ON THE HOUSE Magazine - Issue 2

ON THE HOUSE

Panic!

GOINGS ON

CASE STUDY – YOU HAVE TO BEELIEF IN YOURSELF

VERSUS HOMEOWNERSHIP

THE GLOW UP – INSPIRATION

Editor’s Letter

and advice

This is the official magazine of the Buy To Let group. We are however, under no illusions that it is harder to make deals stack in today’s market. The goings have indeed gotten tougher. But as the saying goes… Well, you know the rest.

That is exactly why, in this second issue we have set out to try and help you decide how you can move forward, take solid investment steps and even prosper. In short, we want to help you be a bit more Captain Mainwaring and a little less Lance Corporal Jones. Don’t panic!

So first, before you do anything else, head to p23 and our cover feature. We sat down with a panel of expert investors, who have far more experience than I do, to find out how they have weathered previous challenging markets, taken the long view and how to avoid pitfalls in the current environment. Property is a long-term game and these investors have been in it for the long haul, so listen up.

And listen up we did, when you asked for more case studies. On p28 you can read about an investor who survived pandemic gridlock to create his first highend HMO, as well as One to Watch (p12) and the Glow Up spread (p34).

If you are not investing, it is still a great time to learn. Our strategy focus (p18) this issue looks at commercial property, picking the brains and benefitting from the hard-won experience and insight of Suzi Carter.

Plus, I would like to welcome writer Alex Daley who brings a younger investor’s perspective to the magazine tackling the subject of home ownership versus investing on p32 and drilling down into how to really forecast maintenance costs –with a little help from a friend (p36).

There is much more I could highlight, but perhaps the most important news I want to end on is, due to the success and interest in the first magazine and the support of our amazing partners, from the start of 2023 ON THE HOUSE Magazine will be published monthly.

This will allow us to bring you even more up-to-date content and actionable advice entirely for free and on a more regular basis.

We’ve also started sending out a newsletter to fill in the gaps between the magazine issues so make sure you sign up at linktr.ee/btlgroup today.

Thank you for your support, thanks for being part of the amazing Buy To Let Group and I hope you enjoy Issue 2 of ON THE HOUSE Magazine.

Pletts EDITOR

Welcome to the second edition of ON THE HOUSE Magazine – a source of calm and considered property investment features

Julian

IN CASE YOU MISSED

Derailed 18%

Sales – The Details 12% 5%

Buyer

or seller pulled out of sale due to slow progress

Astonia Associates Accountancy Tax Finance

PROPERTY TAX

Rent to Rent (R2R)

Astonia Associates are one of the country’s leading Accountancy & Tax specialists and advisors in Land and Property related strategies and techniques including:

Rent to SA (Rent to Serviced Accommodation)

Buy to Lets (BTL)

No Money Down Strategies (NMD)

Build to Rent (BTR)

Build to Sell (BTS)

Serviced Accommodation (SA)

Lease Options (LO)

Property Development (PD)

Land Acquisition and New Build (NB)

Analysis of Additional Tax on Enveloped Dwellings (ATED)

Ad Hoc Scenarios

We have created a unique team of tax specialists that provide all Property Investment and Property Development tax and accountancy services under one roof. We are now one of the most highly regarded and frequently referred professional tax specialists in many of the popular property specific social media platforms.

Our CEO Paul Weller is also a seasoned and active property investor/developer himself.

Our operational experience allows us to offer our clients a more comprehensive service as we personally invest in of all the property strategies . Tax rules and tax laws are constantly changing and we ensure that our clients are structured tax efficiently for today and into the future.

The Buy to Let Property group is one of the busiest, most vibrant and supportive groups for property investors that we know on Facebook. On any given month there are thousands of joining requests, almost a thousand posts and hundreds of thousands of post views. Here are some of the most popular ones that got you talking over the last few months.

Back in the early 90s Keith took the hard decisions and put in the graft when everyone else was out boozing and wasting their hard earned he was snapping up deals and renovating away. Even at 15% interest rates he made deals stack and now his portfolio is unencumbered and he is set for life he shared the important lessons from 30 years of property investing. The group was unsurprisingly fascinated and enthused by his hard-won success. We salute you Keith!

Almost 10,000 of you stopped by to view this landlord’s furry dilemma. If the ad said no pets and the tenants have clearly broken that trust with the arrival a (albeit cute) kitty – how would you react? And now the neighbours with pet birds are weighing in. Just under 200 of you had words of advice for this selfmanaging landlord.

With costs rising for everyone including landlords – this investor took to the group to get her grievance off her chest after being blasted for her rental asking prices. This prompted a lot of advice and support from the group including many saying the rental amount seems very reasonable and others to just ignore the gripes.

Max

Matt shared this meme that in our current rising interest rate environment needs no further explanation.

Numbers never lie. And these ones certainly hit home for many of us as investors adapt and attempt to find deals that stack at higher rates.

Over 20,000 of us definitely felt this landlord’s pain!

There was a glimmer of good news from the country’s shortlived tryst with Truss. It was even more short-lived as she denied it in Parliament the following day.

has been driven a bit batty by the bug-based meme-joke doing the rounds.

Dimitre’s tenants had a punt at trying to claim interest on their secured deposit. This opened a can of worms about the process of investing a protected deposit in insured schemes.

ONE TO WATCH:

Hi Stephen, thanks for taking your time to talk to ON THE HOUSE Magazine. We’ve seen some pretty stylish pics of your most recent renovation – and it looks like you have a solid process which involves working with investors. But how did it all start?

Like many people we always felt as though property was a good idea, only as far as to say that our ambition originally was to own our own home plus one rental property, with the idea being that the rental could one day be sold to fund retirement. But then you get into that position only to realise that it’s actual work having rental property. It’s not like owning your own unlimited ATM like some may allude, but also that when you do the real maths, selling one property in order to fund the golden years will almost certainly leave them less than golden. We are in the North West after all, and the reason investors typically come to the North is yield, not capital growth.

After getting into what was once a dream position of owning our own home in 2013 followed by a rental in 2016, things kind of stalled for a while. After all, we thought we’d ‘made it’!

My partner Natty worked her day job as a civil servant, and myself operating my own barber shop. We enjoyed life and holidays, perhaps a little too much, as we were accumulating bad debt along

the way.

STEPHEN KEMPT

January 2018 would be a fresh start for us, well after investing several thousands of pounds surfing around some property training providers, many of which lured you in with the temptation of striking overnight gold. But that’s another story entirely!

One thing that kissing frogs did teach us, was some fundamentals and tools for property. In particular Buy, Refurbish, Refinance, or BRR as its commonly known. This was the secret sauce for us, as not only would it allow us to clear our existing ‘Doo Dad’s’ (See Robert Kiyosaki’s ‘Rich Dad Poor Dad’ book for the reference) but it would also form our property blueprint. After meticulously studying the property market and its trends, while in the background reducing bad debt to zero, there was now only one challenge, we had the theoretical knowledge, sprinkled with some practical, only we were still at zero, nada, nothing in the bank. But that’s where the second gem from the course selling pied pipers came in. ‘OPM’, or other people’s money. We could fund our property projects using other people’s money by offering them a fixed return on their savings, while we did all the work. After all, we were known to be trustworthy, hardworking people with good standing in our community. All transferable skills, topped off with our research of property investment market and some experience from our first rental property. Now all we needed to do was find some deals!

North West investor Stephen got into property to fund a modest retirement, now the goals are much bigger and, well, furrier!

Luxury renovation

Natalie and Stephen

Did you settle on one strategy early on, or was it a process of trial and error?

Buy Refurb Refinance utilising Other People’s Money (OPM) - buy-to-lets in and around Bolton. That was our model and we were sticking to it. If you’d have asked us at the time ‘Why that strategy?’ we’d have said, ‘because we intend to start small, doing what we have already done before to mitigate risk’. Whereas in reality, yes we definitely do always err on the side of caution (especially when putting to work other people’s hard-earned cash) but also, anything BIGGER than a two-up, two-down mid-terraced that had stood for over 100 years simply scared us, succumbing to that little voice in our heads that said ‘you’re not good enough, or smart enough to do something like an HMO (House of multiple occupation) or CC (Commercial conversion)’. A voice that I’m sure we can all relate to, and frankly a voice that most of the time should simply be ignored, or used as a signpost to the exact opposite!

If your social media feeds are anything to go by, you are very much part of duo with your partner Natalie. How has that partnership evolved when it comes to property and would you have any advice for people who want to mix business and pleasure when it comes to bricks and mortar?

place to conduct business. The simple reason is because it has a habit of blurring the lines between work and play. We’ve had countless 18-hour days as a result, that on one hand was good for business, but on the other at times left us looking like zombies and wondering what we used to do before property?! I believe there was a programme called ‘Love Island’, on that square teleprompter looking thing that was gathering dust in the corner of the room. Jokes aside, downtime as a couple and a date night should not stop, otherwise ask yourself why did you join the entrepreneurial ranks in the first place? #Freedom springs

What are your medium and stretch goals and do they seem more achievable today than you ever imagined prior to property?

As two council estate kids growing up on benefits this is something we never expected to be saying, let alone be within reach. Deep breath… In the short term we aim to get Natty out of her job, and essentially retired. And to think she is 32 now and that’s the plan blows my mind alone, but then onto the stretch goals and the reason we truly work as we do. Natty wants an animal rescue shelter, and with it having a likely overhead of 25-30k per month given the amount of animals she intends to rescue, we aim to fund it through cashflow from a growing portfolio. So more single lets and HMOs, but also moving onto bigger projects like new

ON THE HOUSE Magazine in association with

Stacking deals

builds, blocks of flats, or commercial conversions the first of which we have just had an offer accepted on, so keep an eye out for

What has been the most effective techniques learned or things you have done to help you achieve

Absolutely no hesitation and without doubt, working with a mentor and coach. Think about it like why make all the mistakes yourself when you can learn vicariously from someone who has been there and done that, walked the walk, and got the t-shirt twice over. Not only that but you get accountability and support along the way. It’s actually something we firmly believe in in life, ‘each one teaches one’ as we believe we were given two hands for a reason, one to help ourselves and one to help others. Obviously, high-level coaching

comes at a cost, but our coach Susan Alexander/The Property Mentor is worth every penny and more, and at times, we do wonder what our property journey would have been like without her.

Climbing interest rates, a cost-of-living crisis, government meddling - What advice would you have for someone who is a couple of years behind you and looking at the current market and thinking it looks too hard to get into?

It is hard, it’s that simple! There’s a reason that people choose to invest in our projects for a truly passive return. Property is tough at the best of times, and gone are the days where you can be a hobby landlord or investor, and increased regulation is exacerbating this further. That said, if you are serious about getting into property, know that it isn’t impossible, just be aware that we are in an everchanging landscape that will require you to be equally adaptable. One of things you are known for is documenting the highs and the lows of being a property investor with your ‘F-Up #Friday’ series – what dose of realism would you like to offer up to those who have dream of a life of passive property income and sunning it up on a beach all day long?

If that’s what you’re after you’d better find a way of duplicating yourself first of all as one of the myths of property is that it is ‘passive’. Our experience is that it is in fact far from it (unless you’re investing in other people’s projects), or certainly in the growth phase it won’t be, and even then, I’m not sure it ever will be. It may be semantics, but we prefer the term residual. Income certainly reoccurs, and once you have done the work it does get easier over time as the heavy lifting is done up front, but passive, if that’s what you’re looking for perhaps starting a property business isn’t for you.

What are your funniest posts that have really resonated with people? It was a while ago but this still makes us laugh. We actually had the wrong phone number printed on one of our cars when it was first stickered up for advertising, and we didn’t notice, someone else had to tell us, and even then looking at it we couldn’t see the error!

Thanks so much for your time Stephen - where can people best follow you and get in touch?

Although we are on all platforms as Grey Fern Properties, we believe in human connection and not hiding behind businesses logos, so feel free to add me on Facebook, simply search Stephen Kempt, then don’t be afraid to drop us a DM!

Guerrilla marketing

Teaching the next gen

Whoops!

FINANCE

BRIDGING EXPLAINED

Over the last few years, bridging loans have become increasingly popular amongst property investors and developers looking to grow their property businesses. They are a vital tool for many investors and often the key to getting deals done quickly.

But how do bridging loans work? And how can use them in your property business?

WHAT IS A BRIDGING LOAN?

A bridging loan is a type of finance product often used by property investors, developers, business owners and individuals requiring short-term cash to bridge a funding gap until other funds are available or until a long-term finance solution, such as a BTL mortgage, is in place.

This type of finance is often used by shrewd investors to start or scale their property portfolios as it allows them to make fast decisions and purchase property quickly.

WHAT CAN A BRIDGING LOAN BE USED FOR?

As bridging loans are a form of fast and flexible finance, they can be used for various situations. Here are some, but not all, of the most common uses:

• Meeting deadlines fast

Bridging loans are commonly used to purchase a property, access funds to renovate, or apply for planning permission – quickly!

In most cases, the funds can be available in as little as one week. This means investors can seize opportunities and act on deals before they’re gone.

• Breaking the property chain

If you have found a property you would like to purchase but are waiting for another property to sell, a bridging loan can be used against the property you wish to sell. Once the property has sold, the loan is then redeemed. This means investors can purchase their new investment, find a tenant and continue to earn an income off the property while waiting for the sale of the previous property to complete.

•

Property refurbishment

If a property needs significant refurbishment or is deemed uninhabitable, many high street lenders will be reluctant to help out. A bridging loan can cover the costs associated with renovation work and can then be paid back by selling the property or taking out long-term finance such as a mortgage.

•

Auction purchases

Bridging loans make it easy for investors to say yes to properties in a spontaneous auction environment before the bank has

approved the mortgage.

Auction properties are often uninhabitable and require significant renovation. A bridging loan can provide the funds the investor needs to buy the property and then carry out the work.

WHO IS ELIGIBLE?

A bridging loan can be provided to individuals or companies.

To secure a bridging loan, a lender will require a strong exit strategy and security for the loan, such as another property. As security is required, credit history and proof of income are generally unimportant to lenders, and most will accept:

• Employed, self-employed or retired.

• Private individuals, partnerships or limited companies.

• Borrowers over the age of 18.

• Borrowers that live or have a registered address in the United Kingdom.

• Borrowers with a form of security – usually one or more properties.

• Borrowers with a defined exit route to repay the loan.

HOW MUCH CAN I BORROW?

Generally, lenders will offer a minimum of £50,000 and there is no maximum amount

Bridging loans can be powerful portfolio growth tools when used correctly. Joel White, managing director of BTL Group preferred mortgage partners Ramsay and White explains more

BRIDGING LOANS EXPLAINED

that can be lent. Each lender has its own limit; however, most go to a maximum of 75% LTV (loan to value) of the gross loan amount. This includes any retained interest for the loan term and any arrangement or broker fees.

For example, on a property valued at £100,000, the maximum gross loan available will be £75,000. Therefore, the net loan amount (the amount you will receive) will be £75,000 minus the retained interest and fees.

Some lenders will offer more than 75% LTV and Ramsay & White can offer up to 100% of the purchase price where additional security is added.

HOW IS IT REPAID?

When taking out a bridging loan, it is important to consider how you will make the repayments. These are always made clear in the loan agreement.

Lenders will require details regarding your exit strategy. This is usually the sale of the property or refinancing onto a long-term deal such as a commercial, residential or BTL mortgage. A solid exit strategy can be the difference in the bridging loan being approved or denied.

WHAT SECURITY IS NEEDED?

Most bridging loan providers require property as security. This could be just one property or several.

They will secure their loan by taking a charge of the property. If the payments for the loan are not made, you could lose your property.

HOW LONG CAN I GET A BRIDGING LOAN FOR?

A bridging loan is a short-term solution while long-term finance is put in place.

At this point, the development is usually sold on, producing an income, or long-term finance is put in place so the loan can be repaid.

In general, most lenders offer terms from one month up to a year. However, each individual lender’s terms will vary.

In special cases where the borrower can offer a low LTV, bridging finance may be available for up to 18 months.

The average bridging loan now lasts 12 months. If finance is needed for longer than this, development finance is often a better solution.

HOW IS INTEREST PAID?

The main cost associated with a bridging loan is the interest and there are three ways a lender can charge this:

• Monthly interest: The interest is paid off each month and not added to the loan.

• Deferred or rolled up: The interest is added to the final amount which is paid at the end of the loan term. For example, if you borrowed £100,000 and £1,000 interest was added at the end of the first month, the total owed would be £101,000. In month two, £1,100 in interest will be added, taking the total to £102,100 and so on.

• Retained: The total interest is calculated at the beginning of the term, based on how long you’re borrowing for and is paid at the end of the loan term. For example, if you borrow £100,000 at 1% interest for 12

months, the total amount owed at the end of the 12 months would be £112,000. If you pay off the loan early after just six months, the amount due would reduce to £106,000.

Because a bridging loan is short-term finance, the interest rates are calculated monthly.

Commercial property rates are higher than those secured against a residential property, and loans against land generally have the highest rates. The higher the level of risk, the higher the interest rate will be.

WHY USE A BRIDGING LOAN BROKER?

The property industry can be fast-moving, and when a bridging loan is needed, it’s often needed fast.

Some investors have long-standing relationships with their lenders and go directly to them. However, this is not always the best route to go down as there are other options worth knowing about. And if you’re a first-time investor, you simply might not know where to start.

A broker has access to the whole of the market, will have experience in sourcing bridging loans and will have built up a strong relationship with lenders.

This means they can prevent issues in the application that can cause delays, secure the best deal for your project and save you money.

Getting a bridging loan with the best terms is crucial for the success of your project and an experienced broker can make all the difference.

COMMERCIALLY VIABLE

Commercial property is a key element of the portfolios of many established long-term property investors in the UK. It offers a potentially lucrative way to move up the value chain. Suzi Carter, a stalwart of the strategy tells Julian Pletts exactly how to get started.

When you enter the property investment field a dizzying array of decisions await. But you start to do your research, cut through some of the noise and strategies become clearer. Opportunities start to present themselves, with some effort, of course. For many the humble but tried and tested buy to let is the way forward, after all, people will always need somewhere to live.

And that is absolutely fine; as YouTuber Jamie York, says sometimes there is nothing more attractive than a ‘boring, vanilla, buy to let’.

However, if you want to scale up to bigger deals commercial property offers an opportunity to move up the value chain if you are prepared to put in the time and effort to do your research, build connections and develop your investor skillset.

Suzi Carter, is a chartered surveyor who had been in the property industry for more than two decades and believes there are fantastic opportunities in the pipeline for those willing to put in the work to highlight them and hunt them down.

BACK TO BASICS

You may consider yourself a residential property powerhouse, but before you dive into commercial property it is best to go back to basics. And the most basic question – what is commercial property?

“So commercial property is any type of property, or most types of propertythere are always exceptions to every rule, where a business occupies it,” says Carter. “As opposed to somewhere where it’s a home, it is where a business is based.”

“So obviously, that very definition can include a huge range of property. Now, in more recent years, it can be slightly more widely defined as something that’s valued using a commercial valuation. So, things like build-to-rent are commercial - a multiplier of the rent is how you value it - and student accommodation is the same, but it’s generally where a business occupies it.”

ABOUT THE EXPERT

Suzi Carter is a Chartered Surveyor and has worked in the property sector for 25 years. That includes over 10 years at Director level at industry giants LandSec plc, Kingfisher Group and CBRE. Most of her professional career has involved acquiring, developing or asset managing commercial property and she has been responsible for portfolios worth over £2.5 billion. Visit suzicarter.com

Carter notes there are many ‘push and pull’ factors to commercial property. One big pull is the ability to find a competitive niche.

“Commercial property has got loads of profitable niches that the masses don’t really know about, so there’s definitely potential to enter markets where you are not in as much competition and where if you know what you’re doing there’s a possibility to enjoy a competitive advantage… You can also have a genuinely handsoff income,” adds Carter, singing the praises of fully repairing and insuring leases.

“Then in terms of the push factors there’s more and more regulation and tax on the residential sector and diversification of portfolios is a really good thing.”

RISE TO THE CHALLENGE?

There are some challenges though to starting out in commercial property. Firstly, the level of complexity can be greater than investors have previously experienced, particularly if they are used to traditional buy to let.

“I think there’s a basic understanding piece. It operates as a market very differently than the residential market. So for instance, commercial leases are a different beast to assured shorthold tenancies.”

The size of potential deals can be an eye-opener for some investors and to really succeed in commercial investment you might need to get used to some larger numbers, although deals are available at all scales.

“A lot of people are intimidated by some of the pricing in commercial when they first go into it. I think there’s quite an easy answer to that one, which is really that you can pay as little or as much as you want. I wouldn’t say that many of us are in the territory where we’re buying a £100 million+ assets, but you know, you can buy assets for a quarter of a million.”

STRATEGIC THINKING

If that hasn’t put you off there are many niches within commercial property which offer savvy investors great opportunities.

“Commercial to residential conversions are a really great strategy where you take a shop or a class E property and you do some form of conversion, whether that’s to the upper parts or the whole property, into resi. Now, obviously, in the current market, you’ll just need to make sure that you model a rental exit as well as sale just to make sure that you’re covering all bases.”

“I also really like industrial, it is a growth sector,” explains Carter. “I don’t think local councils have really put enough industrial [provisions] in any of their local plans and industrial is always competing with residential developments. So, I don’t think that there will be that much more industrial built, and yet industrial ticks a lot of global trends with the rise of online shopping, logistics and SME businesses liking to locate in industrial sites. It attracts so many different types of operators.”

It is worth noting new commercial property investors need to go into the current market with their eyes wide open, not least because, just like the residential market, finance is going to be a challenge.

“The commercial finance market is more stringent and it definitely contracted during Covid and hasn’t really freed itself up again,” she notes, saying there are still plenty of creative ways to finance deals for committed deal-makers.

BE COMMERCIALLY PLIABLE

So, where to start and what skills do you need to work on in order to excel in the commercial property field?

One important first step with any investing as well as working on mindset and goal setting, is considering what financial means you have available to you.

“You need to assess your accessibility to cash for sure, in terms of equity and debt - what’s available to you,” she says.

As already said, commercial property offers an seemingly endless array of avenues to go down and the opportunity to develop a

specific competitive advantage. Carter suggests you consider this from the outset of your commercial property investing journey.

“It’s about going an inch wide and a mile deep… and becoming specialists in the area so you get a competitive advantage.

“Get to know the agents in that particular sector really well so that you know they know you specialise in that area, strategy or type of property and therefore, you know, they’ll funnel potential property through to you.”

A great place to start when considering your ‘micro-niching’ strategy is a free webinar that Carter offers at her website. It is particularly powerful if you can dovetail your niche with an emerging trend in the market.

“It’s actually about not investing by accident, it’s looking at where you can hit the trend. So, you know, when people were investing in logistics maybe 10 years ago, there was a lot of foresight there in terms of online retail was going to grow that sector.”

MAKE THE TEAM

Some buy to let investors who have built their portfolio may be used to being a Jack of all trades from deal sourcer, all the way through to managing agent. This is not going to be possible in the commercial world. Therefore, when you have done your research and found a niche to concentrate on that hopefully dove tails with an established or emerging trend, you need to start building a team.

“You need a really good brokersomebody that absolutely understands the commercial market and has good access to commercial lenders,” says Carter. “I always say to my mentees, whenever you have a deal, run it past your broker first just to see how you would

get it financed. There’s no point in going any further if you can’t get it financed or you’re going to need to look at alternative financing, like investment partners.”

“You also need a really good commercial lawyer, again, a specialist in the commercial space, somebody who understands commercial leases,” says Carter.

“Then a commercial agent is absolutely key because they can help you on so many fronts, they can get a commercial valuer to go in and value different asset management scenarios for you, which obviously gives you a really good idea as to how the deal stacks.

“They can source product for you, help you with leases, negotiate with tenants.”

If your strategy or deals require you to carry out works then you would need to find a build team and architect with expertise in commercial property, though some attractive deals require very little physical work says Carter and can just be a ‘paper exercise’ of attracting and putting in a new tenant.

Team building will be a non-starter though if you are not able to establish credibility, particularly with agents.

“Be quite clear in your mind what you want to invest in and what kind of price bracket you’re looking at before you start talking to the commercial agents,” advises Carter. “Credibility is absolutely key. You’ve only get one shot at that. Have conversations in terms of ‘this is my strategy, this is where I want to invest, this is a kind of price bracket I am looking for. Is that something you can help me with? How’s the market in this area?”

SKILLS TO PAY THE CONTRACTOR BILLS

As well as assembling a team, honing a certain few skills will prepare you for your commercial investing venture.

First of those is discipline.

“I think [you need] discipline to follow a strategy or niche and not diversifying too wildly. You definitely need the ability to stack deals and model multiple exits. Relationship building is absolutely key, as in all types of property investment.”

Good commercial property investment takes a willingness to do the research and consult the right experts.

“There will always be a need for houses. Everybody will need a place to live,” compares Carter. “But there will not always be a need for some types of commercial property. And we’ve seen that through Covid when suddenly we saw high street shops falling by the wayside. We saw tenant failures and so the ability to cut through all the noise and understand the trends will definitely give you the edge.”

Keep that edge razor-sharp right now by trying to find recession-proof businesses.

“If you can invest in recession-proof tenants at the moment, it’s definitely the place to be,” explains Carter. “Health is a really good example of that, for instance, dentists, chiropractors, physios. I don’t know about you, but when I’ve got a bad back, I would pay any amount of money to go to a chiropractor, cost of living crisis or not!”

“When you are looking at the tenant you just need to do a sense check as to whether their business is going to be affected by consumer downturn,” says Carter, adding with a smile that people still go to Nando’s in a recession!

TOP THREE TIPS

To finish we asked Carter to give us her top three tips for surviving and thriving in today’s commercial market.

Firstly, it’s all about liquidity: “Get into cash. That will boost your credibility for purchases. It’ll enable you to get the deals others won’t be able to, and it’ll definitely be the number one way to move forward.”

“Number two is definitely niche. We want to be looking at those sectors that are going to recover the quickest.”

“The third one is nurture relationships. Now is a great time to be nurturing relationships with agents, building your credibility with them,” she says, as well as returning to vendors as they get more motivated.

Finally, Carter sounded a note of pragmatism to tie off her advice.

“There’s no rush. I feel like a lot of investors are in a rush a lot of the time. I don’t usually say stop, but I’m also waiting and watching the market and just seeing where things go, where the opportunities lie and where some of the balls land.

“If a deal stacks and you’ve done sensitivities on maybe a 10%, 20%, 25%, whatever, market drop and your asset management still works, then go for it. Absolutely.”

ON THE HOUSE Magazine in association with

With rising rates, a recession and even a possible property crash on the horizon, holding your nerve as a property investor can be a seriously tough ask. So Buy to Let Group founder Wes De Leur and ON THE HOUSE Magazine editor Julian Pletts had a discussion with a group of experts to find how they manage it in markets like these

MEET THE PANEL

Ross Harper (RH)

Having been in the property market since the late 80s Ross Harper has had a multifaceted career with many different interests in the property field including owning Auction House Scotland and online platform National Auctions Property. Harper has amassed a significant commercial and residential portfolio and was awarded Property Development of the Year at the Property Investor Awards.

Debbie Dorans (DD)

Debbie Dorans is the CEO of Vigeo Property Hub and has been investing in property for over 15 years. She has mentored 300+ clients, is a regular speaker at industry events and conferences, and has built a portfolio that covers a host of different strategies from buy to let and HMOs through to hotels and serviced accommodation.

Debbie is managing director at Woodstone Property Solutions.

Adam Lawrence (AL)

Involved in more than 500 UK property deals in the past decade, Adam Lawrence co-owns multiple investment companies and asset management companies and lettings agencies as part of his portfolio of businesses. He is co-founder of the Partners in Property Network and serves as a mentor to students at the University of Warwick Business School.

WES: Are you still looking for property? Sitting and waiting? Or out of the market for now?

RH: Yes, I am still buying, although I’m being super careful not to overpay at the moment and to ensure that I have multiple exits. When you buy 10 units a month this has become a bigger workload for the team.

DD: Yes, I am always looking for property, it’s a constant search, no matter what the market conditions, I just adapt. This is my profession and business and I am already seeing opportunities out there. I believe in our industry we can’t sit and wait around; we need to keep momentum as the deals and properties are out there, again we just adapt to the market. I started my main property investing in October 2008 after getting educated at the time of the 2008, economic crash. I remember back then the lenders pulling products from the market and changing criteria for loans. The mortgage rates were around the 6%. It took around two years for the rates to halve and it was within these two years (2008-2010) that I built a portfolio. This replaced my pharmacy income and I went full time into property.

The biggest ‘why’ for me currently is to help vendors and landlords. Some will be in mid flow of either coming out of a fixed rate or moving house and trying to get the sale through before the mortgage offer expires. I am looking at buying good strong stock, good areas, good properties, that I believe will increase in value in the medium to long term.

I am currently stress testing the cash flow at 9% and confirming that it is positive. It won’t be great, but I am buying for the future. I hedge the risk and increase the cashflow using several property strategies.

AL: Still looking. I follow the old adage from Warren Buffett – ‘Time in the market, not timing the market’. From speaking to many who have been involved in property for 30+ years, they have always done great deals in every economic environment.

JULIAN: What strategies are currently working well for you?

RH: I’ve moved from portfolio building, which I had been focusing on, back to primarily flips and trades. I own auction companies so I like to buy off market and then sell out through auctions without doing work if I can.

DD: We are still buying good buy to let stock for future growth and future cashflows. The main strategy that we are looking at today is serviced accommodation with a buy to let exit. Another strategy we are using is buying social housing properties where we can do assisted living properties. These have long fully repairing and insuring leases on them, 5-10 years so we can get guaranteed rent and cashflow while the maintenance is looked after by the provider.

AL: I only have one strategy - do good deals! Things that make money on the way in - either significant value add opportunities and/or significant discounts to current value. I’m not put off or worried by whether the end product is BTL, HMO, SA etc - these are just noises created by those who sell property education courses, in my experience. It is all business and it all requires business sense.

WES: Are you doing anything in this current climate to help tenants and secure your monthly rents?

RH: By not increasing rents and looking at EPCs and energy saving options.

DD: We are looking at securing long leases on properties at a guaranteed rent and working with our letting and management agents to make sure that the affordability checks have been done including asking for guarantors and deposits. We have regular communication with tenants to check how they are managing throughout the case with the cost-of-living crisis. Heading off a problem can save heartache all around later. Where possible, and if the tenant qualifies, we will also consider insurance for loss of rent.

AL: We raise rents annually to keep costs realistic. That means we are not a million miles behind market rents, although with the meteoric rises some need to catch up. We cap rent rises at 7% annually regardless of inflation. We are also sending out information and links to help save energy costs since education on this front is limited and non-existent outside of consumer money saving websites.

WES: For investors to stay ahead in the current market what are your top three tips when deal hunting?

RH: Don’t use a goldmine area. Loading up in one area could be counterproductive if that area is badly hit in a recession - I said ‘if’. Have your finances in place and be clear about the strategy. Don’t get overwhelmed by the news there is very little chance of predicting accurate outcomes. Instead stick to basics.

DD: Make sure when you buy, you buy at a discount, and there is equity left in the property, this will give you a buffer from market fluctuations. Make sure you buy in the right area for your strategy and do all your due diligence thoroughly. Confirm there is strong rental demand in that area, now and in the future and keeping on top of what’s happening in your chosen area is vital. Will your strategy still work? Make sure the property you are buying is stress tested and is on a positive cashflow from the beginning.

AL: Follow up would always be my number one. Look for badly marketed properties would always be my number two. In this market, don’t overstretch, overpay or overleverage would have to be number three.

JULIAN: For new investors, what should they be focusing on in order to build robustly in these unpredictable times?

RH: If they can cut their teeth on trading properties first as we don’t know where medium term values will move to and when there’s more stability, a long-term plan would be to hold properties as rentals. Do not overstretch yourself financially just now and be careful of giving up employment to follow property dreams.

DD: Have a strong set of values and stick with them, it will help you when you come to work with other people, be they investors, contractors or your power teams. Make sure you carry out, strong due diligence –ask yourself will your strategy and area work? Is there demand for your offering? Have strong robust systems in place and regularly assess your KPIs. Interview your power teams and make sure they understand what your needs are. Plus, make sure you control your costs and don’t let refurbishments get out of hand. You have to treat this as a business.

AL: Cashflow. Over 90% of businesses go broke because of cashflow problems.

WES: Current rates will be proving challenging for some when exiting current deals, bridging etc. What advice would you give to those facing such challenges?

RH: Spend time trying to build your cash pot and also try to find people you can safely borrow from at lower rates if possible. In this current market I’d take a small loss to get out of things if they don’t stack up in the medium term.

DD: Have a good broker who regularly updates you on market conditions and sentiment. Leverage your network. Shop around for deals and providers.

AL: Consider waiting for longer on temporary finance and be ready to transact with finance providers when the opportunity presents itself. Don’t benchmark against rates from six months ago. If it works - take it, and manage the asset well over the next five years. Stick with five-year fixes - revaluations in two years might cause further problems and rates might go up a lot more yet.

WES: For landlords with more established portfolios what do you recommend to look out for moving forward in this current market?

RH: There will be deals. Our auction companies are seeing increased deal flow. Generate cash now and sit on your hands until that ‘superdeal’ comes along. Don’t try and fathom the bottom of the market.

AL: How to exit - on your own terms and not managing the assets well and letting them depreciate. Poor exit plans can cost you an absolute fortune. Never put sticking plasters over something that needs stitches. Consider all your options on every propertyrepurpose? HMO - private or social? SA? Sell?

DD: I would advise constantly looking for the best deals you can if you are still in the market. Also make sure you have robust systems so you can regularly monitor if your properties are performing. Consider pruning those ones that are not if the deal is right to sell. Keep ahead of what’s happening in your chosen areas and demand for your offer. Be aware of increasing regulation and compliance nationally and locally and look at where your properties are with their EPC rating and try and get the works done to increase the rating if this is possible.

WES: There are lots of investors who are one dimensional – can only focus on one strategy. What would your advice be to those investors and what do they need to do to sharpen their investment tools?

DD: Treat it as a business - continuing professional development. Keep up to date with what’s going on by monitoring good property portals and the press but read behind the headlines. Network and listen to various investors to broaden your horizon and see if you can find another strategy or two that you like or that work in your area. Look at who is doing better or are where you want to be. See if you can learn and benefit from what they are doing? Make sure you have the best of the best within your power team - brokers and solicitors are crucial. Consider a mentor or some education but interview them beforehand, making sure that they can deliver what you need and fit your values.

AL: Open their minds. I’ve met lots who have done a lot in certain market conditions (say pre-2008) then in the past 14 years done little or nothing. Why? Push yourself out of your comfort zone and be an eternal learner.

When it comes to choosing a mentor, a lot of due diligence is required.

Here’s how to go about it:

1. Arrange a few meetings before committing to anything

2. Understand what they will be able to offer you

3. Understand what they have done and accomplished

4. Ask to see their overall portfolio for a better in-depth understanding of what they have achieved. If they refuse to be open with this, run a mile!

5. If there are still red flags check Companies House to see if they do in fact have a registered mentoring/coaching/ consulting business

6. Question fees. For instance, some, not all, will have fees running into £1,000s however this does not need to be the case. I certainly would question how the fees are broken down and what you are expected to achieve.

7. Speak to previous mentees - what success have they seen?

8. Alternatively, you could consider joining a Mastermind group for advice, accountability and support. I run a twice-monthly meet-up called The RoundTable Mastermind group and I am genuinely proud of the success members of the group have achieved such as Kev Dendy (featured in Issue 1).

Visit https://linktr.ee/btlgroup

WES: If there is one strategy which is most exposed at present times which would it be and what can investors do to change course to make it through?

RH: I’m not clued up on all the strategies but buying buy to lets at full market value for long term hold might see a loss and I’m staying away from developments just now due to the financial and political climate. It’s hard to predict where costs of materials, labour and values are going to be just now. Anything that drains cash is not ideal.

DD: My opinion is the standard buy to let. Increase in mortgage rates and increase in regulation will increase costs and there are also political moves to make the private rental sector more accountable through regulation. That can be a good thing, getting rid of not-so-good landlords but we don’t know what that completely looks like. It’s therefore a risk that you will have to account for when buying. Locally, you could get councils applying limitations and premiums in areas to influence the property types. Certain lenders may have a large exposure in an area so it may be harder to get that lending. Again, good due diligence and being aware of what’s going on in your area will help you in your decision making.

AL: Hard to pick one but I would pick HMOs, purely because so many struggle to add any meaningful value and often end up with an end product that is worth less than the amount of money they’ve invested, plus - exposure to energy bills. Buy better and look more closely at energy efficiency measures, would be my advice.

JULIAN: There is lots of fear around everywhere you look. How do you sift through the noise and draw on positives to continue progressing?

RH: I don’t listen to the news or property channels. The Partners in Property guys keep me abreast in an organised fashion, which was why I got into that network.

DD: I am passionate about providing good properties for people to live in while helping people achieve a good return. I am not a financial advisor and only an investor, so I can only talk from that point of view. What I know is that there are not enough houses to meet the demand and prices have made it hard for people to afford to buy their own house. So, for the foreseeable future people will need good housing, near amenities that are nice to live in and low cost to run. That’s where we as investors can be a valuable part of the private rental sector, providing good housing where the return on our time and money is best used.

AL: The news only serves one purpose - to let you know what everyone else is thinking. There’s no point being blindly positive but anyone can tell you that more opportunity is created and executed on in a recession than in a rising market. Concentrate on what’s going well and what you have to be grateful for at the start of every day, then make your list of three-six things that you want to get done today - then go and do them!

Anyone who has been investing in property since the start of the Covid 19 pandemic will be no stranger to soul-destroyingly-drawn out completion periods. David Williams not only had to deal with the log-jam at the land registry, he managed to maintain focus when his Ukrainian project manager had to rush back home at the outbreak of war.

Tell us about your property journey so far? You had quite a wait to complete this, your first investment project?

It was quite a wait! We agreed the purchase at the start of July 2021 but didn’t complete until the end of February 2022. We were caught up in the run-up to the stamp duty deadline plus there were issues with the title at Land Registry - historic CCJs that hadn’t been

removed and, in the end, we had to get a ‘tracker’ to find the other party. Also, the fact that the vendor lived in Scotland didn’t help things either. When we did eventually complete, the refurb didn’t start until the end of March, partly due to the fact that our project manager is Ukrainian and rushed back home to rescue family members affected by the Russian invasion.

Sounds intense. Talk me through the project – you were searching for this property during the pandemic right?

Correct. We took the decision to launch Beelief Property in the summer of 2020. The pandemic put a lot of things in context. We all had a lot of time on our hands and having that ‘headspace’ allowed us to focus on what’s important, our dreams.

How do you reflect on that time then versus the uncertainty we have in the market now?

A slump, crash, correction… whatever you call it isn’t necessarily a bad thing. House prices may drop which works for us as we are actively out acquiring new projects, fewer buyers means less competition and we could also see a drop in labour costs and materials due to lower demand. Our strategy is to retain each of the projects in our portfolio and rent them out and traditionally the rental market remains stable during economic dips. Our financial plan is based on cashflow not capital growth.

Back to the project…

How did you source it?

Relationships and perseverance. Relationships that we had fostered with estate agents; perseverance because we had initially missed out on this particular property to another buyer. However, we kept in touch with the agent and when the first buyer pulled out, we’d put ourselves in a position to step in.

THE PROPERTY

How did you feel about doing such a back to brick renovation?

Really excited to be honest. A simple paint job and freshen up would have been a bit boring. Louise nicknamed me ‘Demolition Dave’ when we renovated our family home as I got to use a sledgehammer! I love back-to-brick projects. It’s fascinating to see a building stripped back to its original state and then breath a new lease of life into it.

Any major challenges?

To be honest, the project itself was the easiest bit. Other than the steep increase to the original refurb budget (Increase in labour and materials plus additional works like removal of chimney breasts) the works went well. The only hiccups were installing fire insulation in the loft and the build crew falling ill with Covid two weeks from finishing.

BEFORE AFTER

CASE STUDY

Some say the market for HMOs is getting dangerously saturated? – how did you consider this as part of deciding to convert this property?

You could say the car market is saturated but that doesn’t stop Ferrari producing new models and retaining a loyal customer base. I agree, there are a lot of HMOs but our niche in the market is creating desirable co-living and highquality accommodation. And there’s clearly a demand as we were delighted to rent out all five bedrooms within 24 hours of marketing.

What important learning points will you be taking into future projects?

The realisation that conveyancing and legal process takes forever. This has been by far the most frustrating aspect: both buying the property initially and then the re-financing to pay-off the bridging loan and transfer onto an HMO mortgage. We’ve also learnt that you should never stop looking for your next deal!

How do you feel about property investment after completing this first project?

More excited now than before we started. We thought we knew what we were letting ourselves in for when we embarked upon this venture but until you actually do it, nothing can prepare you for the stress, challenges and obstacles that you are going to face. Both Louise and I have full-time, corporate jobs so at times it’s been incredibly tough but having a clear vision means we remain super positive.

ON THE HOUSE Magazine in association with

TO BUY OR TO BUY TO LET

Should I buy a BTL or home first?

This question or some variation of it is often kicking around the Buy To Let Group on Facebook. The general consensus, (although recent interest rate rises will have a strong bearing on the conversation) seems to often side with owning a roof over ones own head before investing in others.

Many previously cited stamp duty as the main reason for that, alongside lower entry cost and various other elements we’ll explore. In my view and certainly in my case, it’s not quite as black and white as that.

Firstly, a quick intro about me, I’m Alex, I’m 26 and I’m from Bristol (no, you’re not the only person who read that with Paddy’s voice from ‘Take Me Out’). I have a small portfolio, largely in the East Midlands with a mix of a single let and a number of HMOs. I’ve been self-employed since the age of 21, running a small marketing agency which keeps me busy. But, I’m yet to actually buy a home of my own.

If you’re young, are yet to buy a home and are weighing up whether to start with a BTL or a home to live in, this one might be for you. If you’re marginally less young as I appreciate many of you will be, I hope you find my take on this increasingly popular way of getting into property interesting.

So… Why on earth would you start buying investment properties before you’ve secured a home?

Twenty-something investor Alex Daley took the out-of-the-ordinary option of investing in a BTL before owning his own home. Should you follow suit? He weighs up the pros and cons for others.

HOUSE PRICES

Buying a home down south is just very, very expensive. I think Bristol is bad so I don’t even want to consider what it would be like to live in London. My least expensive house set me back £115,000, which was in Nottinghamshire, for a nice two-bedroom three storey house that rented out after a very light renovation for £750pm. In Bristol for £115,000, you’d get, well, nothing and in London, you’d somehow get less than nothing.

If you’re up North or in the Midlands, this is much less of a consideration and actually, the balance may swing back to home ownership for some. This just emphasises the point, that there’s no necessarily right or wrong answer.

FLEXIBILITY

I’ve never thought you need to be in any rush to settle into a particular area. Of course, I know, buying a home isn’t a forever tie-in, but it definitely isn’t as flexible as other options. If ever you’re going to be transient, it’s surely going to be in your 20s. New job an hour up the road? No need to sell. New job across the Atlantic? No need to sell. Test out whether you like a new city without having to grow some pretty expensive to remove roots. At the same time, your property is cash-flowing nicely, which is covering a chunk of any rent you might pay and you’re benefiting from any appreciation. Life could be worse.

The downsides, and yes, there are downsides.

ENTRY COST

Remember that £115,000 house I mentioned before? Well instead of a 10% deposit, you’re probably going to fork out 25%. Then t are those annoying little extra elements (especially when you buy under a LTD company as I have) such as personal guarantees, which for a few minutes ‘work’ has solicitors earning the same amount as premiership football players.

Lending - You guessed it, it’s not quite as easy to get a mortg Very doable, but not quite as easy. My situation, with the self employed income, meant we were down to fewer lenders at the time. My initial rates weren’t great but the maths still worked my deals.

That said, I’m not a broker, so I asked my broker to weigh in. Hardman is the director at The Buy To Let Broker: “Numerous key drivers exist for clients motivated to invest in a BTL ahead of purchasing their own home. The motivators could range from employers providing accommodation for example - such as with th military, quite happily residing with family and not feeling th to run for the hills, or simply due to the local market being v expensive... However, getting a foot on the ladder in this marg non-conventional way can very much work for some.

“There is a common misconception that you need to own your own home to get started, we have plenty of investors who don’t neatly into that bracket; Alex being just one,” continues Hardm He suggests that those entering property with a business mindset at a younger age might suit the BTL-first approach.

“Let’s face it, often the best time to start a business/invest when personal outgoings are low, allowing new investors to cut their teeth without the worry of other financial commitments, reducing the risk factor to them.

“This hurdle does constrict the number of lenders who will consider an application, it’s not impossible by any means, as with most things it will fall to your individual circumstances. access the best the market has to offer, lenders will be keen to ensure no foul play, by lending you no more against a BTL than they would on a residential basis. In other words, applying the same affordability calculations to the BTL loan, as if it wa

indeed your first home. Therefore, personally earned income is paramount.

“There are other fringe lenders who don’t apply these same income thresholds, however, the base interest cost does multiply,” Hardman says. “For prospective landlords, the right advice is key, both for your mortgage and for the overall ownership structure. We always encourage taking quality advice from a property-savvy accountant, to seek solid tax advice on whether purchasing in your personal name or via a Limited company is the most tax efficient for your circumstances and future plans. Sadly, often this initial crucial element is missed, but can be the difference between a mediocre or successful investment.”

HAVE YOUR SAY

So, has the time come for me to look at buying my own home? Yes, it seems it has. I think, now my portfolio is starting to stabilise and I’ve eaten up most of the large expenditures (*frantically touches all the wood nearby*) I can start to look at that next stage. Look, I’ll probably still try to make it as much of an ‘investment’ as possible - somewhere that needs some work. I’m sure you’re the same, that it’s hard to break out of the investor mindset, ‘Oh it’s five minutes from the hospital, that’ll rent out well.’ Have I got it all wrong? Have I played a blinder? Probably neither. Does it work for me? Yeah, I think so.

Would it work for you? How on earth would I know? But if nothing else it’s something to consider if you’re young and looking at what that first step might look like. And if you’re *ahem* less young,

ON THE HOUSE Magazine in association with

Matt Hardman

In

THE GLOW UP

every edition of ON THE HOUSE Magazine

The Developers Bev Tindale and wife Nic Simpson

PREDICTING THE UNPREDICTABLE

What do you use for your maintenance estimates? Five percent. Or perhaps you are more conservative at 10%?

Maybe you plan for 10% of gross profits?

You can be forgiven for trying to find a back-of-the-envelope way of projecting those niggling costs. It is what most of us do and certainly had to do at the beginning of our investing journey.

There’s not a lot that’s too exciting about maintenance, but what you budget for maintenance can turn a good deal into a stinker. So, if you want to be lying on a beach, sipping a cocktail whilst your Ferrari is

Firstly - why bother going into so much detail?

For someone like myself who was toying with the idea of retiring early and living off property, I had to know that the numbers were spot on and that they could support my current standard of living.

It can be easy to be lured into a false sense of security with low maintenance costs as some major issues take 10-15, or even 20, years to develop.

Lee Scott

The last roof I replaced cost £7,250. The 17 years previous, that property had cost me just under £500 in total. Suddenly a £2.50 per calendar month (pcm) maintenance item jumps to £36.77pcm. Now multiply this one common maintenance issue by other obvious lifetime maintenance issues. Turns out I needed to add another five properties to my portfolio to be able to retire as I wished which was quite a shocker.

Tell us about your portfolio, so we can get an idea of how that helps shape your figures...

I have a mix of 22 properties, comprising three and four-bedroom semis and terrace properties, and two flats. I also have a huge 22,000 sq ft commercial building but commercial maintenance is a whole different ballgame and has been excluded from my maintenance calculations to keep it relevant to most BTL landlords.

OK, put us out of our misery, what’s the definitive number for estimating maintenance? So, simply put, to arrive at the figure I consider

3X

being valeted, much like the £3,997 courses promised, then you may wish to give this at least half an eye.

To get a real-world and actionable maintenance budgeting plan, I’ve bought in Lee Scott, who’s done all the leg work so we don’t have to. He’s tracked 19 years’ worth of data across his portfolio as it grew to over 20 properties in the North of the UK. All bills, divided by all properties, over every month owned, then adjusted for inflation and, voila, he has his magic number.

Here’s Lee Scott’s mystic maintenance masterclass:

every penny ever spent on maintenance, divided by the number of properties owned in a particular class. Simple but effective.

Here are my calculations:

3X

2 BEDROOM FLATS £93.43pcm This equates to approximately 15 percent of the rent

2&3 BEDROOM SEMI-DETACHED £136.22pcm approximately 16 percent of the rent

This includes the cost of bi-annual inspections at £7pcm per property. In all instances, you can see this is much higher than the five to ten percent figures bandied around and can make a real difference to cash flow projections.

What’s your advice to those looking to keep maintenance costs down long-term?

My whole business model supports being the best, most profitable, landlord - both long and short-term. Here are my tips:

FUTURE PROOF YOURSELF

Acquiring most of my properties through the BRRR method meant I was able to go back to basics and do absolutely everything in one go - rolling a lot of costs into one. For instance; a property needing back-to-brick or even just more than 40% plastering means a re-wire will be half the cost of a future live-in rewire. Combine that with the future refinance and a lot of future maintenance costs are swallowed up by increased value and getting my money back out.

TENANTS

17X FOCUS

I always find that with a fresh, clean home that stands out in the market, you can afford to be selective over the correct tenants. There is nothing more expensive than a cheap tenant who doesn’t report maintenance or look after the property.

One key thing to look for in tenants is to follow the guidelines set by guaranteed rental insurance checklist. It’s not rocket science to work out that these companies reduce their own risk by setting strict criteria.

Typically, these include:

- Two working applicants in separate industries for maximum protection

- No pets

- Previous landlord and work references

- Credit check

- Homeowner guarantor

INSPECTIONS

Again, so simple but so often forgotten. Property inspections are the key to spotting early maintenance. I have some lovely tenants with beautiful homes but even they miss vital elements that can compound over time. Our last round of inspections was done two weeks ago and found 12 items of maintenance that had not been reported. Catch them before real problems arise.

37

Maintenance, the brown jumper-wearing cousin of the property world but a new boiler here and broken hinge there and it mounts up over the years. Get your cost assumptions wrong though and you could be in for dire consequences. Investor Alex Daley thinks he might just have found the person with the stats to solve the dilemma.

IS YOUR PORTFOLIO UNDERINSURED?

price inflation that no-one is talking about

Recently, at Falcon Insurance, we had a new client come to us who was in the process of purchasing a two-bedroom stone-built mid-terrace in the North for £65,000. When we asked her to get a reinstatement value (the cost to rebuild the property from scratch) estimate it came back at £187,000. Had the purchase price been used as the guide, it would have been almost two-thirds underinsured.

There are two issues here. Firstly, many property owners associate the market value to be the value they need to insure their building for, which unfortunately isn’t the case. And secondly, as market values have risen amid a backdrop of soaring building and material costs reinstatement values have almost certainly increased too.

This is just one example, but underinsurance is a worrying trend we are seeing emerge with investors who have not revalued their property within the last five years.

WHAT IS UNDERINSURANCE?

Underinsurance is when an individual or business has insurance coverage that is insufficient to cover the full extent of their losses – in the case of property, the rebuild or reinstatement costs in the event of fire destruction or another catastrophic event.

Underinsurance can occur when an individual purchases a policy with too low limits, fails to update their policy as their needs change or makes a claim for damages that exceed their policy limit. It can also occur when a business purchases a policy that does not cover all of its potential risks.

HOW DOES IT HAPPEN?

Underinsurance can happen for a number of reasons. It may be that the insured doesn’t

fully understand their coverage or that they’re not aware of all the potential risks they face.

In some cases, people may intentionally under insure in order to save money on premiums. However, this can be a risky strategy, as it may leave the policyholder with inadequate coverage if they need to make a claim.

Underinsurance can also occur when a policy is not properly updated to reflect changes in the insured’s circumstances or keep pace with inflation as we are currently seeing in the property market.

WHAT IS THE ‘AVERAGE CLAUSE’?

The ‘average clause’ is often added to insurance and can be found in the small print. It is a way of insurers paying out less than they need to if a policyholder is paying less than the premium they should be because they have inadequate cover.

Insurers apply the average clause and only pay out a proportionate amount for what you are claiming based on how much you are underinsured by.

The average clause is there to ensure that policyholders declare the proper value of their goods and so pay the correct premiums.

WHAT’S THE ISSUE?

Underinsurance can have a number of consequences. If you are underinsured, you may not be able to make a claim for all of the damage that has been done to your property. This could leave you with a repair bill.

Underinsurance can even invalidate your insurance policy, meaning that you will not be covered at all if something goes wrong. This could leave you facing financial ruin

if you need to make a claim.

Your insurer may apply the average clause to your claim meaning the pay out could be considerably less than your claim.

Here is an example.

If you value and insure your property at £300,000, but the true cost to rebuild it is £600,000 then you would be effectively underinsured by 50%. So, if you made a claim for damage say for £100,000 your insurer would only pay out half of your claim so £50,000 then, minus your policy excess, potentially leaving you seriously out of pocket.

It is recommended that you review the cost of rebuild of your property every year to ensure the value it is insured for has kept pace with inflation.

If your insurer believes that you underinsured your property on purpose to reduce the cost of your premium then it can refuse to pay out at all and can cancel your policy altogether.

Underinsurance can happen to any insurance policy, whether its property, buildings, contents, business or vehicle insurance, so it’s important to make sure you fully understand the value of what you are insuring.

GET COVERED

For residential properties you can use the ABI Rebuild Cost Calculator to work out the cost to rebuild your property.

Falcon Insurance also offer a Rebuild Valuation Service assessment service available for both residential and commercial customers which works out the costs for you ensuring you get the correct insurance.

The Managing Director of Buy To Let Group Partner Falcon Insurance, Pinder Dhaliwal highlights the worrying trap of property

A NECESSARY EVIL

Evictions – the very mention conjures images of drawn out court battles, sour relations, trashed properties and mounting rental arrears. Add to that the fact the more reliable Section 21 route could well be being scrapped leaving us with the more arduous and all together less certain Section 8 route.

While nobody gets into property expecting to have to, or indeed wanting to, boot out tenants, chances are if you are in the game long enough you will have to serve a notice at some point.

With soaring rents, the cost of living crunch and government flip-flopping squeezing affordability margins for many tenants it is likely that day could come sooner rather than later.

Evictions specialist Nick Gordon, from Evict A Tenant, thinks there could be a wave of evictions coming down the pipeline.

“The past two months, we’ve absolutely gone through the roof in terms of serving notices. So, I know in November and come December with the ones that we’ve just had in this massive surge,

they’re going to be wanting to be instructed,” he says, referring to the next stage of the eviction process. This is not meant to scare. But it is the market in which we operate and, as with anything in life and property, you have a choice, you can sell up and get out or you can skill up and hold steady. Ambitious property investors can even see it as an opportunity to get some deals as some landlords head for the exit.

VET, VET, VET!

Gordon, a property investor himself, says he wouldn’t let the prospect of evictions put him off investing and advises other investors not to. He does however have some important words of wisdom.

Firstly, vetting tenants could not be more important including obtaining references, sources of rental and deposit funds, annual income and more.

“Do your diligence checks on the tenants - as much information on them as you can get,” emphasises Gordon.

Still, it is easy to lie or provide false documentation

Nobody enjoys evictions – tenant or landlord. But they are a fact of the property business. Eviction specialist Nick Gordon helps us reduce the chances of needing to carry out an eviction and how to handle the process if you do.

to a landlord so the next step is to get them reference checked by a professional company who be able to assess the affordability of the rent for the tenant, check bank statements, contact employers, find CCJ details and more. It could well prove a false economy to skip this step.

YOUR REQUIREMENTS: TAKE NOTICE

So, you’ve whittled down the list, sieved out the time wasters and referenced your prospective new tenant. The hard part is over. Well, not quite. For selfmanaging landlords, if you do not set the tenancy up correctly and provide the right documents any later eviction could become much more challenging and potentially expensive.

“The most common slip-ups I see is [landlords] just not having the paperwork in order – for instance, making sure the gas safety is provided on time. Making sure that EPCs are in place and you provide the How to Rent guide,” notes Gordon. “When we do an eviction, sometimes the key element is having something as simple as a one-page checklist that the tenant has signed to say ‘I’ve received this,’ ‘I’ve received that’. That saves so much headache when we go to court. It’s unbelievable. Just that one piece of paper.” (See panel The NRLA’s checklist)

TENANTS NOT FRIENDS

An average eviction will cost in the region of £1,000- £1,400, explains Evict A Tenant’s Gordon not including rent arrears. On rare occasions though, if it goes to trial and the tenant is on legal aid

and puts up a defence it can cost much more.

As well as being aware of all of your responsibilities as a landlord (even if you employ a managing agent) having a professional and not overly familiar relationship with tenants is best, Gordon advises.

“I’ve had a case where the landlord bought a tenant a car because they wanted to get back on their feet for work, so they bought them a car even though they were in arrears at the time!”

“You just got to see it as ‘I am your landlord, you’re the tenant. Contact me if there’s any issues but rent’s got to be paid on a certain date and that’s it,” says Gordon, adding that carrying out regular inspections, is not only vital to catch any issues with the property early but also an important part of underlining that professional relationship.

ACT FAST, BE DECISIVE

Believe it or not, eviction specialist Nick Gordon says he has had cases brought to him where a landlord did not realise or did not chase rental arrears for two years!

Do not be that landlord. Part of treating it like a business is keeping track of payments due and he advises reminders should be sent straight away when rent payments have been missed and then suggests a formal demand letter sent and recorded on day seven.

Such correspondence can often be more effective when sent from an eviction

specialist, says Gordon.

“I know we’re selling our services, but it comes stronger from a third party,” he says. “When they see [the letter] saying, ‘Tenant eviction’ or ‘Tenant eviction specialist’… It does alert a tenant to say ‘Crickey, I need to do something about this!’”

While some landlords will opt for online portfolio management software to keep track of rental payments and alert them to arrears, having a separate bank account for rental income and at the very least monitoring your portfolio income on a spreadsheet with diary reminders is important to keep track. It also really helps when it comes to presenting a specialist like Gordon with the details they need should a notice be required.

ACCEPTABLE RISK

Whether or not you are put off by the risk of having to someday go through the eviction process is very much a personal choice and down to your risk profile. With the potential abolition of Section 21 and Gordon’s lack of faith that already stretched courts process can be improved in any meaningful way, it is not a decision to take lively. However, evictions are still comparatively a rare occurrence for portfolio landlords and by establishing a tenancy correctly, ensuring you are a compliant of all rules, maintaining a professional relationship with tenants, proper record keeping and staying on top of rent payments you can minimise the chances of it being a regular and arduous part of your property investing career.

WHAT YOU NEED TO PROVIDE

The National Residential Landlord Association lists the following items that are required to be provided at the outset of an assured shorthold tenancy:

• A valid Gas Safety Certificate if you have gas appliances.

• The current Energy Performance Certificate, unless your property is rented out as individual rooms.

• A current Electrical Installation Condition Report for the property.

• The latest version of How to rent: The checklist for renting in England

• A smoke alarm fitted on

every floor used as living space. These alarms must have been checked to show they are in working order at the outset of the tenancy.

• Confirmation that carbon monoxide alarms are fitted in every room with a fuel burning source. They must also be checked to show they are in working order at the outset of the tenancy.

• Confirmation that the deposit has been protected if already paid.

• Confirmation that the prescribed information for the deposit scheme has been provided to the tenant and anyone who has paid towards the deposit.

• A privacy notice outlining how the tenant’s data will be used.

• In addition to this, you need to check the right to rent status of any occupiers of the property.

Looking to furnish a rental property? Do it the SMART way

RETAIN

WHY LEASE FURNITURE WITH LANDLORD SMART?

You may be wondering why leasing would work for you. Here are the top four reasons why our customers have chosen to use leasing as an alternative to buying.

RETAIN CAPITAL TAX SAVINGS MORE CHOICE EXPERTISE

You don’t need to part with your own hard earned cash up front. We pay the supplier for you and you pay the lease over 3 years from the revenue your project generates.

Rather than capital expenditure a lease allows you to claim every monthly payment as a revenue expense to your business before your tax is calculated on profit.

We are always driven by price, therefore without the worry of finding the capital up front you can choose what you want rather than what you can afford.

We are the number one property sector leasing experts. We understand property professionals, the types of projects you’re running and what finance products will suit you best.

We speak to each and every client before starting an application to ensure that our service is right for you and your project and to answer any questions you may have.

STEP

We have a list of pre-approved suppliers or we can contact your chosen supplier and see if they are willing to work with us. We are only able to work with trade suppliers.

STEP

3 Application completed You will need to provide various pieces of documentation to accompany your application. You will also need to print and sign the lease agreement and make your first monthly direct debit payment. STEP 5

STEP 4 Decision in principle

STEP

next

To obtain decision in principle, a company credit check will be performed. If your company has been trading for under 3 years, a check will be made against you as an individual.

Now you’ve not had to use your own cash to furnish this project, we hope you’ll invest it into growing your business more rapidly, boosting your monthly income to create the life you desire. Good luck!

Check out how cost effective leasing will be for you by using our free online calculator tool or give us a call for a no obligation chat.

LIMITED THINKING

We often get asked about whether properties should be bought personally or through a limited company structure.

The answer, as always, is that it depends upon your own personal and family circumstances and there are various important areas to mull over in making the decision.

The tax system is always changing as underlined by the recent government Mini Budget – The Growth Plan – which caused the tax profession many issues by abolishing of the top rate of tax of 45p for those earning over £150,000 per year, only to reverse this decision shortly afterwards.

It makes tax planning virtually impossible when the rules keep changing and there is uncertainty but this is the world we are all currently living in.

POINT TO PONDER

The rules for working out taxable profits are essentially the same regardless of whether the property is owned by an individual or by a company.

However, where the property rental business is carried on by an individual,

those profits are charged to income tax at the taxpayer’s marginal rate of tax –20%/40%/45% whereas if the rental business is operated by a company, the profits are chargeable to corporation tax – which is currently 19%.

Mortgage interest rates should always be considered when weighing up personal versus company purchases as the interest rates do differ but this also needs to be considered along with the section 24 legislation that restricts the interest a personally/partnership-held property can offset against rental income. S24 restrictions do not currently affect properties held in a corporate structure therefore full interest relief is available.

A corporate structure also allows for effective future tax planning for inheritance tax and the inclusion of other family members in the company for current or future tax planning opportunities.

If the profits are subsequently extracted from the company, depending on the method of extracting and the recipient’s personal tax situation, there may be personal dividend tax to pay on the extracted profits.

If profits are left in the company then no further personal tax is payable so it is a great tax efficient way to accrue deposits for future property purchases or for business growth. A director/shareholder will inject cash into the company to fund property purchases. This injection is generally in the form of a Director’s Loan (Directors Loan Account - DLA).

This can be repaid tax free to the director once funds are available, if required. Therefore, allowing access to the deposit quicker than personally buying a property. This would be achieved on sale of the property or refinancing.

TRUSS BUT VERIFY

The PM (at the time of writing) failed to get the experts to weigh in on her financial plans before it was too late. Don’t make the same mistake. Do your own research, wrestling with the points above, but it is vital that you seek the advice of a trained and experienced tax advisor who can consider your whole investing and financial picture and help you decide whether you should be picking out a limited company name or sticking with personal property investor route.

Rich Dad, Poor Dad – Robert Kiyosaki. The book that so many people chart as their epiphany moment and that started them down the path to property investing.

What financial advice could you possibly glean from a civilisation 4,000 years ago? Turns out a heck of a lot as the parables of Arkad reveal universal wealthbuilding truths along the way.

Think and Grow Rich – Napoleon Hill. The all-time best seller that through extensive research on wealthy folk aims to coach you to

The Complete Guide to Property Investing A solid overview of the property investment game although readers should look to supplement with current information.

Property Magic – Simon Zutshi. Now in its 6th edition Zutchi’s book takes readers through many different strategies that if applied correctly will help accelerate your investing journey.

House Arrest – Nick Gannon. The subhead ‘A Practical Guide on How to Replace Your Income Through Property Investing’ say it all, with the addition of noting a focus on HMOs. So, if you are considering entering the competitive world of HMOs give this a read.

Never Split the Difference – Chris Voss. Sharpen up your negotiation skills with an exFBI hostage negotiator in your corner.

How to Win Friends and Influence People – Dale Carnegie. A time-honoured tome that will boost everything from you vendor interactions to your offer writing skills.

BLOGS

MrMoneyMustache – Pete Adney writing in his alter-ego as Mr Money Mustache. The FIRE movement and extreme frugality might not be for everyone but Pete’s logic, contrarian perspective and entertaining style of writing are a boon for anyone interested in personal finance. Pinch of salt required for US-centric advice.

The Motley Fool – Long-running investment and market commentator website that focuses on stocks and shares investing and believes ‘individuals can beat the market’ with a long-term overview and a hands-on financial management approach.

ON THE HOUSE Magazine in association with

BTL Group Preffered Partner

THE RANT

PODCASTS

Inside Property Investing – HMO Focused investing experience advice from Mike and Victoria Stenhouse, somehow unpretentiously dispensed from their yacht in sunnier shores.

The Property Podcast – The Robs have been dispensing free property wisdom for almost a decade. Impartial and in-depth advice garnered through years of experience and research.

Wealth Builders – A rounded approach to all things money making, keeping and financial fortress building from Kevin Wheelan and Christian Wheelan.

The Side Hustle Show – Inspiration for all those who are looking to make a little extra deposit dough on the side. American but features plenty of universal tips, ideas and concepts that can be within and without a property business.

The Property Jam – A light-hearted and quirky panel show around all things landlording that also reveals plenty of useful and actionable info along the way.

Naked Money – The Naked Trader takes us through stock market fundamentals and his own hard won rules to investing which feature in his award-winning book.

YOUTUBE CHANNELS

Jamie York – No nonsense, plain speaking advice from an investor who favours in his own words, plain and boring, bog standard buy to lets.

Rentals to Wealth – Infectiously positive pairing who sprung off a Bigger Pockets featurette and take you behind the scene of their house hacking and renovation efforts. US-centric but great for motivation.

New2Property – Perma-paint-splashed hands on investor Dan Coachafer gets into the sort of seriously granular detail that only that is perfect for true property fans and also for educating yourself on pitfalls a you go about portfolio building.

Ali Abdaal – Ali covers everything from selfdevelopment to business and investment in a millennial friendly-fashion. For those who adopt an always be learning check out Ali’s best hits.

ONE DIMENSIONAL PROPERTY INVESTING

Ihave seen it of late that there are so many, what I would call, one dimensional investors. By that I mean investors who can only invest in one specific type of market i.e. a growing/upward trending market. I see lots of people telling themselves that they are going to sit back and watch the market waiting in anticipation for a market correctionwhich may not come. What this actually means is that they don’t have the necessary skills to invest in any market condition.

As a ‘professional’ property investor you need to be able to develop the toolkit to invest in any market condition, whether growing, declining or stagnant.

You need to be able to spot opportunities and be in a position to execute regardless of the market.

Warren Buffet springs to mind. He knows and has confidence to invest in any market condition. Property is no different.

Most will say interest rates have had a big impact on certain property strategies.

This is true if you are reliant on deals that were average at best, three months ago. Those types of deals simply won’t be viable at present.

It is not true though if you are determined to find even better deals, creative deals and deals that factor in higher interest rates.

Just like the seasons, challenging times pass. You only have to look at 2008, 2010 and 2012. At the time these were branded as some of the worst times in economic history. We continued to buy property through these times and we are all here to tell the tale, although it definitely had life changing effects on some people who were not adequately prepared.

People lament to me regularly that their deals are no longer stacking in their investment area. My standard answer is either find better deals, find a new investment area or find a better investment strategy. Being flexible will certainly help you through these challenging times. By this I mean sourcing property which fit multiple strategies or exits. This way if one suddenly becomes non-viable you are able to pivot with little traction.

If you think it can’t be done your brain will find every reason to verify your thoughts, so be careful what you think and wish for.

A motivational quote I love:

Don’t wish for easier challenges, work on becoming a better investor.

“The Quality of your questions determine the quality of your life.”