Property Investments, Landlording, CrossFit, Nutrition & Safety

I decided to post this here so I don’t have to repeat the research I’ve spent the last 2 hours doing, after talking to a vaccine worried friend about mercury in vaccines.

There are several points related to the questions of vaccines and mercury and whether you should be worried or not about whether vaccines contain mercury:

1) The mercury used in vaccines (ethylmercury) and the mercury you’re probably thinking of (methylmercury) are very different. Ethylmercury can be easily removed by the body, and is. Methylmercury is much harder and hangs around in the body for much longer.

https://www.cdc.gov/…/vacsafe-thimerosal-color-office.pdf

2) Ethylmercury isn’t actual in the vaccines, it’s thimerosal that’s used in vaccines and your body breaks that down into ethylmercury.

3) Ethylmercury is found in a wide variety of products you’ve probably used and stuck in/on your body on a regular basis, including (this is a small example list):

• makeup removers
• mascara
• eye moisturizers
• desensitizing solutions
• ear, eye, and nose drops
• eye ointments
• topical antiseptics
• soap-free cleaners
• some contact lens solutions etc.

4) I haven’t been able to find the data to support this, but I was told by a career chemist friend of mine that there’s more “mercury” in a wild ocean caught salmon, than there is in a vaccination injection.

5) From that linked pdf: “Today, no childhood vaccine used in the U.S.—except some formulations of flu vaccine in multi-dose vials—use thimerosal [the source of ethylmercury] as a preservative.” So actually you’re worrying about nothing anyway.

In summary, I’d pay no attention to “Oh noes, there’s a drop of mercury metal in every vaccine don’t you know?  Why won’t they think of the ‘ickle children!” scaremongering, spread by people who have no idea what they’re talking about, and can’t be bothered to educate themselves.

In this now roughly quarterly property update I’ll cover:

• Commercial to Residential – Ascroft Court
• The Bristol flat flip that didn’t
• The Telford flip that brings balance to the Force
• Universal Credit nightmares increasing prisoners
• I’ve been told to stop these updates

Commercial to Residential – Ascroft Court

We completed, finally! If you’ve not seen the 1 min video on facebook of me and my JV partner Clive in front of the buildings, do go and take a quick look (you may need to be my facebook friend to see this, so ping me a friend’s request if that link doesn’t work).

Whilst the sign says it’s an industrial estate, as you can see it’s really a small business park of 10 office units across 4 discrete buildings. The address is Ascroft Court, Peter St, Oldham, OL1 1HP and comprises all the 2 storey buildings you can see on this Google Streetview link.

It’s been a roller coaster of a purchase. The final offer was accepted in July 2016, and we’ve just completed some 7 months later in Feb 2017. Several times the vendors were threatening to withdraw due to delays and issues like: restrictive covenants; asbestos reports; mains drains issues; funding delays; building control certification problems; builder issues; squatters; etc etc.

If it could go wrong, it did go wrong. It seemed that every week for months on end there was a new problem to resolve. The clichéd phrase: “If property was easy, everyone would be doing it.” was never far from my lips for months. But that’s when you just have to dig in and just keep swimming: 🙂

Here’s the breakdown of the units:

• Unit 1 & 2: leased to Oldham Citizens’ Advice Bureau
• Unit 3: leased to a dentist and private medical practice
• Unit 4 – 8: currently vacant, to be converted to residential
• Unit 9 & 10: previously sold on 999 year leases, so effectively ignored.

The basic plan is to retain the current commercial tenants, and convert the empty units to residential, for which we already have the necessary planning permission.

Here are the figures:

• Last sold in 2004 for: £1,100,000 (£1.55M in today’s money)
• Purchase price: £390,000 – yes you read that right
• Current rent: £34,400
• Refurb inc all finance fees: approx £322,000
• Expected new rent total: £160,000
• Expected post works valuation: £1,300,000
• Expected equity created: approx £600,000
• Expected monthly net profit: approx £4,500

The Gross Yield, including refurb and all other costs etc will be £160,000 / (£390,000 + £322,000) = 22.5% yield, which is a very healthy figure I think you’ll agree. And whilst it looks good on paper I’ll never see any of the equity of course as it will be locked away in the property, and it’s cash flow that is all important.

The monthly profit is after interest, but before capital repayment, i.e. it assumes an Interest Only remortgage. In reality it’s unlikely we’d get an interest only commercial mortgage, but I used the IO figure to show the profitability compared to a typical Buy To Let property, so the real net income will probably be around £3,000 pcm after capital repayments are factored in. Additionally I’m sharing that income with others, so my own slice will be rather less.

However you can see why this deal has been a main focus of mine over the last 6 months. More details next time as the refurb progresses.

Bristol Title Split

Previously I reported that the last of 4 flats was left to complete. After a protracted and frustrating conveyancing process lasting several months, we finally dealt with every one of the very pedantic issues raised (none of which had been an issue for the previous 3 flats that sold smoothly), and agreed to exchange on the Monday.

Note when I say we agreed to exchange, we were in direct email and phone contact with the purchaser (something I’d recommend anyone buying or selling does, most of the time it ensures a smooth and swift transaction) and were managing the conveyancing issues with her directly. She agreed she had no more issues and was happy to exchange on the Monday.

Monday came and went with no exchange. Chasing, Tuesday came and went. Chasing again and Wednesday went. Then on Thursday we get a 1 line email from the buyer’s solicitor, completely out of the blue:

“I have been advised by our client they are no longer proceeding with the purchase.”

And that was that; 4 months of conveyancing wasted.  The upside is that since the price was set, Bristol has been going up in price, so we’ve put the flat back on for more than before… and we’ve sold it in just 7 days. 🙂

Telford Flip

Back in August I agreed to sell the Telford flip to my JV partner. Unfortunately this sale has also dragged on with various ups and downs, and having thought it was finally sorted a few weeks ago, it has fallen through too. Why will have to be a story for another day. Both this one and the Bristol flat sale fell through within a week of completing on Ascroft Court… That I believe is the universe’s sense of balance being restored!

You know some people talk about balance as if it’s a good thing. Liam Neeson (Qui-Gon Jinn in Star Wars) said of Anakin Skywalker that he would “bring balance to the Force”. But it’s always occured to me that given at the time the Jedi were dominant, that balance could only mean the rise of the Dark Side to balance the Good. So basically, in that case, balance was a very bad thing! 😀

Which is why I can only laugh at the irony of having 2 sales fall through, within a week of a great deal completing.

My First Court Eviction

Venmore’s and I have finally had enough of our errant tenant in Liverpool who has now given up all pretence of paying any rent and refuses all attempts to communicate. Lawyers have been appointed and court papers submitted, we’re just awaiting a court date now, but we’ve been waiting an awfully long time already.

I personally see this a failure to manage the tenant, both on Venmore’s part and my own. It should never have got this far, but the tenant has done a sublime job of manipulating the situation. It’s a tricky one as the tenant has been in the property for 11 years, and I really wanted to save the tenancy as I believed she could continue to be a good tenant for many years to come. Obviously I was wrong. Sometimes you get a bad egg, and sometimes good eggs turn bad.

I think it’s important to point out here that I’ve been a landlord for coming up on 4 years with each year increasing the number of tenants I manage, and this is the first time I’ve had to actually go to court to evict a tenant. It’s annoying, it’s a waste of money, it’s a waste of time, it’s a waste of effort, but it is inevitable. This was going to happen eventually, and I’m actually pretty happy with my record on that front.

This is where small landlords can come unstuck.  The law of averages says eventually you’re going to get a bad tenant who doesn’t pay. Whilst always awful, if you have many properties, it’s not a disaster. But if you only have a couple, it has much more of an impact.

Universal Credit

UC has become a dirty word for me. I can’t begin to explain how badly it’s been implemented. I can only assume that it’s been deliberately designed to be hard to use, difficult to engage with, and punishing in its application. You know I had a tenant who’s served 15 of the last 20 years in jail say to me:

“I might as well go back to prison, it would be easier than dealing with Universal Credit!”

Let’s take direct payment to landlords for example: I filled the correct form for 1 tenant back in November. I sent off the correct corroboratory evidence immediately after. 2 weeks later I’d heard nothing so chased. I got a “We haven’t got your information yet” stock email reply.

Every 2 weeks since I’ve chased again, and all 5 subsequent emails have been simply ignored and not responded to. Only this last week have I finally got a real person dealing with my case to sort it out, who is actually capable of having an email conversation, hurrah, though some 3 months later! Yet despite even her involvement, I still haven’t had a single direct payment. We’ll see if it actually works out in the end.

I’ve been told to stop these updates

Well that’s it for another update. You know I’ve been told by several people that I shouldn’t publish updates like this. I’ve been told that when asked how things are going, the answer should always be: “Fantastic! Couldn’t be better!” Maybe from a marketing / salesy perspective that’s good advice. There’s just one problem: I’m an Engineer by trade; I deal in facts, not fluff. 

When it comes to property, it’s not a matter of “if” something’s gone wrong, but “when”. Things go wrong all the time, it’s inevitable; what matters is how you deal with the problems, your attitude, and your problem solving skills. If property’s problems keep you awake at night, you need to have a think about whether what you’re doing is right for you.

The truth is that if someone says the sun always shines on their property portfolio, the grass is always green, and everything always goes smoothly, they’re lying to you. I believe in making relationships and really talking to people, and every single property investor I’ve had an open and honest conversation with, eventually owns up to the property nightmares they’ve had or are continuing to have, but 90% of the time they don’t advertise it openly.

So I tell it how it is, warts and all, because that’s the reality. I believe I can best serve you by telling it like it is. If you want to invest in someone, and you fall for the shiny sales patter, and get taken in by the glossy presentations and allow the smoke & mirrors to hide the reality that property is not a smooth ride, then you need to have a long hard look in the mirror and have a think about your judgement about who you trust.

Having said that, what probably does not make good reading is what’s going well.  I could mention the family I’ve been renting to for 4 years, who’ve never missed a rent payment, who never complain, who I never hear from until it’s time for an inspection or rent rise, and who’s property has gone up in value about 15% over that time. And there’s not just 1, I have several properties like that, that just tick over quietly making me both monthly cashflow, and (mostly) quietly growing in value.

But who wants to read about that! So what’s the lesson of all this: Just keep swimming! 🙂

This is an awesome speech by J K Rowling on Failure in which she says:

> “It is impossible to live without failing at something, unless you live so cautiously, that you might as well have not lived at all, in which case you fail by default.”

It’s a myth that the road to success is a smooth straight line. Almost every successful person you know, will also be the biggest failures you know and have in reality failed over and over again. As the saying goes, it takes some people 10 years to become an over-night success! 😉

I publish a bit of property diary on this very blog (scroll down!), in which I not only detail my successes, but unusually in these days of the internet, also my failures and cock ups.

I have been told that I shouldn’t do that; that I shouldn’t come across as negative, as it will put some people off. I appreciate that advice and respectfully will decline to follow it. I think that we shouldn’t shy away from admitting our failures and do as most do, which is to pretend we’re perfect and fart rainbows.

I believe we learn more from our mistakes than from our successes, and I don’t think we should shun those who make mistakes. E.g. I’ve just engaged an architect to do a HMO, despite the fact that he failed to get planning permission for his last HMO project! Do you think he knows more or less about where the limit of acceptable planning is than another architect who was successful at his first attempt say?

Formula 1 drivers are some of the best drivers in the world, driving some of the best cars in the world, yet every Grand Prix some of them crash. Why? Because they are testing the limit of their car’s ability until traction fails. Only when they hit the point of failure (and in most cases instantly recover) do they know how hard and how fast they can go.

If you’d like to get my property updates by email, comment here (no one else will see your email address) it, I send it out about once a quarter now.

It’s time for my newly quarterly update on how things are progressing property wise. In this update:

• How property cost me a 10 year friend.
• The Bristol title split is nearly done
• The Telford flip has sold
• My first court eviction, possibly
• Universal Credit cock up
• Commercial to residential teaser
• A property investor’s Dear Santa letter

Losing a Friend

You may remember that last update I mentioned that we’d had to evict the 2 tenants from the Bristol flats. Posting up about that has cost me a 10 year friend, who decided that he could no longer be friends with someone who boasted about evicting pensioners from their home. He made this declaration on his Facebook page and promptly defriended me.

I’ve known this guy for about a decade and we’ve sporadically visited each other as families, and whilst we do have wildly differing political and life views (he’s on the anarchist end of the socialist spectrum) we’ve always maintain a mutual respect and acceptance that different people think differently and that that’s ok. So his actions upset me on several levels:

First off, I was horrified that he’d got the impression I’d “boasted” about evicting pensioners. I’ve re-read my update and whilst I was pleased to get a resolution that worked for everyone and avoided the nastiness and stress (for all involved) of court action, I didn’t think I was boasting. That certainly wasn’t my intention, but I apologise if that’s the way it came across.

Secondly, we’ve done everything we could to help these people stay in their homes. Because we didn’t take a hard nosed approach and ask them to leave the day we bought the flats, we are literally out of pocket by £7,000 for that effort, broken down like this:

• Extra bridging loan interest payments: 2 x £750 x 3 months = £4,500
• Deposits returned (that we didn’t have to): 2 x £500 = £1,000
• Voluntary assistance offered with moving costs: 2 x £500 = £1,000
• Rent arrears not chased: £500
• Total = £7,000

When was the last time you spent £7,000 trying to keep someone in their home?

On top of these direct costs, we tried as hard as we could to find an investor to buy these 2 tenanted flats. One of the key problems was that the rent they were paying was 25% below the market rent for those flats, as the previous landlord hadn’t kept them up-to-date with current market rents, and that scared investors off. However the tenants weren’t prepared to entertain the idea of such a massive rent increase, which was understandable. As a result, when the previous landlord decided to sell, he made their eviction inevitable.

The only investor offer we had for the flats, which came with no guarantee that the tenants would be allowed to stay, was so low that the deal would have made no profit at all. As a self employed property investor, my profit = my salary and I’m afraid I have to feed my family and keep the lights on just like everyone else, so that wasn’t an option.

My conscience is clear that we went above and beyond what most reasonable people would do to help these tenants, and as I said, are £7,000 out of pocket as a result. That’s a decent second hand car, or a cruise round the Caribbean kind of money we’re talking about, so no small investment in good will.

Thirdly, was the way he handled the situation. If I had a long term friend that appeared to write something that offended me so much I felt I didn’t want to speak to him any more, I’d pick up the phone and bloody well speak to him about it! Facebook is not real life. Defriending someone on Facebook whilst you’re in a huff is a meaningless act. Honestly I didn’t even notice it had happened, I only found out when some weeks later a mutual friend mentioned he’d seen his rant about it and guessed he was talking about me. Of course the way he span it, all his friends think I’m evil incarnate (I won’t repeat here the names I was called) so I do appreciate the fact that he didn’t name me directly.

I’ve had my phone in my hands many times whilst pondering whether to call him to discuss it, but then, if he didn’t think we were friends enough to bother picking up the phone and talking it over, perhaps I’ve completely misjudged this “friendship” all these years…? Maybe this irrevocable difference of opinion was inevitable…? Or perhaps now I’m just being the crap friend…?

Bristol Title Split

Anyway, on the subject of the Bristol flats; all 4 have been sold and we’ve sold the freehold too. 3 of the flats have completed so we’ve been able to pay off Shawbrook’s bridging loan, with the last 1 going through conveyancing and we’re all aiming to complete by Xmas, so the freehold should complete then too. Inevitably everyone gets paid before the property investor does, so I’m still to see any actual profit out of this deal. I’ll give full figures for the deal when everything’s completed.

I must remember to tell you next time about a really important freehold Gotcha that I very nearly stumbled over regarding the selling of the freehold, and why you definitely want to exchange on it before you’ve sold the majority of the flats it relates to. If you’re selling a freehold in the mean time, get in touch ASAP!

Telford Flip

This house has also sold now, but again is going through conveyancing, so I’ll return to this subject once that completes, which finger’s crossed, will be in a week or 2.

My First Court Eviction, Possibly

As I write this a section 8 eviction notice period expires tomorrow. This particular tenant has been a nightmare all year, honestly it’s embarrassing how I’ve managed to get myself into the situation where she owes me about £4,000 in rent. Considering the house only makes about £100 per month profit, that’s 3.5 years profit lost already, and that’s before the court and bailiff costs, and the inevitable refurb that will be required when she leaves.

On the upside, her rent is way below market rent anyway, so when re-let, it’ll go up by about £1,500 pa.

This is another example of how I’ve tried my hardest to help this woman, giving her chance after chance to avoid eviction. It’s no wonder that older landlords are often cynical and jaded individuals, every time someone takes advantage of your trust and breaks their word, you become a little less likely to give the next person the benefit of the doubt.

When I speak to non-property people about things like this, they get very worried, but there’s really little to be concerned about. This is 1 (plus the 1 below) tenant out of many who do a fine job of paying their rent on time, in full, every month. In total my arrears rate over the last 3.5 ish years, is measured in a few % of overall rent. Of course that number could always be better until it’s perfect, but as long as you bake it into your figures that there’ll inevitably be some rent arrears, and the numbers still work, then there’s no drama, albeit it’s very annoying.

Universal Credit Cock Up

Which brings me nicely to my next cock up. Last update I mentioned my first tenant was going onto Universal Credit (UC) and I was helping him. Well I ended up sitting next to him 3 times in the Job Centre, literally telling him where to click and what to type as he had no idea what to do and the staff their we’re unable to give him the one 2 one help he needed.

The problem is as soon as I stopped holding his hand, he stopped going to his appointments so he got sanctioned, and for reasons I haven’t quite worked out and he can’t/won’t help with, he’s not getting any housing element in his UC either. As a result I’ve had next to no rent from him for several months either, and he’s currently over £2,000 in arrears. I’m afraid that no rent = no roof, so I’ve had to ask him to leave too. Despite promising to go by last week, he hasn’t left, so that’s my next headache. UPDATE: He’s surrendered his tenancy and given me the key back, marvellous. I always offer my tenants £20 if they return the key to me, as it saves me a headache of changing locks etc, and so far that’s only failed to work once, last year.

To top it all off, I’ve been told that he’s made a complaint to the council about me! Though I have no idea what that could be for. Even the council’s Housing Solutions officer told me that she’d told him that I’d gone well above the call of duty in helping this guy, far more so than most other landlords would have. UPDATE: It appears that came to nothing as I spoke to the council and they’ve not received any complaint.

Commercial to Residential Teaser

Like last time I’ll end on some good news. Whilst I had expected to have completed on the com2resi project by now (things always take longer than you’d like) so I could tell you all about it, we haven’t, but it’s very close. Last week a favourable valuation came in and this week the bank to OK’d the funds, and the remaining minor conveyancing snags were ironed out (utility bills, updated service charge accounts, and the like), so hopefully exchanging and completing on that is imminent.

I’ll put a note here to remind me to tell you next time about something really interesting I found out about restrictive covenants, that can make them unenforceable.

Dear Santa

For Xmas please can I have:

1. Completed on the last Bristol flat and the freehold.
2. Completed on the Telford flip.
3. Tenants who pay their rent!
4. Completed on the com2resi project.

Thank you please.

That would be nice! 🙂

These monthly updates have definitely become less frequent, so perhaps a Quarterly Update is in order. It’s been a busy few months, some good, some bad. Let’s start with some good news:

4 Bristol Flats

I’ve previously written about the 4 Bristol flats I bought in March, 2 were vacant and 2 were tenanted. The 2 vacant flats were spruced up with pot of paint and some new carpets and both sold within 2 weeks for full asking price and we’re due to exchange imminently. (I’ll list all the figures once everything is done.)

The 2 tenanted flats were a different matter. We tried to find investors who would buy the 2 tenanted flats, which both had 9+ year tenants in, and offered a 10% discount. Sadly after several months we were unable to, which I confess surprised both myself and my business partner. The best offer we had was 30% below what we’d sold the vacant flats for, which was obviously unacceptable.

We had no choice by to evict the tenants (thanks to Jim “HMO Daddy” Haliburton for his DIY Eviction tips) and sell the flats with vacant possession. Not surprisingly, the tenants were not happy! This is definitely the worst part of being a property investor, asking people to leave their homes is an unpleasant business. Fortunately for me, my business partner was point man for the discussions with the tenants. Both tenants left within the 2 months’ notice after we preemptively returned their deposits and offered to pay £500 each towards their moving costs.

Both of the newly vacant flats have been sold, again for asking price, although 1 has since fallen out of bed. It was in line with the typical average that 1 out of the 4 flats’ sales would fall over, so this one went back on the market last week. Fingers crossed, it’ll all be done and dusted by Xmas.

Telford Flip

The refurb on the Telford flip has been done, although it ran over budget slightly due to builder issues, the results were fantastic. Take a look at the RightMove Ad. It’s a lovely looking property that’s been well staged, there’s just one problem: 2 months later we’ve not had a single offer!

It’s easy to say that the reason is it’s a quirky property etc etc, but the truth is, if a property isn’t selling the reality is, the price is wrong. As an investor here, there’s a balance between how long you wait for the price you want, against the monthly loss of finance interest charges, and possibly more importantly, the opportunity cost of having the investment money locked away.

It is inevitable that some property deals don’t go quite as planned, and in property you have to take the rough with the smooth and mitigate the downside wherever possible. In this case having a great relationship with your business partner is vital, and we’ve decided we’re going down the Plan B route, which is to refinance the property and rent it out. It’s not ideal, but it’s an acceptable second option, and it releases much of the investment cash for another deal.

Tenant Issues – Non payment of rent

It’s a landlord’s worst nightmare, when a tenant doesn’t pay the rent. One of my tenants being managed by Venmores in Liverpool, has managed to not pay any rent for far too long, and is several £thousand in arrears! It’s a long and complicated sorry story (buy me a coffee and I’ll tell you about it sometime) that I trusted Venmores to resolve, after all, isn’t that what we pay letting agents for? Well as Susannah Cole is fond of saying: it’s their fault, but it’s my responsibility.

By getting involved directly and meeting with the tenant (who’s been in the property with her family for 7 years) we’ve agreed a settlement which has her paying the full rent again (even though it’s somewhat below what the going rent should be) and a contribution towards her arrears each month. It’ll take some time to clear her debt, but the tenancy is back on track, and we’re rebuilding the landlord-tenant relationship.

Storm Damage Unreported

Whilst attending a Gas Safety inspection at one of my properties I noticed that there was ridge tile on the roof missing. The tenant claimed to have no knowledge of it, despite the fact it would have made quite a mess when it hit the ground. I thought I’d try using www.MyBuilder.com again, so posted up the job at 8am in the morning. By 10am I’d had 4 quotes for: £220, £120, £90 and £60.

Whilst I don’t necessarily always go for the cheapest quote, the £60 one was from a lifetime roofer with some 40 years experience, who had a spare morning. I said I’d meet him at the property at 11am. When I arrived he was already on the roof and half through the job! From posting the job to have it done, for £60, took 4 hours, now that’s good service.

Retired Romanian Police Colonel

I’m very pleased to have moved a new family into one of my properties, they’re a lovely Romanian family headed by a retired Romanian police Colonel who was a prison Governor back in Romania. I’ve known some landlords who’ve had a torrid time with Romanian tenants, but I have faith that this family are decent honest people who will make excellent tenants.

First Significant Water Leak

I’ve had my first significant water leak in my LHA HMO. One of the tenants found 1/4 of his room under an inch of water. The carpet is probably ruined but the bigger issue is, where is it coming from? The primary suspect is the shower on the floor above, so I’ve got a plumber resealing it today.

First Tenant on Universal Credit

I’ve been quite busy in the last 2 weeks dealing with my first Universal Credit application by one of my tenants. I’ve been supporting him partially because he needs it, and partially because I’m interested to learn all I can about what it entails for future claims. For those that don’t know, it’s almost completely done online, which sounds great except when you have DSS tenants who’ve never even had an email address before, let alone have access to a computer or smart phone. Universal Credit has a terrible reputation amongst landlords, so we’ll see how things go.

A Commercial to Residential Project

I’ll finish with some good news, I’ve agreed a significant commercial to residential deal, which is by far my biggest property deal to date. I’ll provide more details in the next update.

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 (panic not, as you’ll see, there’s nothing to worry about).

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. 😀

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 proved 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. 🙂

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.

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 – 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!