ON THE HOUSE Magazine - Issue 3

Editor’s Letter

Iwant to start on a positive note and say a big thank you to our advertising partners and headline sponsor Falcon Insurance for helping us make the transition to a monthly magazine to bring fellow investors even more actionable, inspirational and informative content – and entirely for free!

And now I have to pivot to a not so cheery note - as witnessed in our update section, even though the rental sector is 35% of UK homes, landlords are heading for the exit faster than ever before. This is, as we are all too aware, due to, among other factors the short-sighted policies of the government in recent years accompanied by the challenges of higher finance costs.

The hurdles of being an investor in today’s environment cannot be ignored.

Neither, however, can the simple fact that the need for good quality rental stock will never go away. In fact, that demand is, as we know, also higher than ever before. So, for those of us who remain - regardless of whoever is the current tenant of Number 10 - look at it this way, you are providing a product that is as sought after as a YouTuber’s sugarwater concoction and your competitor-base is dwindling. What’s more, with predicted further property price drops and upwards pressure on rents, it is now going to be easier to find deals that stack (That’ll cheer Wes up – see his rant on p57 ).

At ON THE HOUSE Magazine we adopt a cautiously optimistic approach – we know there are challenges (see ‘Recession proofing your portfolio – p22) but it is your ability to overcome those challenges that will make you a successful longterm investor. If you’re flexible enough to adapt to whatever the government throws at you, diligent enough to always be stacking and smart enough to ignore a lot of the ‘sky is falling down’ noise, you’ll be perfectly placed to ride out this recession and even make 2023 your best year in property yet.

And almost this entire magazine is designed to help you do just that.

There are even more case studies to learn from (p36, p40 and p54), roadtested insights from a property and business billionaire (p25) and a feature on how to make 2023 your best year in property yet (p18). Plus, to complement our previous social housing and commercial strategy guides, we present a pragmatic overview of another margin-maximising strategy; serviced accommodation, from the man who literally wrote the book on it.

Add to all this, access to the Buy to Let Group – the largest and most supportive BTL Facebook group in the UK , our weekly newsletter and the opportunity to join the RoundTable Mastermind group, frankly, it begs the question what’s stopping you from succeeding in property in 2023?

Julian PlettsEDITOR

Happy New Year and welcome to the first 2023 edition of the now monthly ON THE HOUSE Magazine.

ON THE HOUSE Magazine in association with

ON THE HOUSE

Need to Know Scale

Buy to Let Property group is one of the busiest, most vibrant and supportive places for property investors 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 couple of months.

Is Arnie on to something here? Some commentators certainly thought so, while others thought it would just be too much hassle for only a quarter of the profits. Eitherway it really was a thinker.

Jacking in the day job! Has to be one of the most common reasons for getting into property. Paul was a-pondering how many rental properties it would take folks in the BTL Group to say sianara to their boss. The answers were as varied as the strategies there are in property from two to 50 properties. Just goes to show, hardly anything in property is binary.

ON THE HOUSE Magazine in association with

Sometimes a side by side comparison says it all. This one shared by Ricky shows just how lending costs can affect prices – albeit in the States. 21,000 members were interested.

The Buy to Let Group founder took to the group to welcome the latest preferred partner, Full Power Utilities. It may be difficult to get a deal with utilities in the current market but if you are a commercial property investor it is definitely worth getting in touch with Full Power to see how they can help you reduce your utilities costs. Every preferred partner’s services are carefully vetted by the group leaders.

The

Vaden lamented the recent capital gains allowance cuts in the Chancellor’s Autumn statement. Some commentators blasted the decision while others pointed out how much it will actually amount to and that the mainstream media predicting a landslide of landlords leaving might be a bit over the top.

Thinking about moving into a new investment area – why not see what inside know-how the group can share first? That’s what Daniela did asking the group’s opinion on Hull as a BTL investment area. If you are considering Hull it is well worth checking out the comments on this post too.

A little bit of motivation to kick start you on your property journey from Diane Lawton there.

Approximately 16,000 folk popped in to have a digital nosey at Lucy’s first BTL investment after a light refurb. Good job Lucy, don’t forget for the next issue you can submit case studies, large and small at https://linktr.ee/btlgroup

BTL GROUP 2022 HEROES

Alizon Jane Breen

Most common-sense commentator

Martin Rollinson Most active member

Peter Adley Most supportive member

Max Duval Member with the best gif-game

Chris Madden

Most inspiring BTL Group member

ONE TO WATCH: JACKIE GAMMAGE

Jackie works 60 hours a week, has a family to support and has been rocked by a loss of a family member, but she knew there was never going to be a perfect time to start, so she got stuck in anyway. Three Rent to Rent (R2R) HMOs later, this is how she did it

OTH: What made you go down the R2R (rent to rent) route?

I farted around ‘exploring’ all the different property strategies there are, and started off considering R2R HMOs around four years ago, went around the houses changing my mind, and then landed back again with R2R HMOs about a year ago. I realised that I needed to commit to something and go with it. For me, R2R HMOs are a way of me getting decent cashflow relatively quickly, which I want for two reasons: One, so that I can have enough cashflow to choose if I want to continue to be employed or not and two, I can start to build a pot of money which I can use for my own investments, as I think it will be easier to show potential investors that I am serious and that I am happy to have a bit of skin in the game too. I think that is quite powerful.

OTH: Tell us about your goals and plans for the next year or two?

I want to build my portfolio of R2R HMOs over the next couple of years, and am aiming for at least six more in 2023, taking me to nine. If I can get more, I will. Whilst this won’t replace my income from employment, it would allow me to leave if I wanted to, so that I could focus full time on property which excites me so much. I also want to get some R2R Serviced Accommodation properties, as there are so many opportunities in this space - something I discovered through enquiries into my HMO rooms. Watch this space on that one. Additionally, I want to dip my toes into commercial conversions. I see this as my step towards moving into developments, so I have a course lined up early this year which I am super excited about!

OTH: You’ve grown quite quickly, many R2Rers however spend quite a while getting off the ground. What’s behind your success? It took me three years to commit to a particular strategy and go for it. That was the hardest bit for me. Once I committed, things changed. I knew I needed good mentors who could push me through my fears, and who would be there for me every step of the way so joined a mentoring programme.

I took daily manageable actions, calling agents, meeting agents, and attending viewings where I could. I would get up super early and drive to my goldmine areas so that I could be in the area before my first meetings started for work (7am meetings are regular for me as I work for an Aussie company). Then I would take my lunch hour or finish at 4pm so that I could view properties… It was really really difficult to find enough time to build the relationships and attend viewings but I did what I could.

[To take the leap] I paid for a programme which gave me continued mentoring, and at the same time I would get three properties sourced for me. It was an absolute no brainer for me!

In September, I said I wanted to get three [R2R projects] before Xmas. Didn’t really believe it would happen if I’m honest. When my first one came along I was so scared but knew I had to do it. Then my second one came, almost the same time. Instead of letting my fears hold me back, I went in headfirst and took that on at the same time! I now have three and am in process of filling the rooms for that one. I will honestly never look back now. It was the best decision I made.

OTH: We are so sorry to hear about your brother dying in March last year. Horrific as that was, was it also somehow a catalyst for action or was it hard to maintain focus after such a tragic event?

Yes, it was a huge catalyst. My brother was so like me, entrepreneurial, but he didn’t quite take that next step. I think that’s why I knew I had to take the leap. After seeing a life end that could have been so different.

He was just 53 when he died and had been drinking more and more as the years went by. It was the alcohol that eventually killed him. I never looked at him and saw what you’d imagine as an “alcoholic”, which I guess goes to show these things don’t always look the same from person to person. I didn’t ever believe he would die, it didn’t seem possible as he looked and acted so ‘normal’.

OTH: What have been the biggest hurdles you’ve faced? Yours truly! I had so many fears, and I let those stop me from moving forward. I would make excuses that my work was taking up so much time, I work 50-60 hours a week; I’m going through some big changes in my home life; my daughter needs my attention, blah blah - you get the picture. Yes, they are extremely challenging, but do I want to continue to let my challenges stop me?

Key for me in overcoming these hurdles is focusing on one thing and committing to it. Stop chasing shiny pennies. As soon as I committed to one strategy (R2R HMOs) things changed. Personal development – I listen to something on Audible most days, and I firmly believe this continues to help me grow and opens my mind to what is possible. And then mentorship – find a good mentor. There are lots of them out there and my best piece of advice is to be really clear about what you need from a mentor. I knew that I needed someone to hold my hand and be there for me every step of the way… Always, always make sure you speak to people who have been on a mentoring programme you are considering.

OTH: What advice would you give a would-be R2Rer?

Firstly, be clear about why you are doing it. And then commit and go for it. If I can do it, anyone can!

Secondly, you do need money up front - I don’t care what others say. But please don’t let this stop you! You will recoup any investment you make fairly quickly, and there is always a way. See past this hurdle if you can. Next, get educated. You have responsibilities as a landlord, and you need to make sure you are aware of these and take them seriously.

And finally, it’s not complicated, and it’s actually stupidly simple, but you do have to put in the work. Setting up my properties meant I was getting up at 4.30am and staying at my properties to get them set up as quickly as possible. You have to make sacrifices.

RENT TO RENT CASE STUDY

SET UP COST

HOW TO SMASH

New Year, New Me.

Oh, give it a rest!

If there’s one thing I hate, it’s short-lived bursts of motivation to suddenly make everything so much better before slipping back into the same old, same old.

I don’t want this article to lead to any of that. I want this to serve as a springboard for your 2023 planning with practical perspectives, ideas and questions for you to mull over. I will do my best to remove as much of the airy-fairy from this as humanly possible and leave you with the golden nuggets on how to take advantage of 2023.

So, to start me off, I grabbed some time with Buy to Let Group founder and longterm property investor Wes De Leur to discuss goalsetting, planning and to bounce a few ideas around about the best routes to go down for early stage investors in 2023.

GO-GETTERS ARE GOAL-SETTERS

“I never used to be a goal-setter. I had these ideas in my head of what I’d want to do in a year. I wouldn’t write them down. But over the course of the year I’d tick off maybe 50% of my list,” Wes explains.

However, after his wife - ‘the brains of the operation’ - told him to start tracking, he decided to try it for a year.

The results?

“I now achieve 90-95% of what I set out to do. A hell of a lot better than 50%!”

Where and how you do this is down to you, but Wes advises a quiet room “where you can go deep into your own thoughts… Quiet time can be quite revealing”.

The key, he explains is to ask yourself powerful questions: “If you ask yourself silly questions you get silly answers. Ask yourself powerful questions and you’ll get powerful answers.”

Here are Wes’ favourite big questions:

• What do I want my life to look like in 5/10/20 years from now?

• What sacrifices am I prepared to make in order to achieve my dreams?

• Do I have the time right now to make that goal a reality?

• How big am I prepared to go this year?

• What do I really want to achieve this year?

Find somewhere quiet, take your time, draft, refine, get clear.

Having multiple sets of goals is a great way to stretch your mindset. Targeting say, £3,000pcm profit from your rentals as your main goal with a stretch goal of £4,000. Something loftier to aim at. Goals that if you don’t reach, it’s not the end of the world.

GOAL FACTS

many deals do you need to secure? Where do you need to make refurb investments in order to raise rents?

If you’re on track at year one, then it’s eight more quarters and you’re home and dry on that bigger picture goal. This is something I picked up from working with business coaches as part of my day job.

Property is a lonely game. It’s one of the things that makes The Buy To Let Group so good, it’s an opportunity to make property friends. Many entrepreneurs have what are called ‘accountability buddies’. A person who they tell their goals to (usually going both ways, they tell you theirs) and what they need to do each week, month, or quarter to achieve that. I think if you’re going to go down this route, a monthly catch-up is a good balance. The idea is you keep each other accountable for it. No one wants to be the one to turn up to the meeting to hear the other person has smashed their goals and you’ve been lazy on your KPIs and are now way behind where you hoped to be.

Wes’ review Qs to keep yourself on track:

• What steps can I start with in order to progress?

• I might not have the capital now but what can I do to get it?

• Who can I follow and speak to help guide me?

There are tonnes of apps that you can use for documenting this, but sometimes the best thing is a pen, paper or a sticky note!

for me, a key component when deciding where to put my time, effort and of course, money in 2023. I’m a high-leverage investor (always buying at max LTV), so my first exposure (like many of you) is mortgage rates. Some strategies are then exposed to rising utility bills and council tax where margins are squeezed.

Therefore in 2023, I will be focusing on finding deals where I can consider and then minimise my exposure.

DO FORCE IT!

The key for making the most out of single lets in the current market (in mine and Wes’ view) is getting your money back to work for you again – ie finding ways to add value. As for the most part, our investment funds are finite. Most of us don’t have millions for seed money, we have to make the most of what we’ve got - using it again and again.

Wes describes this by asking you to imagine “tying your money to your hand with an elastic band. It goes out, does what it has to do, let the band stretch, then it has to come back to your hand. Once it’s back in your hand it can go out and do something else for you. If that elastic band goes out and doesn’t come back, you’re in trouble.”

Here we’re talking about the BRRR (Buy, Refurb, Refinance, Rent) strategy as opposed to traditional vanilla ready to go buy-to-lets. The BRRR strategy is applicable for HMOs, SAs and other strategies - in this case though we’re talking about it in relation to single lets, with Wes’ advice being “start out simple, build a good solid base of single lets, then branch out to other things”.

Excluding cash buying, this is usually done one of two ways:

1. Bridging and refinancing after six months

LIMITING EXPOSURE

Now we’ve got a fix on goals it’s time to look more at property game-planning for the year ahead. From choosing the right strategy to executing.

I want to make it clear from the start, I don’t think any particular strategy is off the table in 2023. There will be deals that stack in every route you can go down. But I do think that, broadly speaking, some strategies are less appealing in the current market.

2. Two-year fix and then refinance - of course here, your lender & insurer need to know your plan to carry out extensive works and use an appropriate product for this.

The BTL Group founder sides with bridging here due to the speed, but I think, for the cautious, early stage investor (subject to getting the right product), a two-year fix, the slower of the two options, has its merits and is worth considering. In 2023, with my plans, I’ll be going down the bridging route next.

Members of the RoundTable Mastermind Group (run by the BTL Group Founder) are paired up with accountability partners and check in once a fortnight to talk about their progress and challenges. Find out more here: https://linktr.ee/btlgroup

2023 STRATEGY - HMOS

I’ve actually always been a proponent of starting with houses of multiple occupation (HMOs) if that’s where you want to focus your efforts long-term. Contrary to popular belief, you can get lending on an HMO as your first investment. But in 2023, I’d add caution to that line of thought. That’s not me saying they’re off the table, far from it, but proceed cautiously.

Room by room council tax banding and rising energy bills are a big worry for my fellow HMO investors and I. Profit margins aren’t as well insulated from recessionary forces as they are in other strategies.

That said, there are other alternatives – for instance, many student HMOs are let on a bills-not-included basis. Plus, without exposure to council tax, you get the cashflow of HMOs without the worry of skyrocketing bills. What’s more, voids are less of a make or break situation compared to single lets.

As the cost of living continues to rise, many renters who have lived on their own for a while are looking at ‘downsizing’, going into shared accommodation where they can save often half of their original monthly rent and bills amount. As that trend continues, demand will likely keep pushing those rents up. Making increased bills less of a sting for the operator.

If prices do come down in the next three to nine months, but demand remains high, a sweet spot may be found. Many investors (as we’ve read about in OTH Issue 1) have found good success going down the social housing route, where again, exposure to rising costs is kept to a minimum.

The issue with many HMOs right now (at least those I’ve looked at recently) is that they’re at sky high prices, but in many cases are getting hurt a lot by the added costs. You have to really dig for the deals.

“We aren’t really looking at HMOs at the moment” agrees Wes noting that he’d run the maths on a few but was hit with the same problem: “They want top dollar for it.”

That said, with all these things, there will be good deals out there, they just might be harder to find right now.

2023 STRATEGY - SA

Serviced accommodation (SA) has been a hot strategy over the last few years, with many doing very well from it in the wake of the pandemic.

Will serviced accommodation be hit more widely by limitations on how many nights you can have guests stay at your properties? Will the hotel industry make inroads to take back chunks of the market aided by their economies of scale?

But as we continue into a recession where expendable income will shrink for many and flights are sky high (I just paid double what I used to pay for a flight to Australia, believe me, I know!) it’s logical to think that more people will look to staycations (similar to when flights were an issue). With the potential for increased demand, this could well be a great strategy into the next year!

In addition to expected demand the fact holiday lets are currently not subject to Section 24 and the potential for higher cashflow make it remain an attractive prospect.

“There’s nothing more cash-flowing than serviced accommodation,” Dave Cordner explains in our serviced accommodation strategy focus piece which can be found on p30. Of course, he cautions that the strategy is very labour intensive if you manage it yourself.

HAPPY HUNTING!

Prices have started to come down from their highs, which means there will likely be an increasing number of deals to be had. Our advice is to tighten up your stress testing, gone are the days when you can test at 5% or when you can go into any estate agency and make just about all of their properties work as a rental. It’s time to bring back the hard work and creativity in finding deals!

“Good investors can buy in any market. Because they know what to do in any market. You need to be flexible, understand your strategy and how to make it work,” Wes says.

Wes’ final advice for those in the early stages, who are perhaps nervous about prospective deals they’re looking at, is to speak with more experienced investors, ask advice, see what they think. Whether you take that advice is up to you of course! And on that note, as I sign off, if any newbie investors are looking to do just that, to ask, my emails are always open - alex@pulse-property.com

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RECESSION PROOF YOUR PORTFOLIO

The R word is on everyone’s mind right now.

Recessions sound really scary, especially after the 2008 recession where property prices dropped faster than a greased-up elephant going down a slip-’n’-slide.

I think it’s worth noting quickly that the ‘08 recession doesn’t exactly represent what a classic recession looks like, that was after all - the housing crisis recession. The fundamentals between what happened then and what’s happening now aren’t the exact same. In fact, in some recessions over the last 50 years, house prices have continued to rise. I’m not suggesting that will be the case with this one too, I’m just making the point that recession doesn’t always mean death and destruction of the entire property market.

But this isn’t an economics lesson, nor would I be qualified to give one. This also isn’t a history lesson. General advice online on recessionproofing property portfolios is, well... a bit weak. “Decrease debt”, “Diversify”. Hardly worth reading. Let’s discuss the future, let’s go super simple, practical and see if there are any steps we can take to ride this out. My promise is simple, you won’t see me suggesting diversifying and I’ll avoid the wishy-washy rubbish.

Firstly, it’s important to say, this isn’t financial advice, I’m not qualified to give that. Instead, this is a discussion around what options there are, things that are on my radar, things that I’m doing, or even just ideas to play around with.

MINDFUL OF LEVERAGE

Oh boy has there been a shift since the interest rate jumps. A lot more talk and celebration about paying down mortgages, not overleveraging, and generally not relying on financing as much. I should probably add here, I’m team leverage. But I’m young, trying to aggressively grow and have only been buying properties that meet much higher stress tests than the market currently demands. So, for me, leverage is a key component. That said, I had planned to start paying down one of my properties. The downturn has hit too early for me, I hadn’t actually put this into practice. But I’d eyeballed one property, my lowest value and most widely appealing property (the kind that you can put on the sale market and every first-time buyer would be interested in), and the plan was to pay that down a bit. Lowering my LTV but meaning if the sh*t hits the fan and I needed £££, I wouldn’t need to sell two or three to get my 25% equity from each. Instead, I could sell one, quickly, and not impact the wider portfolio. The general conversation here is, if you want to pay down your properties, is it better to pay them down across the board or to focus your attention (and cash) on one? There is also the option of ensuring you have a large cash buffer to cover lower cashflow periods.

RATE MY TENANT!

Eviction may not be the nicest thought because, despite what the mainstream media often spouts, we’re generally quite nice people (most of the time). But we do need to always remember, this is a

business and sometimes tough decisions have to be made.

Looking at our portfolios and identifying where there’s a good chance of problems as recession really bites - we need to look at properties and tenants. Perhaps you’ve been wondering about serving a tenant notice and looking to get someone else in due to them not being the most reliable. Maybe there’s been missed payments recently, which you’ve been able to work with, but are you prepared to take those greater risks into a recession? Maybe you are, maybe you aren’tsomething to ponder.

I discussed this with BTL group founder Wes De Leur and he outlined an action plan he’s put in place to manage the risk of problem tenants. Firstly, Wes risk assesses each current tenant on a one to three scale – one being least risk and three, high risk of non-payment. Knowing exactly what they do job-wise he checks in regularly with them. He keeps an eye out for what he describes as ‘triggers’ such as rent coming in late, irregular payments, always reporting maintenance “issues” on or close to rent due dates or tenants becoming distant communicators.

“If a tenant is deemed high risk we open up lines of communication immediately to understand their situation with regular follow ups to monitor things,” explains Wes. “If it is apparent that the tenant has financial issues we put in place a suitable payment structure which works for both parties.”

Whilst he doesn’t operate a strict stress test for rent to income ratio when choosing a tenant, he looks at each on a case-by-case basis and will often look at bringing in guarantors.

REVIEW YOUR RENTS

This article isn’t about rents, and in fact, I’ve written another one specifically about that. But I feel it’s important to do an internal review of rental figures and make sure you’re happy with where they are and they are near market levels. Maybe they’re where they should be, maybe they’re well behind, and whilst your margins get restricted, how much of a hit are you prepared to take?

BE MORE BEAR?

Black bears hibernate for up to 7.5 months per year. Black bears are cool. Be more black bear!

Those like me, who are on an aggressive growth mission may hate this, but sometimes it pays to be patient. If that means sitting on our hands for three, six or 12 months before our next purchase, then that’s what it means. But unlike bears in hibernation, we can’t be fully asleep. As the months drag on, more and more deals will be seen. If the right deal comes up, having tightened the rest of our portfolios up, we may well be in a position to make some very cheeky offers.

And in truth, that’s what I’m excited about in the next 12-24 months. The opportunities will be there. I saw a post that said something along the lines of ‘right now, sellers are selling like it’s 2021 and buyers are offering like it’s 2008’. Which was spot on. But let’s see what happens over the next few months.

So, take the time now to tighten up your business and that’ll put you in the best position to make the most out of these next few years.

The

Best poses after purchasing East Thurrock United in 2020 in a seven-figure deal

founders of the Buy to Let Group and ON THE HOUSE magazine head to Wyldecrest Parks HQ to learn the secrets of success from property and business billionaire gypsy King Alfie Best

‘W

hat is the secret to your success?’ ‘How can I achieve what you have achieved?’ ‘Success leaves clues – so, give me a clue?’

If you reach a certain level of financial or outwardly visible success in life – these are the sort of questions that people will start to ask you.

Alfie Best, who can be described as Britain’s first selfmade gypsy billionnaire, is asked this question so often he not only has an answer ready, he says he can give people the blueprint. But, frustratingly, he says very seldom do people put it into action because they are not willing to pay the price. And no, we are not talking about another inflated-cost property course. The price for success is not paid in pounds, but in real and tangible sacrifices that you could well come to regret later in life if you are not wired for it.

“I have people come up to me and ask my advice and I’ll say, okay, I’m happy to help. I would happily give you this. What would you like? And I’ll say, ‘This is what I would suggest and here is a plan that worked for me’. So, this is like a franchise, a blueprint, I’m giving you what works,” explains Best, from his meticulously organised Wyldecrest Parks HQ, which is equipped with a bank of widescreen TVs displaying the feed from a variety of his static holiday and retirement home parks.

“We have to face reality, sometimes success costs. It costs you your mind, it costs you stress. It can cost you your health. It can cost you your family. There are prices to pay for it.”

It is not an uncommon conclusion drawn by those who have achieved seriously high net worth status in life.

The late British publishing Tycoon Felix Dennis, in his book looking for a financial success formula ‘How To Get Rich’, said: “Happiness? Do not make me laugh. The rich are not happy. I have yet to meet a single really rich happy man or woman.”

Alfie Best certainly does not seem unhappy, quite the reverse, but he is pragmatic about what it takes: “I’m a sad person because my life revolves around business. So that wouldn’t be for a lot of people.”

That unrelenting dedication was evident to us as he arrives for our 11am interview on a standard Tuesday morning having already visited a number of his parks. He clearly hasn’t lost any of the hustle that has seen him climb the Rich List and run a business and property empire

with an estimated value of around at £1.2 billion and personal net worth of £700 million*. (*Sunday Times Rich List 2022)

“I love what I do and I eat it with a spoon. But it wasn’t always like that. I had to do what I didn’t like to end up doing what I did. Everybody comes up with this great saying – ‘Do what you love.’ I agree, do what you love, but, you know, you have to also learn to eat shit to get to caviar and that’s life and people don’t understand it.”

REVS, RINGTONES AND RECESSIONS

This is a lesson the star of ITV’s ‘Undercover Big Boss’ does not just embody, he’s learned it over and over again during his life.

At just eight years old he was put to work by his father laying driveways and by the time he was 14 he was buying and selling vans and cars, fixing them up and selling them in the Exchange & Mart magazine and later, at 16, trading at car auctions. By 18, he had bought his first showroom.

Then, like a blow out on a Merc doing 80 miles an hour in the fast lane, it all came to a screeching halt as the 1999-2000 recession ravaged his business.

“It was the darkest and most painful time of my life,” he recalls, in his book ‘Can Anyone Build a Property Empire? Yes!’

“Due to the pressure and pain that I was experiencing, I eventually had a heart murmur. I literally collapsed across my desk… In total honesty, it was an extremely challenging time and it is the one time in my life due to the pain that I had felt of nearly losing everything, that when I look back, it still haunts me today.”

Brutal though that time was, he bounced back and took a job in a mobile phone shop and sensing an opportunity in an emerging market, within three weeks Best opened his own mobile shop, followed by 13 others around the country. According to his book, in less than two years, he sold that business, Voda-Tech, to Vodafone for £4 million. Crucially, he maintained control of the freeholds on the shops, thus overnight becoming a commercial landlord.

PONDERING PROPERTY

That wasn’t Best’s first foray into property investment though, having previously purchased a house called ‘Maypole Cottage’ which he changed to ‘Maypole Manor’, adding instant value. He renovated and extended Maypole creating a five-bedroom property out of a three bed.

“Property development starts with a vision. You must be able to

simply

This was a philosophy that was tested when he bought his first commercial investment property – a workshop in Forest Gate, East London, which he details in his book.

“I did not know the difference at the time [between commercial and residential], and I thought that property was just property.”

“The commercial property that I purchased consisted of three workshops. Fortunately, I did okay and received a rental income stream of around 10% yield. This was not as high as I could have achieved as I did not benefit from a conversion and refurbishment and uplift on the commercial property like I achieved with the first residential house that I purchased.”

He explains how he sold that property but did not achieve the same return he had in his residential deal.

reason for that was because I did not stick to what made money like the first residential property.”

create it and keep moving forward no matter what you face.”

“The

“It was the darkest and most painful time of my life… I literally collapsed across my desk”

Therein, explains Best, lies another lesson: “Stick to what you know before you move on to something new – become the master.”

FINDING AN EDGE

So Best, returning to the residential market, started to find deals where he could ‘push the boundaries’ and find ways to add value and achieve a higher ROI, a strategy he followed for 10 years – becoming well-versed in the strategy.

Then despite the early low ROI commercial venture he eventually returned to commercial investing having taken the time to research and highlight a competitive edge. He realised that if he could find a commercial property that was next to, or very near, a major established business such as say, Dominoes or a Tiles R’, Us his tenants would benefit from the footfall that would be generated by the mega-bucks ad spend of the neighbours.

It was however, when Best used some of his Voda-Tech sale proceeds to purchase Lakeview Park in Romford for £1.7 million that the seeds of his current parks empire were sown.

While he has his share of detractors there is no doubt that Alfie Best is a rags-to-riches business success story and he could not have done that without a massive dose of determination.

“To keep the dynamic of your determination, we must have a burning desire. Your burning desire is so vitally important. You must nurture it because it is like a flame and if we do not fan [the] flame your desire fizzles out,” Best notes.

Wanting or even desiring success is not enough though – achieving it takes guts and quite simply hard graft.

FINDING SUCCESS

If you look up Alfie Jnr, Alfie’s son on Instagram, it is an understatement to say that he is a living a very different life to that experienced by his father growing up. So how does Alfie Snr instil in his children that same sense of determination and burning desire to succeed?

“It is very, very important that I learn from them as much as they potentially learn from me,” he says. “The old warrior on the Indian plains became the elders [and would] give advice but it was always the young braves that went out to battle, to fight the battles. Did they always listen to the advice of the old braves? They made their own judgments along the way. We have to make our own mistakes sometimes. You know, there’s a great saying I love, which is ‘Learn from the mistakes of others. We can’t live long enough to make them all ourselves’.”

“I would be proud of my son if he was a road sweeper or if he

invented the cure for cancer as long as he wore the broom out or wore the needle out,” says Best, adding that the same goes for his daughter Elizabeth.

One thing that the Best children might not be able to directly relate to is the fear that their father says still drives him to work harder and push the boundaries in his business.

THE GREAT MOTIVATOR

“I’m successful today, tomorrow is another day.”

“Fear drives me,” Best tells us with a steely-eyed confidence as he lets the sentiment sit in the air.

“Fear of failure… It’s a long way up the ladder and the ladder can take you to a [great] destination, to the top of the roof. You know though, there’s a few rotten rungs on that ladder.”

As it so often does, it can often boil down to mindset, and even for those starting out who have yet to experience major failures, fear can be a great motivator if harnessed correctly.

“I think anybody needs a little bit of fear. Imposter syndrome is fear because we are somewhere where we feel that we shouldn’t be. It’s a good thing. Fear makes you live on the edge, keeps you sharp… Your fear will either drive you or kill you. Allow it to drive you.”

Maybe the fear of failure comes from knowing first-hand what it feels like to lose it all. One element that has surely driven Best in the past is the desire to overcome prejudice he has faced as a gypsy in business.

There was a point where he finally felt he was able, in his own words, to ‘come out’ as a gypsy in a business setting.

“Where do I start with that change? Okay, so the real honest answer is this, why would I ever tell the world or my bank manager or people that I’m in business with, that I’m a gypsy when it comes with a stigma,” explains Best.

“The stigma and prejudice is the stereotype that goes with it. Gypsies, tramps, liars and thieves. That’s the stereotype,” he says, relaying the story of when as a child he would hide his heritage from school peers for fear of abuse.

“So, what then, should we use the phrase, made me ‘come out’? That was then being comfortable with my success. That made me feel equal. That I proved that I wasn’t a liar, a thief, and a cheat,” says Best. “It took a lot to come out [as a Gypsy business person], but I did and I am where I am.”

To give some context to how hard such a decision could well have been, in a joint pilot paper published in December 2020 from Bucks New University and the Ministry of Housing, Communities and Local Government it stated “Hate crime against Gypsy, Traveller and Roma (GTR) communities is described as almost a daily occurrence, ‘as regular as rain’”.

The report said that the GTR community “continue to experience widespread prejudice and discrimination, so common that it is almost normalised and seen as a ‘fact of life’”.

What’s more, it has previously been found that GTR “community members are six to seven times more likely than the general population to die by suicide”.

“I’m successful today, tomorrow is another day”

COMPOUNDING LEVERAGE

One of the keys to success as the Wyldecrest Parks business has grown is Best’s ability to spot the opportunities that scale can present – something that any aspiring billionaire or property empire builder must look out for.

For instance, he purchased motorhome rental company Unbeatable Hire (which now trades as Varoom) – recognising space on his existing parks could be utilised instead of the firm’s existing bases representing a massive cost-cutting opportunity. Similarly, he set up Best Parks Home Finance to be the lender to people purchasing homes in his parks and he even started buying golf courses nearby to his parks and offering cut-price membership to park residents.

Where can you look for similar leverage opportunities within your property business?

Leverage can also come in the form of using other’s expertise. With a wry smile Best tells us of how when he works with a bank he leverages their auditing team to give his businesses a financial health check.

“Free advice for them to come through and tell us you’re getting this or that wrong.”

FIGHTING CONTROVERSY

As his business has scaled there have also been moments of controversy which have found Best the subject of articles in the satirical publication ‘Private Eye’ relating to a planning permission run in with a local council and what the publication suggests as excessive charges and arduous agreements presented to park residents. These are, of course, allegations that Best has denied and as a former boxer, he does not shy away from a fight.

“I’ve still got individuals that have got hate pages on me,” says Best. “Physical hate pages, yes, that spread lies. In particular one man he’s got a hate page… He’s never ever used the phrase ‘because he’s a gypsy’ or ‘he is a gypsy’, but it’s obviously that’s what it is… I’m so pleased that I take up so much space in this man’s life and that hopefully when he dies and, on his deathbed, it’ll be me that’s going through his mind!”

LOOKING AHEAD

Controversy aside, Best has perhaps more pressing concerns as someone operating at such scale in today’s challenging market. So, now that we are officially in a recession what is his best advice based on having built his empire through them before and for mitigating the effects on your business?

“In my view, it is about not basing your business on the actions of today in a recession. It’s about basing your business on the actions of the economy in a year’s time. Can you afford what you are doing? Is your business functioning correctly? Not at today’s interest rates but at tomorrow’s. Assume they’re going to go to five to 6%,” he explains.

After that, he says, consider looking at your sales and modelling what would happen if they were to drop by 35%? Would your business survive? If not, it could be time to act.

“Go through each department. Which department is hanging on? Which department is benefiting your business? Which areas of your business, if you haven’t got departments, which areas need stress testing now?”

PLAY YOUR HAND

To paraphrase uber-Guru Tony Robbins the quality of your questions can be what sets you are apart. So, to conclude our time with Alfie Best we ended by asking him what is that one question that no-one ever asks him but he always wishes they would?

“One question that people should always ask, does it make me a better person being born in an underprivileged background? Does it give me the drive to be the man I am today?” he poses.

“My answer is no. Gimme the silver spoon, any day. If I can be born with it, please, let me be the baby that got picked out the cot and got switched at birth and handed to the Royal Family!”

“Why? Because life’s a gamble. Life is a gamble and we just don’t know what we are going to be dealt. So, I always say, and I say this to my son, be thankful where you were born, you could have been born somewhere even better. It could’ve been somewhere much worse. It’s about grabbing the hand that you are dealt and going, ‘that’s my deck of cards’. Go and play hard, work hard, play, work, play. And hopefully more of your work will just be playing.”

AT YOUR SERVICE?

Serviced accommodation (SA) is an idea I’ve played around with for a little while now as a form of diversification. And I dare say I’m not the only one.

The draw of potentially higher profit margins, not needing to worry about eviction rules changing and maybe even somewhere I could stay on a free weekend here and there to, you know, ‘live my customers’ experience’. It could be a lot worse!

It’s something I want to explore further as in truth, it’s outside of my current skillset and knowledge base. I know the basics, but do I have what it takes to jump right into it now and make a success of it? Possibly not.

Luckily, Dave Cordner of Central Belfast Apartments and author of ‘Serviced Accommodation 5 Star Fundamentals’ is happy to help. Dave and his team have been managing SAs in Belfast since 2016 and currently have over 60 properties on their books which both belong to clients and in their own portfolio.

ON THE HOUSE Magazine in association with

I’m really hoping he says the best plan is to get a nice

apartment on Lake Como and make sure you’re on site to inspect once a month! I am absolutely down for that strategy, count me well and truly in.

WHAT IS SA?

Before we quiz Cordner though, let’s get into what serviced accommodation is and the different types.

Simply put, SA means the landlord provides ‘services’ to their guests staying in their accommodation, for instance housekeeping. SA tends to be shorter lets rather than your traditional six-12 month fixed contracts.

There are many different types of SAs and just as many variations of guests. The most common type of SA guests are tourists on holiday as well as corporate lets - where a company may book out say, two months, for their staff working away or training. Some people, of course, will just need somewhere to stay whilst they can’t be in their home. For example, they’re having their home renovated and need a home from home for a few weeks. They don’t want a hotel where they have to eat out most nights, so a self-contained place to stay is perfect.

explores what actually goes into

and whether it could be the

WHY INVEST IN SAS?

“There’s nothing more cash-flowing than serviced accommodation, but with that comes a lot more work. It’s not technically a property strategy it’s the hospitality business,” Cordner explained. “You might think HMOs are a lot of work but wait till you try serviced accommodation” he laughs.

“But the rewards for that are vast. To give you some numbers, here in Belfast a two bedroom property can do £40-50 thousand pounds in annual rental revenue, that same property would rent out for maybe £900pm on a standard let... the potential income is huge.”

OK… my interest has now gone up another 10%. Keep talking..

“There’s a big mindset change from tenants to tourists” Cordner continued. You’ll be “fighting fires every day”. Of course, this is if you self-manage. Companies such as the one Cordner runs, but local to you, will handle that for you should you wish to look at that option.

Actually, there’s another potential upside to consider. Holiday lets (SAs which are available for at least 210 days per year, let for at least 105 days but never more for 31 days to a guest) are actually exempt from Section 24 - loss of interest rate relief. So unlike BTLs in your personal name, interest can be tax deductible. That’s because holiday lets are classified as ‘a trade’. With many landlords getting hit hard by the loss of relief, this could be a welcome discovery.

SHOULD YOU SELF-MANAGE

Many would-be SA investors plan to self manage, which, whilst do-able, can definitely be hard work. So in order to give you an idea of whether to SA or not to SA, let’s break down what you need to make a good go of it.

Systems - The key word with SAs is systems. Can you systemise things to mean that you’re not doing absolutely everything? The answer is an unequivocable yes. For instance see ‘cleaning’ below.

Cleaning - David explained that “people often think ‘why would I pay someone else to do it when I can just do it myself?’ But you’re not accounting for your own time. This is your biggest drain on your time”.

Linen - He describes using a linen leasing company as “The perfect system. They’ll do a much better job of washing it, folding it, ironing it. It’ll look much more professional. They won’t come round every day so you need somewhere (on site) to store maybe a week or two week’s worth of linen.”

Maintenance - We all know a good handyperson is worth their weight in gold, but here you need someone who is willing to move mountains to get your problem sorted, and get it sorted the same day. Over the years Cordner’s built up a great team of contractors who look after him and it helps there is a decent volume of work he can offer a tradesperson with so many properties on the books.

Pricing - Rate pricing software is “an absolute game changer” says Cordner. He recommends Room Price Genie, noting: “SA hosts are very good at spotting gaps in availability and lowering the price for that to fill it. But what they’re not good at it spotting areas of very high demand and putting prices up. Managing rates and revenue is a full time job in itself.”

Cordner’s subscription costs £370pm for 65 properties which I don’t think is half bad and “you make that back in one weekend” with one right decision, he explains.

“You have to be streetwise and have strong vetting procedures”

MONEY MATTERS

Listening to Cordner talk, it made me realise how much goes into running SAs, if you’re hoping to balance this whilst having a full time job, a life and keep some of your sanity, well, best of luck! And this is coming from someone who’s very pro self-managing. I’m sure you can manage it, but will it be to the same quality? Will it be sustainable as achieving and maintaining those 5* reviews is key? I’m not too sure. Unless you’re looking to do it as a job, which some people may be.

For context, for a high quality agency like Cordner’s to manage your property, you’re expecting to pay somewhere in the region of 20-23% + VAT as a commission to them. Which obviously feels like a lot, but if the profits are phenomenal, I can deal with that.

So that brings me to the all important element of any strategy equation; how to fund it all.

Standard BTL mortgages aren’t suitable for running SAs. While I won’t be the one to shop you in to your lender for committing mortgage fraud, I certainly wouldn’t advise it. Some lenders have been known to check if the landlord is still paying the council tax, as to see whether they might be living in it themselves or other things, such as this perhaps.

You need to speak with a good broker and lay out your plans. Going about gaining finance for an SA can be trickier than a BTL and like all elements of financing, is ever-changing. What is said today could be out of date

tomorrow with one change in lending requirement. The group’s preferred broker is Ramsay & White, so speak with them and they’ll be able to assess your exact situation.

“A lot of investors are adding SA as a strategy to their growing portfolio to diversify and to increase yield, which helps with rising interest rates,” says group managing director Joel Ramsay. “Over the last two years we have seen more lenders come to market in the SA and holiday let sector especially with the boom in demand for staycations local to the UK.”

“SA mortgages allow the borrower a first charge loan (mortgage) using an investment/residential property as security. The product allows the property to be rented out for short periods at a time, this is usually up to a maximum of three months with no AST in place. SA mortgages are ideal for landlords that wish to cater for the Airbnb, contractor and business traveller markets that offer the flexibility of not staying in a hotel,” explains Ramsay.

“The mortgage payments are covered by the rental income received from the serviced accommodation. However, a number of lenders in this space will work off the rental income the property could achieve as a single let AST to determine the maximum loan. An SA property, depending on location may also be suitable as a holiday let, there is a difference between SA and holiday let products so worth speaking with a specialist mortgage adviser beforehand,” continues Ramsay.

“If the property has a track record and accounts to demonstrate SA usage and occupancy rate then there are lenders that can work off this income rather than AST to workout the maximum loan.”

STRATEGY FOCUS

LOCATION, LOCATION…

…Location. It is a cliche for a reason and it is especially important when it comes to success with the SA strategy. Even the best management company can’t make it work if you’ve bought poorly or in a naff location.

“Guests don’t know the area. They want to be close to the action,” Cordner advises.

You won’t last long if the area your properties are in are dangerous or unwelcoming, and the reviews will sure let you know if they are! Be close to where it’s all happening, if it’s a city centre you’re investing in, you want to be in the thick of it.

Cordner has built a full understanding of his area so he’s able to say almost instantly what a property could achieve and whether it’s a good buy or not. But if he was to branch out, he’d look at websites such as AirDNA, which pulls the data from Verbo & Airbnb to show income potential, seasonality, demand, high and low room rates. Everything you might need. Combine that with your feel of the area and that’s a good starting point.

Decor-wise, don’t be too concerned when looking at properties, you’re going to be spending some money there either way!

“If you’re a BTL investor and want to start in SA, this will be the best property, internally, you’ll ever do.”

He advises landlords to be prepared to spend good money on a renovation but that “the ROI will be massive”.

STRATEGY FOCUS

PROCEED WITH CAUTION

So, in the SWOT analysis of the SA strategy what threats do you have to look out for?

Overregulation (as seemingly with everything) is the main concern Cordner has. He cites places like London and Edinburgh where SAs are limited to letting for 90 days per year. In Dublin, for instance, you can be fined a cool £10,000 if you don’t have planning permission in place… Blimey!

Then there are guests… Expect bad guests. It will happen.

“The reality is there’s a very silly underworld of those who use serviced accommodation, because they can’t do what they want to do in a hotel because of security, cameras and everything else. They think if they go to a serviced accommodation they’re anonymous... we’re talking parties, prostitutes, drugs. You have to be streetwise and have strong vetting procedures to protect yourself and your property. If you’re a lazy host, and don’t care who books your property every weekend, then you’re going to have to deal with the aftermaths of parties and such.”

Readers of the weekly ON THE HOUSE Newsletter (Sign up here) will be well aware that Labour is also proposing a ‘statutory licence scheme’ for holiday lets which essentially, would be a registration scheme (somewhat similar to HMO licencing). There having been attempts to set up an online registration scheme for SAs in Brighton for example, citing HMO licensing working well, so their argument is why would they not work for SAs in the seaside resort?

We’ve no crystal ball so we don’t know what the future holds, but we can see that SAs are in the spotlight, politically. So the best advise we can give on that is proceed with caution and, as with any investment strategy, be ready to read up and adapt.

FIND OUT MORE

Knowledge is key to success and gaining a competitive edge in any property strategy. A great place to start with SAs is Dave Cordner’s book which can be purchased HERE and subscribing to his YouTube channel HERE.

FOUR BEDROOM HMO CONVERSION

OTH: Tell us a bit about your property investing journey so far? Chloe and I met in 2015, I was serving as an engineer in the RAF and Chloe was an ex-critical care nurse, working in local government improving the NHS and Social Care services across North Norfolk. We each owned a property in our hometown having known property was a sound investment, but it wasn’t until 2018 when I was injured whilst serving in the RAF and subsequently medically discharged, that we started to explore property investment with a strategic view to secure our finances and future health.

We educated ourselves; studied extensively, read books, attended webinars, used transferable skills and our degrees to create a plan for a new life in property investment. We knew we wanted to own assets and maximise cashflow. In 2019 we refinanced our properties and joined assets to buy renovate refinance (BRR) our first property together. We carried out local research and used our existing knowledge of Norwich city to buy a tired property near the local university and transformed a three-bedroom family house into a fully compliant house of multiple occupation (HMO) with five bedrooms, two bathrooms and a large social kitchen living area.

We completed this in six months whilst also working full time; we were so proud of the work we had accomplished we moved straight onto another! Our second property was bought using our recycled funds and was the first property we worked with a private investor to fund the refurbishment. This house required a full refurbishment which we completed within five months and created another fully

compliant HMO with five bedrooms, two bathrooms and a large social kitchen living area.

Fast forward three years and we’re now full-time developers, owning multiple student and professional HMOs in the area as well as single buy to lets through BRR; we love the process of purchasing run down hovels and renovating them into high quality homes using our trusted team of tradesmen and professionals.

Our current projects involve a two-bedroom terraced house conversion into a four-bedroom, two-bathroom HMO and we have a six-bedroom BRR project in conveyancing that we will hold as serviced accommodation. We are also in the process of purchasing our first commercial development that will be converted to apartments.

OTH: Please tell us about the project and how it was sourced? Our last project was sourced through a local estate agent; we use online property websites and regularly contact local estate agents for updates on any properties that fit our criteria. This property was relisted, having already been marked as sold several months previous; the former buyer was an out-of-town investor whose intention was to purchase the property and rent it out at once. After viewing the property, it was found the state of the property was in a much worse condition than initially believed with illegal minimum room sizes and roof spread. This is exactly what we love working with, creating value in properties where others cannot! We were able to agree a 9% discount on the original purchase price which the vendor was pleased with for a quick sale.

Investing duo Chloe and Carl bring a military level of attention to detail to their projects. First time investors can definitely learn a lot from the story of one of their latest projects and how they managed complications with the build team

OTH: Why did you feel it was a good prospect?

We knew this property was a good prospect for BRR due to its bad condition, seeing its potential and knowing the excellent rental demand in the area. To be more specific, our due diligence on the property and area included a structural survey to address the roof spread and costs, we created a concise renovation budget plus contingency, and looked at data from recent sold prices in the area so we were confident the property Gross Development Value (GDV) would be acceptable at point of refinance.

We knew local rental demand as an HMO would be high due to being in close proximity to the university, hospital and amenities making it ideal for both student and professional tenant bases. Our deal analysing spreadsheets showed this property would work very well using the BRR strategy and we were confident this project would be of minimal risk, and a successful property to add to our portfolio for long-term holding.

OTH: How did you decide or manage to finance the deal?

We used a combination of our own funds and bridging finance to purchase and renovate this property before re-mortgaging onto an HMO mortgage product.

“We love creating value in properties where others cannot!”

OTH: Were there any issues during the conveyancing process? One challenge during the conveyancing process came after the valuation report was carried out as there were signs of roof spread. It was minor but we needed a separate report from a structural engineer to progress with the purchase. Fortunately, we had worked with a local structural engineer on several of our projects and they inspected the issue at the same time they calculated the RSJs required for the chimney removal we had planned.

Our largest challenge though was the conveyancing communication and speed. The estate agent we were working with on this purchase moved to another branch and the new agent wasn’t as efficient; they seemed to ignore phone calls and emails from both parties which delayed the conveyancing process to everyone’s detriment. We had originally planned two months to purchase the property but in the end, it took six months.

OTH: Please can you talk us through the plans, the process and the result?

The property was an ex-local authority consisting of two double bedrooms and two bedrooms below minimum space standards, a downstairs bathroom, living room, an old dysfunctional kitchen, roof spread, missing patches of roof and terrible gardens.

Downstairs, we chose to move the kitchen from where it was into the living room and converted the old kitchen area into a bedroom. To do this we needed to remove the chimney breast, an internal porch, reroute utilities, internal doorways and block up a back window. This created an impactful open plan social area, a kitchen full of amenities and better flow throughout the home. The downstairs bathroom was completely modernised, including floor to ceiling tiling.

Upstairs, we continued to remove the chimney breast, reconfigured the walls, moved the old deficient water tank and replaced it with a brand-new high efficiency boiler, upgraded the electrics, created a second shower room, and decorated the home to a high standard. This improved the layout for minimum space standard compliance, improved the EPC rating in preparation for legislation changes, enabled ergonomic design and created a wonderful, safe, welcoming place to live.

All windows and doors were replaced with modern fire escape compliant windows, we addressed all roof issues as per structural plans, landscaped the front and back garden adding a large brick weave driveway and patio area, and installed fencing around the whole property; all of which increased security, privacy, structural longevity and property value.

OTH: Any unexpected roadblocks during the renovation? Due to the prolonged conveyancing period impacting work schedules, we were unable to use the contractors we have worked with in the past. After putting the project out to tender, we signed contracts with a building company; we were pleased with the evidence they showed us of their previous works and were confident of our due diligence. Initial demolition works were successful, and progress was shown quickly, but unfortunately, we noticed the tradesmen were turning up later to site, leaving early or not appearing at all, the project was falling behind schedule and the standard of work completed was not acceptable. We quickly decided to cancel the contract and remove them from site.

This was so disappointing and a great inconvenience to us as we were in the process of two other refurbishments, but knew we needed to take control of the site before any more substandard work needed remediation. We took back ownership of the project management and hired some of our trusted sub-contractor tradesmen to rectify all issues found and complete all the carpentry, electrical, landscaping, roofing, and painting works. We finished the project eight weeks later than we planned and within budget due to acting before any more issues were created, but we are now seeking legal advice on how to recoup our remediation costs from the disreputable company.

than a mile away; enabling four care workers to live in a beautiful home whilst they carry out their important work looking after the elderly. Additionally, this created a stable business arrangement for us with guaranteed rent without compromising on cost, and the term of the agreement means we’ve already secured the rental income to pay our investment back. We’re delighted with the overall investment picture!

OTH: What lessons, key learnings and philosophy will you take with you from this project?

We firmly believe that success is in the planning and people you choose to work with, but that doesn’t mean it’s always easy. When issues arise, resilience is critical to ensure you succeed! The key lessons learned from our projects are 1) Identify issues early; schedule of works can help you see delays, quality assurance measures help you notice substandard workmanship, schedules of payments help keep your finances in order etc. 2) Be honest and don’t lie to yourself about problems you face; avoidance does not work 3) Problem solve and take action; work with your team to find solutions quickly and stay adaptable 4) Remember to stick to the plan that will lead you to achieve your goals; it’s easy to lose focus on small problems so make sure you step back to see the big picture 5) Take your data, experience and learnings from each project you finish, use a model of reflection and make continuous improvements to your processes to help you in the future!

OTH: Tell us a bit your property investing journey so far... I’m Jamie, I’m a full-time property investor based “up North” in Sheffield who specialises in buy-to-service accommodation/holiday lets. My portfolio is currently across beautiful areas throughout North Wales, Lake District, and the Peak District. My first 18 months as an investor/business owner was an absolute disaster with mistakes made, capital lost, and lessons certainly learned. In the past two and a half years though, things have gone fantastically and I’m incredibly grateful for growing my portfolio, which has come through Focusing, huge Action and Teamwork… in short… being F.A.T! ;-) With close family members who live with special needs, I left my career and jumped into property investment so I could provide them with a life full of freedom, fun, choice and happiness. My mission has since grown, which is to provide a life-changing difference to people from vulnerable and deprived backgrounds.

OTH: Please tell us how the project was sourced? The first step to sourcing a great property is taking time to fully understand what you are looking for and why. Once you have a clear idea of this and you learn how to stack deals, sourcing becomes much easier. We specifically wanted to purchase a hotel, within one of our investment areas, whilst ensuring we were buying at fantastic value. Most hotels are sold for their commercial value (bricks and mortar value plus a yield based / EBITA) which is why for example in an area where 8-bed residential houses are sold for £500,000, you’ll see 8-bedroom hotels on the market for say £800,000.

What we specifically wanted was a hotel being sold for the bricks and mortar value which whilst rare, every now and then happens! Our clear criteria meant we had to firstly be patient, then when the right deal became clear we moved at speed with full confidence –which allowed such a fantastic purchase.

OTH: Why did you feel this property was a good prospect?

So many reasons! Firstly, it was based in an area my business partner knew like the back of his hand, having lived closeby for many years - area knowledge is SO important when investing in SA/holiday lets! Secondly, this was a 10-bedroom all en-suite guesthouse on the market at offers over £275,000! This was way back during the first COVID lockdown, when no one else was out trying to buy hotels! As we know the area, we understand that hotels, when sold commercially start at £450,000. Lastly, as we chatted with the vendors and shared a cup of tea and biscuits during our viewing, we realised the major opportunity we were sat on. For example, the hotel had never been marketed on Airbnb nor Booking.com and the vendors had refused to sell through a commercial agent. Of course, buying a hotel during a national/global lockdown doesn’t come without its risks, but as you’ll see in the numbers below the rewards significantly outweighed these.

OTH: How did you finance the deal? We decided to purchase the hotel on a C1 70% LTV Commercial mortgage. As our own funds had been tied up in other projects, we also brought in a JV partner for the remaining funds. This JV partner has gone on to become a business partner and good friend, showing the superb opportunities that can arise when you collaborate with great people in property.

OTH: Were there any specific challenges that you can detail during the conveyancing process?

Yes! As there always is with buying properties! Looking back… the purchase price was too low! Yes, you heard that correctly. Most mortgages for hotels start at £250,000, we found this out after the fact we had agreed a £240,000 purchase price. Also, this was one of our first purchases a couple of years ago now and our solicitor wasn’t overly experienced in commercial purchases which brought major delays. We have since built a relationship with a fantastic solicitor who has significant experience in such commercial purchases - An important tip which your readers should follow.

OTH: Talk us through the renovation - the plans, the process and the end result?

We were not looking for a major renovation project, which meant this deal worked so well for us. The vendors had already fitted modern en-suites and a good quality kitchen – meaning our refurbishment was largely cosmeticdecoration, flooring, interior design, furniture etc. Our challenge came through managing a tight budget and we learned quickly how much capital 10 bedrooms and such a large property could eat up. However, being a natural (tight, haha) Yorkshireman came in handy and after instructing some brilliant trades, we were absolutely delighted with the result!

OTH: Tell us about that result... We are delighted with our hotel! The numbers are fantastic; once we refinance next year, we’ll have no funds left in the deal. Moreover, we wanted to test

our management systems and staff on a busy hotel, as we knew this would stretch our capabilities. Hotels require a lot of management given their short-term stay, additional service nature. Owning a busy guesthouse has meant we’ve had to become world-class at managing our own portfolio – an important strategic benefit that supports our wider SA portfolio.

OTH: What lessons, key learnings and philosophy will you take with you from this project to future property investments?

People – Look after people, including vendors, investors, trades. The more you support other people with ethical and warm values, the more you’ll be looked after in business. Secondly, knowledge – Know your market and who your tenants/guests will be BEFORE you buy an investment or start your refurbishment. This makes everything else so much easier and successful - Our purchase and refurbishment was done with our guests in mind. Third, go your own way – Don’t follow the herd, be contrarian. Whilst lots of investors were looking for hotels they could turn into aparthotels or apartments, we looked for a hotel we could turn into a… hotel. This contrarian and clear thinking allowed us to source a nomoney-left-in, high cash-flowing, (we think) brilliant deal!

Where you can follow’s Jamie’s investment journey:

Jamie Greaves - facebook.com/j.s.greaves

BEFORE BEFORE BEFORE AFTER AFTER AFTER

With 2023 upon us, we round up what the media is telling us will happen in property next year. Best case, we can spot some trends to inform your 2023 plans (although of course, taking things with a pinch of salt). Worst case, we look back in a year and have a good giggle at how wrong the experts were.

So without further ado, we give you… People predicting property stuff.

HOUSE PRICES - CRISIS?

Probably the topic that gets the most coverage, especially since the ‘08 recession.

Halifax cited “significant downward pressure” and that “we therefore expect that UK house prices will decrease by around 8% next year [2023]”

- Halifax, Andrew Asaam. Savills painted a slightly bleaker picture.

“We would expect a marked improvement in mortgage affordability. Combined with nominal price falls of -10% in 2023 (-12.6% adjusted for inflation), that would gradually bring more buyers into the market and allow a return to modest house price growth from 2024 onwards, with a more pronounced rebound in 2026.” - Lucian Cook, Savills.

Credit Suisse also went for lucky 10%. Lloyds Bank are forecasting an 8% drop next year and set aside £668m to cover ‘bad debt’ from borrowers who struggle to make repayments.

The Office for Budget Responsibility is projecting a 9% drop over the next two years before prices start to rise again in 2025. Zoopla and Rightmove have come out with 5% and 2% drops respectively.

Graham Cox at SelfEmployedMortgageHub.com has thrown a larger number out there, saying; “Early next year is when it will become obvious the market has turned and house prices are actually falling sharply. A drop of 20% or more over the next 18 months is quite possible.” (Source: Business live)

Jack Robert, CEO of SlothMove.com chimed in with some informed commentary around the ‘why’: “While the last recession that followed the global financial crisis saw

unemployment soar to over 8%, the labour market is expected to prove far more resilient this time around… As a result, the 2023 downturn could prove shallower than first feared, prompting a bounceback in transactions later in the year as buyers and sellers adjust… A shortage of housing supply will also act to buttress prices so drops of between 5% and 9% are more likely than double-digit falls.” (Source: The mirror)

So we have, amongst others falls in the range of a surprisingly optimistic 2% to a major 20% crash. Pick your favourite!

ROCKETING RENTS?

Savills predicts a cautiously positive outlook for landlords stating: “Growth will then slow to 6.5% next year, before slowing further beyond 2024 as renters return to spending a similar proportion of their earnings on housing costs as they did in 2014/15.”

Leaders expect an increase in rental figures citing lack of supply: “We are expecting demand to continue to increase and for rental growth to remain above average 2-3% rises” mentioning higher demands in energy efficient homes.

INTEREST IN RATES

We found a few sources willing to test their crystal ball with regard to interest rates.

“Indeed, the pricing of fixed-rate mortgages, which soared after the mini-Budget, continues to drift slowly down. Come 2023, we could see five-year fixes priced below base rate.”Mark Harris, SPF Private Clients (Source: Property notify). The base rate was 3.50% at the time of writing.

“Interest rates for fixed rate mortgages are likely to reduce to be closer to 4% as inflation is brought under control,” - Richard Dana, Tembo Mortgage Brokers. (Source: Property notify)

While Matthew Jackson, Mint FS mortgage brokers said: “Broadly speaking, I would expect fixed rates to continue to soften slightly and settle between just under 4% and 5% for the majority of 2023… we will see a raft of exclusive or limited availability products priced competitively in the first three months of the year.”

RATE

INFLATION - JUST COOL IT!

The word it’s been impossible to avoid for the last few months.

“Inflation is expected to average 8.9% in 2022, 5.5% in 2023 and fall below the Bank of England’s 2% target (to 1.8%) in 2024.” - Ernst & Young

“There will be a rapid fall in inflation from 2023… inflation will remain well above 3% for the whole of 2023 and our current forecast is that it will not return to target [2%] until mid-2025”

- National Institute of Economic and Social Research. “[Inflation] will remain significantly above the Bank of England target over 2023, ending the year at 3.9%” - The Confederation of British Industry.

While inflation can be a property investor’s best friend, I don’t think anybody is going to be too worried about those predictions.

WE COULD SEE FIVE-YEAR FIXES PRICED BELOW BASE

There seems to be two schools of thought on the subject of rent levels; the ‘raise rents between tenancies’ camp and the ‘adjust rents regularly’ camp. It certainly quite a contentious topic. I won’t pretend I don’t love getting involved when this is brought up on the Buy To Let Facebook group, because I really do!

Let’s get it out there right from the off, I raise rents, usually annually. Shoot me now.

*Waits for the barrage of comments telling me I’ve got it all wrong*

I’m not out to put any of my tenants in a bad position and typically my rents lag behind market rent after the first year of being with each tenant. They will however, never fall so far behind that I’m simply not getting anywhere near what the place is worth.  But isn’t a good tenant more important than chasing high rents? Absolutely, but in today’s market where you’ll get dozens of applicants for each advert, can you not have both? I think you can. I think this again comes back to tenant selection, which is always such a crucial factor - but you don’t need me to tell you that. It is important to consider what they’re like as people, as well as what’s affordable to them. Is your prospective tenant comfortably safe at the current rent stress tests? Or are they just about scraping over?

Which, of course, poses the question, at what rent to income level are you stress testing your rents? Something we can explore in another article perhaps, along with tenant selection strategies - stay tuned.

Imagine if a Freddo went from 10p to 30p overnight, there would be riots in the streets! London would burn. People would flee to the countryside to get away from the madness. But as the price of Freddos have edged up over the years we moaned a little but still end up buying that irresistible little frog every so often.

I believe much is the same for rent. If you edge it up each year, never straying *too* far from market value, then you never have to have a large price hike. It becomes an expected norm. Get yourself 40-50% behind where you should be, and when you make that call to bring it back up to market rent, it’ll feel like the rug has been pulled out from underneath your tenant. Sure, they’re actually better off without incremental changes, but it’ll never quite feel that way!

FILLING THE VOIDS

Why might you not want to raise rents quite that regularly? One factor is voids. And voids are no small thing. If you price out your existing tenants and have to look to bring in new ones, you risk what could easily be a two- or three-week void period. Which doesn’t sound like much, but let’s do the maths.

Example void & new tenant scenario:

Usual rent = £1,000pcm

3 weeks missed = £700

Tenant find through letting agency* = £850 Council tax & bills = £120

Total cost of void: £1,670 *This could be lower if using other marketing strategies such as OpenRent

Well, if you’re doing all that for just £150pcm extra after having priced out your old tenants, it’s almost a year before you’ve made that money back. Not really a tactically astute move! So, you have to pick and choose your battles.

THE SWEET SPOT

Now, it is of course true that market dynamics may change and the demand we have been used to in recent years dissipate, so your rental strategy like many other things in property, could well need to evolve. In the current market though I carry out annual rent reviews and I tend to keep my rental amounts within touching distance of true market value. Close enough that I feel happy I’m making a solid return, I’m not worried about increased costs and have the budget to really take care of the properties. But… Low enough so my tenants feel they’re getting a good deal, that I’m recognising they’re good tenants, and that it makes sense for them to stay rather than moving. That’s the sweet spot.

WHAT DO OTHER LANDLORDS DO?

“As a company we raise rents across the portfolio at 5% a year to absorb rising costs faced on the company from licensing, increased maintenance and so on. We have done this for 20 years and never once had an issue, as our rents are still below average for area by around 10%” - Joe Trembath, Woodland Properties

“I raise the rents just below the market value. My tenants know me and trust me to get any jobs done so they will only move if they have significant life events. I have very low turnover of my 60 tenants with many over 10 years.” - Neil Cox

“I always review rents annually and check rental prices for similar local properties. This, of course, might mean that some years you might not increase rents however recently rents have been steadily increasing. It’s important to do your due diligence prior to reviewing any rent increases.

“Rightmove is a great place to check current rental prices and then check: gov.uk/renting-out-a-property/rent-increases to ensure that you are using the correct government forms and following current government legislation.” - Jeanette Kirkby

MANAGING A RENTAL RISE

How do you communicate the rental increase?

As far as mode, this depends on how you usually communicate with your tenants. It is vital that you get the increase agreed over email or in writing.

How often can you increase rents and by what %?

If the tenancy agreement lays down a procedure for increasing rent, you’ve got to stick to it but otherwise you can raise rents once per year. Despite what many people seem to think, there is no exact limit to how much you can increase by, other than (quoting the gov.uk website) “the rent increase must be fair and realistic, which means in line with average local rents”. You can’t increase rent during a fixed-term contract (unless you request and get permission from the tenant - which would be very rare and not particularly good practice in my book). So, if you renew your AST each year, the rent is the rent.

How do I increase rent?

Two main ways - 1) by agreeing in writing (email is fine) the new rental amount 2) Section 13 notice (the more official route). Some send a formal letter explaining the rent rises and then requests that they confirm in writing the increase, however if they do not respond but pay the increased amount this is tacit agreement.

What if my tenant refuses?

Ultimately, this is a negotiation, so negotiate. If you can’t come to an agreement you can go to a rent tribunal, which is free to apply to. Essentially, it’s a couple of professionals, who will research, look at comparables and decide whether the proposed increase is fair or not. It is also worth noting that the tribunal can decide to adjust the rent down.

What notice period do I need to give my tenants?

This is usually 1-month minimum but it Is good practice to give as much as you can. Aim for at least two months if possible.

AN INTRODUCTION TO BTL MORTGAGES

Joel White – Managing Director of Buy to Let group preferred mortgage partners Ramsay & White presents a guide to getting a Buy-to-Let Mortgage

We all have to start somewhere – and for property investors one of the first steps is working out how to finance a property purchase. Joel White breaks it down for first-time investors to make the process as transparent as possible.

WHAT IS A BUY-TO-LET, AND HOW DO THEY WORK?

If you are purchasing a property to rent out to tenants, unless you have the funds to buy the property outright, you will need a buy-to-let (BTL) mortgage.

A BTL mortgage is a type of mortgage designed specifically for investment purposes. It is a type of property loan that allows investors to purchase a property that can be rented out to tenants for a profit which will repay the mortgage. A BTL mortgage can be used on various property types, such as houses and apartments.

WHAT TYPES OF BTL MORTGAGE ARE THERE?

Like a residential mortgage, there are many BTL mortgage options, such as a fixed, variable, tracker, discount or capped interest rate.

Interest-Only BTL Mortgage

Most BTL mortgages are interest-only and require a larger deposit, which means the monthly mortgage repayments only cover the interest element of your mortgage, and the amount you borrowed will not be paid off unless you sell the property or pay off the loan another way. Interest-only rates are lower than repayment because you are only repaying the interest portion of the loan.

Repayment BTL Mortgages

With a repayment mortgage, you pay off the full loan amount by the end of the term. Once the mortgage has been paid, you can either keep hold of the property and continue renting it out, keeping all the rental income or sell the property and keep the full sale amount.

The monthly payments for a repayment mortgage are more than an interest-only mortgages and are only suitable if the rental income can cover the cost. A mortgage is a loan, compare mortgages and finding a suitable mortgage lender that meets your needs is key. Don’t forget that a BTL property may be repossessed if the rental income doesn’t not cover the payments or you cannot make the mortgage payment yourself.

WHAT DEPOSIT DO I NEED?

The typical maximum loan to value (LTV) ratio to get a mortgage on a buy to let basis is 75%, meaning you need a 25% deposit. However, there are some specialist lenders that will offer 80% and even 85% under the right circumstances. Generally, a deposit of at least 25% will secure the best BTL rates.

HOW MUCH CAN I BORROW?

Lenders will generally look at the rental income you expect to generate from the property when determining how much you can borrow. The higher the income, the more you can borrow. As a general rule of thumb, the income will need to cover between 125% and 145% of your mortgage interest. There are mortgage calculators available that will calculate this for you.

Your deposit will also affect how much the lender will lend to you, which will impact the loan-to-value. For example, if you want to borrow £100,000 against a property valued at £150,000, this is a loanto-value of 75% so you would put down a 25% deposit.

Depending on the specific lenders’ criteria, there are also other factors that need to be considered, such as your credit file, income and outgoings (affordability).

To determine how much you will be allowed to borrow, start by establishing how much deposit you can afford and how much rent the property is likely to generate by comparing similar properties in the area and speaking to local estate agents.

HOW LONG ARE BTL MORTGAGES?

The duration of the mortgage term is usually 25 years. At the end of the term, you will need to pay off the outstanding mortgage – if there

is one. This is usually paid by selling the investment property. In most cases, the property’s value will have increased to cover the remaining balance of the mortgage and provide you with a profit.

HOW LONG DOES IT TAKE TO ARRANGE?

While every case is unique, it takes around 2-4 weeks to receive a mortgage offer. Completion of the offer can vary depending on the duration of the property purchase. For example, if the property is part of a chain, this can typically take 12 weeks to complete.

CAN I RENT THE HOUSE I LIVE IN?

In short, the answer is yes. However, there are some hoops to jump through, including speaking to your existing mortgage lender to get what is known as consent to let. If you have a property on a residential mortgage the lender may ask you to change your mortgage to a suitable BTL product. BTL mortgages are normally more expensive unless you convert to an interest-only mortgage.

WHAT’S THE BEST BTL MORTGAGE AVAILABLE TODAY?

With the market is constantly changing, BTL deals are changing frequently. If you need a BTL mortgage, speaking to one of our mortgage brokers is a great idea. After a quick fact find we will be able to recommend the best lenders and products, compare the best buyto-let mortgage deals and secure a suitable buy-to-let for you.

WHO IS ELIGIBLE?

Each lender has its own specific criteria, but typically, landlords will need to meet the following:

• Some lenders require an annual income of at least £25,000, however some do not.

• Have the deposit required

• Be able to pay off the mortgage by the age of 90.

• Ideally, you would have a good credit record, however some lenders may agree to lend if your credit score is not perfect.

• Prove you can afford to maintain the property.

It is worth noting that you can get a BTL mortgage without owning your own home.

WHAT IF A PROPERTY

IS UNMORTGAGEABLE?

If you find a property that requires work, such as a derelict building or a property at auction, it will most likely be unmortgageable, and you will not be able to take out BTL finance to purchase it. However, you can still purchase the property by taking out a bridging loan – more info on that can be found here.

WHAT DOCUMENTS DO YOU NEED?

In general, most lenders require you to provide:

• Proof of income with your last three months’ bank statements

• Proof of expected rental income

• Proof of deposit

• Proof of ID

• Proof of address

• Current or most recent P60

• Your last two years of tax returns (if you are self-employed)

• Portfolio Record

HOW DO I APPLY FOR A BTL MORTGAGE?

Many high street lenders will not be able to offer you the competitive rates and terms that a specialist broker will. There are many mortgage deals that are only available to specialist mortgage brokers, so it’s always worth speaking to an experienced broker to find the best deal that matches your circumstances. The broker will also take care of the application process for you and provide all the relevant information to improve your chances of getting accepted for BTL finance – particularly important if you are a first-time landlord.

As professionals in the insurance market we cannot overegg the underinsurance issue in the current market – which is why we are revisiting it for an update in this issue of ON THE HOUSE Magazine.

The number of complaints to the ombudsman has increased by over 700% over the last six months. Investors are still not realising the increased cost and pressures of reinstating a property in today’s climate. Many investors automatically assume the correct value to insure their asset for is the market value for which they purchased the property. Depending on which part of the country you have decided to invest, the market value will sometimes be in excess of the rebuild cost of the property. But this doesn’t happen very often.

THE NUMBERS NEVER LIE

To illustrate the above, we have taken four properties from around country all three bed semi-detached houses, all a similar size and layout as possible and all located in the same type of demographic area. You can use the rebuild cost calculator provided by The Building Cost Information Service (BCIS) of the Royal Institution of Chartered Surveyors (RICS). This is the standard all insurers use to determine the rebuild cost of your property.

So, as you can see from the example, had the market value been used to insure the property, three of the investors would have been underinsured, two of the investors by over 40%. Had the property been based further north where traditionally a lot of properties were built of stone the cost will increase by 10 to 20%.

Based on these facts, had our investor in Stoke made a claim under his insurance policy for say £10,000 – the insurers would reduce the amount payable to the investor by 50% then less any excess, leaving them considerably out of pocket.

As you will see from the approx. insurance cost the difference of getting the property insured correctly is minimal compared to the impact it will have on any claim.

The responsibility of providing the correct rebuild cost is yours not your insurance broker or company. Getting this wrong can have serious consequences should you have a claim of a considerable size or even worse total loss.

TENANT TYPES

The second biggest problem is getting the tenant type right. Many investors are turning to various high ROI strategies without thinking about how this in turn will affect their insurance. Complaints to the Insurance Ombudsman have increased significantly in this area too.

agreement directly with the tenant that resides in the property. They also require you to have carried out your due diligence regarding the tenant e.g. references and credit checks for your policy cover to remain valid. Many will also require you to have carried out a full inventory and have kept photos of the pre-let condition of the property.

If your tenancy agreement is not directly with the tenant and you have either signed up to a guaranteed rent scheme via your letting agent, a rent to rent operator or serviced accommodation operator or anything else where you do not have a direct AST with the tenant, then your property is sublet and you probably have invalidated your insurance cover. You may also be in breach of your mortgage conditions.

The information we based this estimate on was: Semidetached two storey house built with brick external walls and tile roof built around 1940. The property is not listed and does not include any special or unusual features. Gross external floor area: 88m2, 1 bathroom, 1 garage space.

More and more properties are being sublet through rent guarantee schemes, supported living or serviced accommodation, where the yields are higher, voids reduced and potentially offer less hassle for the investor.

Most landlords’ policies sold in the UK require you, the property owner, have an assured shorthold tenancy (AST) or tenancy

Guaranteed rent schemes are a particular problem as we have seen properties not sublet once but even three times. The investor has given it to a local letting agent who then has leased it to a rent-torent operator who then has leased it to a supported living provider.

Claims in this area are not reduced by average but are repudiated in full by insurers as this will have breached your policy conditions. It is your responsibility to know who is residing in your property and have some control over who resides there!

You will not be able, to the best of our knowledge, buy cover for a sublet property online, you will need to speak to a broker who is familiar with this type of letting arrangements.

In his monthly column The Managing Director of Buy To Let Group Partner Falcon Insurance, Pinder Dhaliwal talks about the challenges facing the insurance market

In

& THE STRATEGY BRRR TAX

The BRRR model can be a very lucrative property strategy if executed properly and can provide infinite rental profits into the future.

As with all property projects though you need to get your ducks in a row first.

Here I am going to introduce the tax ramifications of the BRRR strategy but, as always, get sound tax advice at the outset and also ensure that your mortgage broker understands what you are trying to achieve.

NO SALE, NO ISSUE

The BRRR strategy generally calls for the use of a bridging finance facility to purchase the property and then migrate to a conventional mortgage once the refurbishment is complete. Alternatively, you may have the cash to self-finance the purchase and the refurbishment costs yourself therefore saving any finance costs.

The idea is that you purchase the property, undergo refurbishment and then re-mortgage on the higher value of the property in order to extract as much cash as possible.

The re-mortgage provides cash to settle the bridging finance and you take out the cash balance to allow you to repeat the process on the next property.

Because you are retaining the property to rent to tenants, you have not disposed of (sold) the property therefore there are no company or personal taxes to pay on any sale at the moment. Eventual sale and rental profits are however taxable.

CAN I CLAIM IT?

With any property refurbishment project, it is very important to understand how the refurbishment costs you incur are treated for tax purposes.

Generally speaking, as this area can get complicated, costs are split into two categories – Revenue Costs and Capital Costs.

You can receive tax relief on revenue costs in the year the expenditure incurred, meaning that you can achieve tax relief quickly. Examples are repairs and maintenance, replacement of items on a ‘like for like’ basis, general painting and decorating.

Capital costs are of a more permanent nature such as extensions, new en-suites, the addition of conservatories etc. These costs still attract tax relief, but only when the property is sold.

FAIR ADVANTAGE

Occasionally, savvy investors will find that unicorn deal where they are able to not only refinance all of their cash back of a deal after the renovation has been completed but they actually get out more money than they put in.

It takes serious hard work to not only find such a deal but to manage the work and get it across the line, so I am happy to report that the money that you get back out of such a deal in the way of refinance cash can be tax free if you retain the property and rent it out. There are certain rules to this and you need to obtain professional advice on your own circumstances.

If you then put that extra cash released to work in the next property deal it should be pretty self-evident how you can achieve significant portfolio scale.

If the BRRR model forms part of your overall investment portfolio then a group structure may also be beneficial whereby properties, cash and profits may be able to be moved around the group in very tax efficient ways. Again, you need to seek professional advice.

the last issue of ON THE HOUSE Magazine we introduced the BRRR model (which you can read here). In this issue our preferred tax advisor Paul Weller of Astonia Associates looks at the tax implications of the strategy

THE GLOW UP

Every month in ON THE HOUSE Magazine we celebrate the efforts of an investor, developer or property pioneer! This issue it’s RoundTable Mastermind group member Andy Thompson and this perfect BRRR bought when everyone else was staying on the side-lines in lockdown.

The Investor Andy Thompson

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 – Rick 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

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.

THE RANT

DON’T WAIT, FIND BETTER DEALS

Ihave heard it so many times lately that it is beginning to really grate my gears - People saying deals in their area no longer make sense or stack!!!

The thing is, the market has changed whether you like it or not which means, deals that made sense three months ago are just no longer viable. How does that affect you the investor?

Simple.

You need to be looking for better deals! Right now many “investors” will be sitting around “waiting” for the “crash”. I for one though have never been an investor who relies on external influences to determine if I buy or not.

What I do is look for better opportunities as now is a fantastic time to be investing. We completed on a deal two weeks ago and it is a fantastic opportunity with multiple exits. Did I ever consider walking away before completing? NO!

WHY?

Let me list the reasons:

1. We make sure we are monitoring what the market is doing constantly i.e. interest rates and property values

2. We make sure we stress test at the correct levels to absorb any potential market shocks 3. We make sure we have multiple exits

4. We also don’t rely on fair market value revaluation - this is a bonus

5. We always look to recoup our invested capital over a period of two years max – either through revaluation, profit from income or a mix of both.

Stick to these parameters and, I find anyway, you can’t go wrong.

(READ THIS IF YOU ARE STRUGGLING TO FIND BETTER DEALS!)

And just to cement my point – last month, while others were sitting on their hands, members of the RoundTable Networking and Support mastermind group that I run agreed on four deals which will set them up perfectly for success in 2023.

(CLICK HERE TO FIND OUT MORE ABOUT THE ROUNDTABLE) Wishing everyone a prosperous 2023 and happy investing!