7 Secrets os a successful property investor - Secret #7 Exit Planning and Review

Exit planning & Review

Before you start building your portfolio you should consider your exit strategy because it’s important to plan with the end in mind.

Here are some case studies for different age groups we put together to help show the typical starting scenarios.

You can then plan your exit – here we have some exit strategies for you to consider.

You should discuss your plans and aspirations with your mortgage broker so that he or she can apply for the mortgage products which fit your timescales and flexibility.

If you want a free discussion with us on this planning stage of building your portfolio then please give us a call and we’d be happy to help you get started, regardless of whether you use us or not.

Every 6 months you should look at your portfolio from 3 angles:

• Rents and whether you can increase rents – your letting agent should be writing to tenants 2 months prior to the tenancy end date if you are adopting secret#5 and so its important that existing tenants are notified of an increase in rent with good time for them to move out if they are unable to pay. You should conduct a rent survey on the property again in good time for you to determine whether your rents can be increased. Failing to do this every 6 months can cost you a lot of money – especially if you have a lot of properties.
• Mortgage reviews – make sure you are talking to the same mortgage broker about your portfolio. He or she will be right up to date with the latest mortgage products and the market changes and because they understand your goals , they will also be able to recommend which products are going to be reduce your monthly payments and give you the flexibility to move onto your next property in the planned time frames. Therefore it is really important that you build up a strong relationship with the broker so they are able to come alongside you at any time. We recommend you look to review your mortgages every 6 months.
• Equity review With Secret number #2 – Carry out a valuation of your portfolio. You will also be receiving all rental profits and paying them into your buffer (i.e. rainy day account , cash approximately 15-20% of money invested should be in cash) With the rent reviews complete and the mortgage review complete you will be able to see how much you can borrow and top up your buffer) All of our investors in keeping with their overall exposure – so the bigger the portfolio the bigger the buffer.

For more information on what we do please click here

7 Secrets of a successful property investor - Secret #6 Reducing Risk and Tax Planning

One of THE most important principles of property investment is to have a Buffer. You might ask what is a buffer?

It’s your nest egg!

Or insurance against the following things happening across your portfolio

•          Mortgage rate increase (buy to let or main house)

•          Lack of rental

•          Repairs to property

•          Flexibility on rentals

Without a buffer you run the risk of running out of cash and getting wiped out.

We recommend 5% of your property value should be held in your rental account for such circumstances. So with 200k property, hold 10k as a buffer. 

As your portfolio grows then so should your buffer. Our clients with 6 or 7 properties have buffers with 60-70k. Now some of this money can be held in a high interest account but you should have ready access to some of it to keep yourself safe. You must stay disciplined on this at all costs – we had one client who spent some of her buffer on a holiday and new clothes and on her review we asked for her rental account statements and asked her to put the money back or else we would resign her as a client.

You Must Plan from day 1

Income Tax

•          Compliance - HMRC dictates that as soon as you receive income you need to declare it.

•          Non Compliance - Failure to comply could result in fines, penalties and records going as far back as 3 years

•          A tax specialist can register you, and liaise with HMRC and the client to cut down red tape and confusion

•          They will inform you what you can & cannot claim, when this is done, the frequency and any updates to legislation through budget changes etc

Capital Gains Tax

Excludes

•          Sale of your home

Includes

•          a property that you've bought as an investment, for example a buy-to-let property

•          a second home, for example a holiday home in the UK or overseas

•          business premises, such as a shop or a factory

•          land, such as agricultural land

Summary

Capital Gains Tax is paid through the Self Assessment system and will be calculated as part of your Self Assessment tax return.

You should keep any records and information that might help you work out your capital gain or loss. If you've made a loss on a disposal you'll need to claim it in order to set it off against your gains.

If you would like to be referred to our preferred supplier for all tax issues then please contact us

For more information about what we do please click here

7 Secrets of a successful property investor - Secret #5 Managing your properties

Once you have a tenant in place you should ensure that your agent adopts the following practices.

The agent doesn’t have to be a local agent because you have now marketed the property on a find only basis using a local agent and now you can be really fussy about which agent you instruct to manage the property for you. These are some of the things we do for our clients which you may find useful in selecting your own letting agent.

•          Take control of referencing process

To ensure the best possible tenants are secured and credit checked. References are taken from employers and landlords to qualify the tenant.

•          Video Inventory checking.

We also carry out a full video inventory check on all items in the property to ensure all damage or loss is documented and costs recovered from the deposit. Date-stamped evidence at the beginning and end of the tenancy is vital for protecting the landlord from loss or damage to the property and contents.

•          Rent guarantee policy

We also introduce a rent guarantee policy on every tenant which guarantees your rent when a tenant falls out of work or becomes made redundant. We also implement a £25'000 legal cover policy which covers the costs in the unlikely event of an eviction.

•          Never allow contract to expire in a dead time

We never allow a contract to expire in a dead time i.e. We do not allow a 6 month contract in July avoiding the possibility of a property coming available in December and having it empty for months or a serious reduction in rent to secure a new tenant.

•          Never charge landlords for re-signing tenants

We never charge landlords for resigning current tenants, potentially saving landlords up to 50% of the 1st month's rent each year.  We also take care of any changeovers in tenancies instructing agents in the area of your property to find tenants.

•          Use a 2 month notice period on all tenancy agreements

We contact tenants 2 months before the end of the contract to find out if they are resigning and making the property available again with all the agents if they are moving out.

•          Conduct regular rent reviews

Midas will then always conduct a rent review 2 months prior to the end of a contract to see if an increase is possible. This gives us the maximum advertising time to secure new tenants ensuring as little of a gap as possible between tenancies, a real money loss for landlords.

•          Single point of contact with one management company

Having a single agent for the management ensures you are dealing with one management company and not having to deal with lots of different practices and procedures and therefore standards.

•          Nationwide maintenance team

Midas employs a quality management team of over 50 experienced staff covering every aspect of maintaining your property throughout the UK 365 days of the year. We pride ourselves on being able to respond to all repairs and maintenance queries on our clients behalf and we stay in touch with our clients to authorize all costs.

•          Landlord dispute service

We have access to an expert legal team who have an extremely cost effective service. You should identify an expert in landlord disputes to be able to deal quickly and effectively.

For more information on what we do please Click Here

7 Secrets of a successful property investor - Secret #4 - Finding tenants quickly

Finding tenants quickly for your property

The 4^th secret I am going to share with you is how we find tenants quickly in any location in the UK.

·         Firstly with 2 months lead time to exchange on your purchased you should survey the property for its rental potential – so email as many letting agents in the area and tell them you have a property to let – proving the square footage and the specification for the property.

·         You will get a variety of emails back providing a mixture of rental figures – you should now consider the ones that came back to you in the best available time and talk to each one and get a feel for their professionalism on the phone – you are aiming to select the best 4 agents from your list. Choose a rental figure in the upper 25% of the range you are given from the agents and don’t place it too high or you will price yourself out of the market.

·         Once you have chosen 4 hungry agents who have been professional courteous you will instruct all 4 of them to market the property for you. Tell them that you are instructing multiple agents so that they are aware of the competition. This is critical for ensuring that they are going to work for you.

·         Tell the agents you are an investor and have more properties to let and if this works out you will be bringing more in to them. Ask them if there is anything that they can do for you in terms of discount.

·         Provide keys to each agent you have instructed and wait for your tenant to be found.

Using this method you are not limiting yourself to one agent and being left behind several other landlords during peak times and you should be able to negotiate down your finders fee.

Secret #5 will explain how to manage your properties once you have a list of suitable tenants in place.

For more information on what we do please click here

7 Secrets of a successful property investor - Secret #3 - Negotiation

The 3^rd secret I am going to share with you is how to negotiate with a developer on price for your property and here are the  questions I go to them with:

• Ask the developer - How many have you sold to other investors? Because if you hear that 20% or more have been sold to other investors you will be competing on completion and this could impact your rental potential and you should leave this development alone.
  
• Ask the developer to be shown a surveyors report for the valuation of the property. You want an independent valuation from a professional - not just what he tells you.
  
• Ask the developer also to be shown that Joe public has paid the market price declared to you. You want to make sure that any discount you are being offered is genuine discount. Evidence of true value again here backs up what the market value is.
  

When you have all this information you are now ready to negotiate.

·         Tell him you are ready to go to exchange in 4 weeks, with no chain, cash buyer.

Now before you can claim this you will need to have your finance in place so it’s a pre-requisite that you have spoken to a good mortgage broker – if you haven’t got one then please ask us to recommend one our bank of preferred brokers. The mortgage broker will need to know that these timescales are required because he or she will know the lenders that can turn around an application in 4 weeks. For a list of benefits of using a dedicated mortgage broker click here  – and then you will also have to “prime” a good lawyer to do your legal work in equally quick time – so talk to a lawyer in advance of your conversation with the developer.

Then ask the developer how much discount he will offer you and tell him you are able to exchange in 4 weeks  – you have no chain and you are buying as an investment.

He will then be very motivated to offer a discount. Depending on the location and the demand for that location. Some extremely high demand areas will only bear small discounts but it is worth trying for as much as you can get.

For more information about what we do please click here for our full service

7 Secrets of a successful property investor - Secret #2 Research, Research, Research

Research tips for your portfolio

Another common mistake made by some investors is not carrying out enough research. I am amazed at some of the stories from investors who have bought without even visiting a site. People sometimes even buy properties online!

Having established a good location you are going to need to roll up your sleeves and do put in some time to single out the best properties and sites to buy. Here are the questions we ask developers before we make any decisions:

• Find out where the university is - close is best to bring strong rental demand.
• Find out where the best schools are - again close to large schools is best to bring extra rental demand.
• Visit the location during the day and go to the cafes, pubs and restaurants and get a feel for the place- what kind of people frequent them? These people are going to be your tenants.
• Go back during the evening and find out what its like then.
• Go to the schools and ask parents what its like living here – you’d be amazed what they tell you. try and tease out the issues by asking open questions like "how much crime is there in the area?". "What do you like best about the area?". "What would you change if you could?"
• Where are the local authority housing estates in the area? - in the nicest possible way - we need to be further away from LA housing.
• Ask about the developments in the area and seek local opinion of them. Your locals will dish the dirt on local developers and the issues that come up. You may get a heads up on the developer which will serve to warn you off.

Once you are satisfied that you have found a nice area in a good location and your research is complete you are ready to start negotiating which we will cover in Secret #3.

For more information about what we do please click here for our full service

7 Secrets of a successful property investor- Secret #1 - Location, Location, Location

Finding the right location

The most important part of any property investment strategy should be location. A common mistake made by investors is to think that by employing the “Zulu principle” they can become experts in their own area and build a portfolio of properties wholly in the same area. I have no doubt that over time this strategy will identify the bargains in plain sight and also the better properties in the area – but this strategy has a big weakness.

Your potential for growth is limited to the strength in your area and when the market takes a rest, then so does your portfolio. Why not identify where in the UK the greatest strengths for growth are?

We look for 3 key themes in any area – a. Education – ie a university town, b. employment – good jobs market strength and business centres c. tourism – proximity to popular tourist hot-spots. This year we have identified these specific locations as good investments in the long term

Newquay

247 flights per week

Jamie Oliver and Rick Stein (celebrity chefs) boast prestige restaurants in the area

Fabulous beaches with surfing all year round

People seeking a duel lifestyle can commute use Newquay as the weekend location

Waterfront locations command the best rents and become the best for capital growth

The Cotswolds

Extremely popular destination for UK and overseas tourists www.cotswoldhomes.com gets 1 million hits per month from overseas web visitors. Tourist hot-spots in the area are Bourton-on-the-Water, Stow-on-the-Wold and Moreton-in-Marsh.

RAF Lineham closure lead to 200 families being relocated to RAF Brize Norton which is in the Cotswolds – We believe Rissington is a hotspot for the extra demand bearing on 2 and 3 bed properties. 

London - Muswell Hill

In good locations 10 minutes walk from a tube station and you are in the centre of London

Up and coming area becoming very popular with young professionals

London – Stratford

The London Olympic games brings £2 billion investment into the area with 30,000 new jobs being created and a complete face lift of the site for the stadium. There is a new shopping centre destined to be the largest in Europe called Westfield and this will boast all of the high street brands. The new stadium will be the London Premiership club West Ham’s new ground. With 2 stops to Canary Wharf and the West End close by too – this location is too good to miss with the Olympic 2012 games just around the corner. Growth is baked into the cake.

The second weakness of building a portfolio solely in one location is that you are not diversifying into the strengths of different areas which have periods of growth. It is about identifying those periods of growth and buying into the growth story that gives you the most capital growth and if you have many properties in different locations you are spreading the risk of a downturn or lull in the market for a specific area.

For a full list of the properties we recommend grab some ideas from our website click here
Look out for Secret #2 - Research, Research, Research

New Bristol Office is open!!

The search for an office is now over and we are over the moon about our new location a fabulous converted barn house in Flax Bourton.The beautiful peaceful village is close to the M5 with parking for all our clients and team.

Robin was over the moon because he gets to hear my lovely voice every day now!! and its a thrill to be able to move our lettings manager Andy into the same building.

If anyone wants to drop in for a coffee and a chat please feel free!!

Here's the address

Suite 1, Farleigh House , Farleigh Court, Old Weston Road, Flax Bourton, Bristol, BS48 1UR