what are they looking for?

6) Direct to Vendor – I’ve also started a collaboration with someone on a direct to vendor campaign. Having got 20 initial leads I’ve been busy phoning them all, but it’s very much in the early stages, and I’m very much aware that my initial sales patter needs rapid improvement. Something I’m actively working on.

All in all, June has been a good month and I’m looking forward to what July will bring.

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MMR Vaccine – What Did Dr Wakefield *Really* Say?

MMR Vaccine – What Did Dr Wakefield *Really* Say? post image

A very good friend of mine, who’s expecting his first kid soon, posted up recently about the MMR vaccine and how Dr Andrew Wakefield’s research caused a lot of harm.

When my daughter was due her MMR jab, I did considerable research into this subject, but that pre-dates this blog by some years, so I thought it would be useful to summarise the several weekends of research I did on the subject at the time.

For things like this, I always like to go back to the source, as the internet is full of opinion and conjecture. This is the link for the full text of the original research that ex-Dr Wakefield did, ignore his summary and read it:

http://www.thelancet.com/journals/lancet/article/PIIS0140-6736(97)11096-0/fulltext

Note at the very bottom it says this:

“We did not prove an association between measles, mumps, and rubella vaccine and the syndrome described. Virological studies are underway that may help to resolve this issue.”

And:

“If there is a causal link between measles, mumps, and rubella vaccine and this syndrome, a rising incidence might be anticipated after the introduction of this vaccine in the UK in 1988. Published evidence is inadequate to show whether there is a change in incidence or a link with measles, mumps, and rubella vaccine.”

I don’t think the published evidence was/is inadequate, just do a Google image search and checkout the rates of autism yourself. Take a look at the graphs and see if you can spot the step change when the MMR was introduced? (Pssst you won’t find one.)

https://www.google.co.uk/search?q=autism+incidence+history&num=50&tbm=isch

“We have identified a chronic enterocolitis in children that may be related to neuropsychiatric dysfunction. In most cases, onset of symptoms was after measles, mumps, and rubella immunisation. Further investigations are needed to examine this syndrome and its possible relation to this vaccine.”

The point I’m trying to make is that ex-Dr Wakefield’s own research said they hadn’t found a link, the incidence data didn’t support a link, that there might be a link just because A followed B, sometimes, but that further research was necessary.

So now go back and read the summary of findings at the start, which begins:

“Onset of behavioural symptoms was associated, by the parents, with measles, mumps, and rubella vaccination in eight of the 12 children, with measles infection in one child, and otitis media in another.”

Note is says: “by the parents”. Nothing in the rest of the findings says he found a link. That’s because he didn’t, and he said he didn’t, as I’ve quoted above.

I actually feel a bit sorry for ex-Dr Wakefield, as it seems to me that somehow he got caught up in all this and misrepresented his own findings to people who it appears, didn’t do a very good job of reading the research in question.

Now having said all that, it’s absolutely true that vaccines are not completely safe. A small minority of people will respond badly to them, that’s just a fact. But in general*, the good vaccines do FAR outweighs the risk of side effects. But do your own research, the internet is a marvellous tool, as long as you’re careful what you read.

[* In case you hadn’t worked out already I’m definitely pro-vaccine, but I say “in general” as in my mind, based on the evidence I could find, the jury is still a long way out regarding the HPV vaccine.]

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May Property Update – Auctions… bah!

May Property Update – Auctions… bah! post image

May has proved to be a frustrating as April was. There’s been lots of activity to source property to flip, and we’ve come close to a few, but all have slipped through our fingers for one reason or another.

1) Refinance my existing portfolio – You’ll recall that I have postponed a decision to refinance my HMO. Since then a second lender has potentially become available, but as the first, the initial costs are prohibitive. I’ve decided that this property will remain unencumbered for the time being, to be used as security for bridging finance, and as a potential emergency fund for future use, should the need arise.

2) Lease Options – The 3 flats I’ve mentioned before continue to be tantalisingly close to signing, but as I’ve mentioned, getting the vendor in the country and in a position to sign is proving very tricky.

3) LHA HMO – Both my jail birds have returned from prison now and I got a bumper payout of housing benefit in May as a result.  Unbelievably one only managed 2 weeks of freedom before getting locked up again!  He’s out the end of June again.

After much faffing with the council, the VOA’s rebanding of the HMO into 5 separate bands has gone through, and I’ve finally got everyone uplifted to the 1 bedroom rate, so I’m now getting £2,000 per month housing benefit on a property that’s cost me £100k to buy and refurb.

The £2k council tax bill I got when the VOA rebanded the HMO has been successfully appealed down to…. £24 !! Hoho.

4) Property Sourcing – I mentioned last month that I was upping my focus on auction properties, and have attended several property auctions to bid on properties. My general experience has backed up what several developers have said to me recently, which is that there are not a lot of bargains at auctions these days.

One auction I went to had just 5 lots, so I was hoping it was going to be a nice intimate auction… oh no, it was rammed.  All 60 seats taken, people stood in double ranks down the side and back, and struggling to get in the door; I estimate there were 110 people there.  Most properties went for 15% over guide and the one I was bidding on (as most) was bought by a home owner for a price that left zero profit after refurb, so they basically bought it for full market value.

All the properties I bid on were bought by home owners, not developers, and were a good 10% over my max price (set to leave some profit in the deal obviously).

I’ll continue to keep an eye out for auction properties, but look more to buy pre or post auction.

Over the month I’ve continued to bid on local properties found at estate agents, but have also been looking at some JV deals in London, and some bigger deals like buying a block of flats and doing a wholesale to retail strategy, and also looking at some commercial to residential conversions.

No one said property was easy, and I remain confident that the hard work will pay off soon.

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