Category: Money and Finance

Why savers are losers!

Posted on by Wendy

This is a quote from Robert Kiyosaki and I must admit I was shocked when I first read this. I was brought up to save money, and to be frugal. I always had savings – even a small amount for a rainy day. So to hear the words that I was a loser because I was a saver, was quite distressing! I wondered what on earth he could possibly mean. After all, we all know that savings give us a back-up should the need arise. An unexpected car repair or a higher than average utility bill, or another new pair of sports shoes for your child who’s growing like a beanpole, means that savings are a very good idea! Surely, having some money in savings makes sense?

Well, I think that the answer has to be yes, as long as you understand the terrible downside to cash savings. Savings are inert, and in today’s economy are actually costing you money. 

Take £1000 for example. If you put this in a higher rate savings account (not your bog standard current account, it has to be the highest rate available), the most you will probably receive in interest is about 1.5%. After a year you’ll have the princely sum of £1015. You will have made £15 in interest. £15!

Not only are interest rates depressingly low, but the other fact that we have to face is the effect of inflation. The government assesses the rate of inflation each quarter. Inflation basically erodes money as it describes prices going up, and therefore how much reduced is your money purchase power. Currently, the UKs stated rate of annual inflation is about 1.5%. Ironic that it matches the interest rate, isn’t it?!

Which means that just as you make £15 in your bank account, the £1015 also loses 1.5% in value over that year. 

This equates to £15.22. 

So in fact, your money which has been in a HIGH RATE savings account all year, is now worth £999.78

Yes it’s only 22p. Nothing too frightening…yet. Multiply that by many thousands of pounds sitting right now in other people’s bank accounts and you can see why Kiyosaki was right – savers ARE losers. 

And this is before we see inflation rising and interest rates in bank accounts dropping.

So what’s the answer? That’s where financial education comes in. What other medium you choose to invest in is down to individual choice, personal belief and how you educate yourself. For me, I choose an asset class whose value increases as inflation grows; pays me in cash regularly; and has some utilitarian benefit to the wider world. 

If you don’t do this ONE THING, you’ll never succeed in running a property business

Posted on by Wendy

What am I talking about?

  • Doing viewings?
  • Managing a bank account?
  • Raising finance?
  • Finding deals?

No, not any of these things. Although these are all valid activities you should be doing regularly if you want to grow your property portfolio, but they’re not what I’m talking about today.

I’m actually talking about something that makes all of these happen, almost without you having to think about them. Almost automatically, without worrying whether it’s happening or it’s not happening and the one thing that makes this happen and it’s this – A BUSINESS ROUTINE.

You see, most investors I meet haven’t established any kind of routine in their week that keeps the business growing. Each week appears and they just react! 

They book viewings, take some photos, do a couple of Facebook posts, and then they forget that they should have contacted their bookkeeper, or called back a vendor or replied to an investor.

They act as if everything is URGENT, and they forget about what’s IMPORTANT. 

Is that YOU? Do you fail plan? If we are honest with ourselves, we often fail to plan. But you know that if you fail to plan, you plan to fail don’t you?

It’s so true isn’t it? By doing the things that are URGENT, we so quickly run out of time to do the things that really matter – the things that will make the MOST difference long term to our income. These are the IMPORTANT things – but the things we often treat as being less important. 

There’s a reason why we behave like this. It’s because we believe that fast action creates fast results. So we do what is immediate. We do what is right in front of us shouting ‘URGENT’. But the truth is that is not what makes you wealthy. 

What makes you wealthy is delayed gratification. Doing what’s hard and feels more difficult. Doing what is NOT yelling ‘Urgent’ takes more determination and strength. The other problem we face is that we are OK doing what we’re currently doing. 

We are not starving, or homeless, or aimless. We keep busy and just about managing. 

But in reality our wealth is not growing, our portfolio is stagnant and our complacency is killing us.

So what’s the solution? 

  1. Plan your week – take out your diary and PLOT into it one of your IMPORTANT tasks. Do just one of your important tasks per day. No more, no less. Just one.
  2. Consider how long that task will take, and if it’s gonna take more time than you have in a day, spread it over two days.(Consecutive days though to maintain momentum).
  3. After you’ve completed it, be pleased and proud. Take a ten minute congratulatory break. Dwell on the great feeling that it feels like when you’ve done something tough, but IMPORTANT.
  4.  At the end of the week, write down all the important things you’ve achieved and WHY they were important and not urgent, and how they could help you more than doing just the urgent stuff.
  5. Now plot your diary for the following week with all the new important tasks that can become a routine, and enable you to know that Tuesday’s are viewings days, or Wednesdays are social media days or Fridays are calling investor days. 
  6. Now do the urgent stuff. 

So you think you have no money to invest with?

Posted on by Wendy

One of the biggest problems that I hear from people when they start investing in HMOs is that they don’t have any money. They think that they can’t invest or do rent to rent or do anything. They feel completely stuck. 

The biggest problem that they have is NOT that they don’t have any money but that they don’t know how to find money. In fact many people who say they want to start investing DO have money! They’re nervous and fearful about using it to invest with. It’s their pension, or savings, or back-stop. So they start by thinking that the only way they can invest is by using other people’s money. 

I love using other people’s money. In fact it was only by using other people’s money that I grew my business from two to over twenty HMOs. But I realised that in order to put my money where my mouth is I had to start by using my own money; my own resources; my own confidence.

If you have resources that you’re not willing to use, because you’re fearful and don’t really believe that what you’re doing is going to work, do you think an investor will be willing to work with you?  What money do you already have that you’re not prepared to use yet? If you’re not prepared to use your own resources, that demonstrates a lack of belief in what you’re doing. If you don’t believe that you can make money should you really be using other people’s money with which to invest? 

Until you funnel ALL your resources into getting your property business off the ground you probably won’t ever become investible. This is a huge mindset shift for most people, but it’s so important. You need to be totally committed if you’re going to make investing work. You have to take risks (which yes, you must identify and mitigate) and you must be prepared to give it 110%. If not 200%! Obviously doing the deal analysis, sourcing the right properties and doing the necessary foot work is also part of what you give. But you MUST use some of your own financial resources too.  

If you do believe that you can make money in property and you’re prepared to take the risk first step is to find and use your own money. Where do you find the money then? 

  1. Old savings or bank accounts that are sitting lying dormant 
  2. ISAs and other investment accounts that are giving a lower rate of return than you could make with an HMO
  3. Using your pension. Not all pensions can be used to invest in property but some can, and this is worth investigating
  4. Saving with your hard-earned cash. If you can’t make cutbacks and budget and save each month, you cannot look after money. If you cannot look after your own money you will never be able to look after someone else’s.
  5. Remortgaging your house
  6. Selling stuff you no longer need on ebay to make some cash. Selling other people’s stuff when yours is all sold
  7. Set up a car wash business, dog walk business or cardboard box collection business (yes I do mean used cardboard boxes. Think of all those deliveries that fill up people’s re-cycling bins so there’s no room for anything else). Charge a reasonable amount, do it regularly and leverage your time using other people’s skills. Save the money, use it to invest in property.

What else could you do to find the money yourself? How do you feel reading this? Do you think I am off my rocker?!

Raising Finance for your HMOs

Posted on by Wendy

I could write a lot here about the HOWs of raising finance. (In my latest book there is a whole section on this – so grab your copy now – www.epfop.co.uk)! 

But I don’t really think that it is the HOW that is the problem. There are two areas that influence us MUCH more with regard to raising finance:

  1. Internal beliefs
  2. External context

As Henry Ford (apparently) said ‘If you think you can, or you think you can’t, you’re right’.

How is it that some people have investors lining up to work with them, and yet some of us, despite having good deals (even average deals), find it SO hard to raise person-to-person finance?

With mortgage markets getting more regulated every day, and products becoming more refined, there are also many more challenges to getting commercial finance.

So we are facing two problems – getting mortgages from banks and getting money from investors. And as we all know, without liquidity we cannot develop HMOs (even if we are buying with ‘low’ money down).

Here are my tips to creating a pipeline of money for your deals:

  1. There are amazing stories of people who have gone out and raised £150k for their first project from an investor. Yes that does happen. In my mentoring group, one lady did just that with NO experience. Amazing! But TBH this is the exception. Most people start by raising £20-30k from family and friends. Aim to start small. Just raise a small amount (although treat it like a large amount) and take it on a % return basis over 12 – 24 months.
  2. Build your confidence first. Speak to people you know, like and trust and share your hopes and dreams with them. Those that doubt you, stay away from – they aren’t ready to lend you money. Others who do want to help you and encourage you on your journey are the ones to focus on.
  3. Take some form of action EACH DAY. NO EXCUSES. Talk to one person you know. Put a post on Facebook about what you’re doing. Follow up someone from a networking meeting. Keep asking the question ‘ WHO do you know who …’ You’re action will create momentum and belief.
  4. Study money mindset. Work on your internal beliefs. Read about other people’s achievements in raising finance. Allow yourself to believe that YOU CAN DO THIS. When you find yourself disbelieving tell your mind it has got it wrong! If it can be done, you too can do this.
  5. You can only control your internal environment. You cannot alter the wider environment with all its facets. Be controlled about what you let yourself read, think and be affected by. Environment dictates performance. Ensure you spend 70% of your time (or thoughts) in an environment of success. (Not always easy if you are in a job you hate, or with a negative partner. They cannot control your mind though, only you can do that).
  6. Learn to be laser focused and the best in your niche (your area, your brand, your type of HMO).
  7. Study financial markets to understand just HOW VALUABLE your offer is to an investor. Understand the effect of inflation and QE on the value of money (and cash). And how (as Kiyosaki says) ‘savers are losers’. If you understand this, you can explain it. If you can explain it, you can educate people. When people are educated they start to see you have the answer to their problem (and will be much more interested in working with you).
  8. Create a CAPSTONE pitch (I can tell you more about this if you wish). There’s an infographic uploaded to the group you can read that tells you more.
  9. Keep getting better every day. Engage, read, learn, listen, look.
  10. Get your paperwork right. (Tomorrow I’m going to share ‘How to be Mortgage Ready’). If you get organised, then bank finance will be much easier to come by.

Do you have any other thoughts? How do you feel about raising finance? Nervous or excited?

If you want a FREE copy of my new book (just pay P+P) go to www.epfop.co.uk

The Rules Of Money to Live By

Posted on by Wendy

I have discovered that just like any other energy form, money has its own rules. When you defy them, you don’t have enough if it. When you fulfil them, you have more than enough. Here are my thoughts but I would value yours too!

1. Money likes flow – what does that mean though? It means that you need to think of money flowing through you. It comes in, and it goes out. As you make it, you spend it, invest it and use it. It is not there to be hoarded. It is a gift and an energy which needs to move to increase.

2. It likes to be used and leveraged in a structured and managed way. If you don’t have a handle on your money you will lose it, and won’t be able to make more. Every month you should assess your personal expenditure against your income and make sure you keep at least 10% for saving. This is not a pot for long term saving but for investing. Never spend more than you earn.

3. It needs to be backed by an asset to be properly magnified! That’s why property is such a powerful compounding tool. Always invest against an asset. Whether that is a fixed asset like property, or a paper asset like stocks and shares. Property is better as you can leverage far better.

4. It comes to people who can manage it and show diligence, competence and discipline. Decide today to raise your investment game by managing money better. Save some, invest a lot and spend as little as possible on wasted items and fripperies.

5. Your gearing (amount you borrow against the asset) should be based on four things

1) how much risk you are prepared to take

2) your long term view about your involvement in the asset (ie: when and what is your exit strategy)

3) how far your cashflow will be reduced and whether that is acceptable to you, and

4) the cost of borrowing.

If you can borrow at a much lower level than you can make (at least 10% difference) then it’s often worth taking the borrowing. Example: Your return on an HMO is 15% yield, and your borrowing is 4%. The difference is 11%. Therefore it’s worth borrowing the money.

Your cashflow after gearing should be double the amount of the cost of borrowing. Eg: Your mortgage amount per month is £476. Your cashflow (profit) should be £952.

6. It grows when you add value. Property is a people game, as such it needs you to be a people person! It’s not about bricks and mortar, it’s about solving as many people’s problems as you can. You do that, and you’ll get rich. You are already wealthy. You just now need to manifest it through the zeros (added to the numbers) in your bank account. But remember – keep it flowin’ and you’ll keep it growin’!

What do you think? What have you learnt about money as you’ve been investing in property?

If you have any questions about investing in property, or want to know about Houses of Multiple Occupation please book in a FREE half hour call this week: https://fwfozt-free.10to8.com

After that, I’m on holiday!

Why you have to take a leap of faith at times!

Posted on by Wendy
In life there are many times when you cannot determine the outcome of your actions. You cannot see the final results that will be achieved by what you decide today to do, or not do. You might be able to guess at your results by looking at other people’s outcomes who have taken the same action, but even then there are so many variables, it’s impossible to determine with certainty that you will get the same results as them.
Where does that leave you? One path of action would be to find out more information. To analyse your potential strategy in more depth. To minimise the risks of failure.
Another action would be to look at people similar to you and see how they got the results you want. How did they overcome some of the same hurdles you might have to jump? Another action is to wait a bit longer, and see whether things will improve by themselves. You might win the lottery after all, and then all this planning and action taking could be a real waste of time couldn’t it?
Or what you could do is make a commitment. A decision. Today. To change what is the BIGGEST issue in your life. Today. Whether that is lack of money, being overweight, a dysfunctional relationship, not getting enough sleep, not reading enough or smoking and drinking. The only thing you need to do is make a PROPER decision. Not a half-hearted ‘maybe’. Not a procrastinator’s ‘Will do that when …..’ But a true, decisive YES.
Today I commit to …… getting out of debt in a year; losing half a stone; stopping seeing x person; going to bed at 10pm; reading a book a month; quitting smoking and drinking. Today I commit to being the best person I can be. I commit to finding deals and finding money so that I can invest in property and in (2, 3) years time (you decide) leave my job.
There. That’s it. You’ve done it. Now you have to just do it. Nuff said.

Taking leap of faith

Creating a Pipeline of Deals

Posted on by Wendy

There are plenty of places to find deals, and creating a sourcing pipeline needn’t be difficult. You do need to be organised and have a structure in place to ensure that you maximise your chances of success. To find great properties and great deals you need four things

1.       Process

2.       Perception

3.       Paperwork

4.       Persistence


Without a process you won’t be able to create a steady stream of potential property deal. Without perception you could uncover a wealth of amazing properties but not know what to do with them. Without paperwork you can’t finalise the deal. Without persistence you can’t grow wealthy. As you can see, only two of these are practical actions – the other two are personal attributes. Finding deals needs you to be practical and personal.

1.       Process. Ideally you want to design a campaign. This gives your activity definition and purpose and allows you to learn each time from your mistakes and successes. I would recommend that you design a 4 week campaign, in which you agree to target a particular area of no more than 1.5 square miles.

·        Using a map, define the area you are going to target and find the postcodes that are part of this location. This will be the HMO location that you’ve already pinpointed. Now locate all the shops, post offices, takeaways and supermarkets that serve that location.

·        Next, you want to get some leaflets designed that tell people about you and how you can help them. We use www.smartpropertyleaflets.com who provide ready-made templates ideal for leaflet campaigns of this type. One thing to remember: you will want to repeat your campaign up to seven times before you see steady results. Order enough leaflets at the start to ensure you have enough volume to repeat your campaign regularly.

·        Find a reputable leaflet delivery service. There are many ways you can achieve this – one is by working with a local takeaway service who are already delivering leaflets in the area. Another is by hiring independent leaflet distributors. Make sure you have a way of spot-testing the coverage of the drop.

·        Write out a number of simple postcards that you can put up in shop windows locally. A suggested wording would be:

   ‘Struggling to sell your house? Do you need to move fast? I am looking for a house to buy and might be able to help you. Please get in touch to see if I can help you call Wendy on xxxxxxx’. A simple postcard with a call to action is the best way to get your message out there.

·        The third aspect of your campaign is direct-to-landlord letters. You can download a sample letter from the website www.centreround.co.uk. The letter needs to be direct, friendly and polite. It needs to state what benefit you can offer to a landlord and how you can help them. One piece of advice: persistence is the key. I regularly receive letters from well-meaning investors who have found my details online and are offering to help me rent or sell my properties. I always wait until I’ve had a second letter before I respond. The sad thing is, I’ve rarely had that second letter. Remember that landlords who may be ready to sell, want to know you are committed. One letter is not a sign of commitment.

·        Another great tip is to incentivise your recipients in some way to meet with you. I mentored a female partnership who had no money to invest and were looking for a rent-to-rent deal to get started. I suggested that to stand out from the crowd, that in their letter they offered to meet up with the landlord and pay for a coffee. As a surprise incentive, even if the landlord was not willing to meet in person this time, I suggested that they include a voucher for a free coffee. As a result they had a number of calls from investors, one which led to a profitable rent-to-rent deal making them over £800 profit per month. Be different.

·        Your campaign should also include contacting all the people like estate agents that you’ve already started to engage with, and should include networking like crazy.

·        Plan your diary so that you can give yourself deadlines and structure. You don’t need to complete all your actions in week one.

·        After you’ve completed the four weeks, spend some time analysing what went well and what didn’t. It takes time and experience to execute a great campaign. Now you need to wait for your seeds to flourish, plan the next campaign and follow-up any leads you have generated.

2. Perception. Perception gives you insight into the possible motivations of a seller so that you can delve into the real reasons for a fast and efficient sale. This is a vital skill as it means you can cut to the chase and start negotiating on terms that are meaningful to you both. Perceiving what will work is a core skill when negotiating with people, and if you rush into the details of an offer too quickly you may miss important details.

However, educating yourself about the various strategies available to secure property is also a must. Without education I would have overlooked many potential deals that crossed my desk. It’s by understanding what makes a deal work that you will be ahead of the crowd, and you’ll be able to work with vendors, agents, local people and your contacts with confidence and insight. Knowing how to adopt the right strategies in particular situations, coupled with understanding people, will allow you to find and negotiate great deals.

Knowing the different approaches for securing property deals will allow you to have a number of strategies to use in addition to the usual route of traditional buying. This will give you confidence to negotiate deals. It will also bring you a streak of creativity when it comes to funding. Many sellers are not necessarily looking for cash. Although their property is up for sale, and it apparently looks as if a purchase transaction is what’s required, many vendors have reasons they HAVE to dispose of the property even though selling is the least beneficial to them. They don’t know what you know and therefore choose go to an estate agent to sell the house. They simply don’t realise that other strategies are possible. It’s your job to work with them and use your knowledge to help them too.

Other vendors are desperate to sell and need a fast transaction. So in an environment where sellers want SPEED and CERTAINTY, how can you work with that? Unless you understand the process for executing a deal fast, you won’t be able to meet the needs of a seller and you will most likely lose out on a possible deal.

In the negotiation for a deal, then, perception and awareness is key. If you struggle with this, here are some tips to help you:

·        Put the vendor first. Make sure you listen more than you talk, and hear more than you speak.

·        Create rapport by asking pertinent and meaningful questions. Watch the person to see how they react to you, and whether they are nervous, shy or wary. Are they a dominant person, a decisive person or an impatient person? Take some time to find out a bit about them but be aware of their motivation. Don’t prod too far immediately, or spend too long on meaningless chatter. There is a maxim in psychology which is ‘pace, pace, pace, lead’. In other words, let the other person set the pace while you set the structure. Then you can mould the interaction and lead the discussion.

·        Have a list of questions already prepared, but sense when it’s time to stop. There are facts you’ll need to gather to assess whether you can form a deal or not. Some people want to get to the point of the offer immediately and others are assessing you to see if they even want to do a deal. Don’t rush into making an offer or saying something you’ll later regret. If you sense that the other person wants to rush you (which is common if they’re motivated to sell) just explain – ‘So that I can make you the best offer, I just need to go away and crunch the numbers. I’m sure you’d rather I got this right than messed you around?’. Most people will say yes to that.

·        After any interaction with someone spend some time reflecting on what you learnt. What did you observe? What were the give-away clues about the motivation of the vendor? What conclusions could you draw about whether a deal is possible on a personal basis? Did you rush the discussion? How were you feeling throughout?

·        It is impossible to predict the outcome of a discussion at this point. Stay calm and positive, and press on with your next steps.

3. Paperwork.

Having the right structure to do the deal once you’ve found a motivated vendor is vital. Before starting any paperwork, you need to gather some core pieces of information from a vendor (seller). These pieces of information are best gathered face to face. Your leaflets and postcards and letters will generate interest and phonecalls. You need to be prepared to take some basic information on the phone. However, the idea is that by meeting in person you can create far more rapport and trust and have much greater chance of creating a deal for you both. The aim is a win-win situation.

Without the following pieces of information you won’t be able to come up with a succinct, clear and precise plan that benefits you both. The core pieces of information to gather are:

  • Address and details of the property and the vendor
  • How long the vendor has owned the house/ property
  • How quickly the vendor needs to / wants to sell
  • What the reasons for the sale are (divorce, downsizing, moving abroad, pay off debt etc)
  • Why the property isn’t up for sale already with an estate agent
  • Are other people to be involved in the decision (partner, parent, siblings etc)?
  • Is there any debt on the property (mortgage, second charge, bridging finance)?
  • If there’s a mortgage, how much is it, what type is it and what’s the remaining term
  • Has a purchase of another property already been agreed?
  • Would the vendor be prepared to let out the property rather than sell it?
  • Has the vendor got plans for the money from the sale?

Once you have these core pieces of information you can then go away and crunch your numbers and come up with a suitable offer. There might be a number of different possibilities so be sure to present them clearly and slowly. Chances are your vendor has never heard of some of them, and was awaiting a simple purchase price offer. They will be pretty mystified when you start to talk about lease options, rent-to-rent and delayed completion if you’re not careful about avoiding jargon. Your communication skills in presenting a deal will be paramount to whether the offer is accepted or not. Practice your delivery with someone who can give you fair feedback if you are unsure of your ability to be clear.

Once you’ve had a successful meeting, you’ve come up with a plan, and an agreed way to proceed, it is vital that this is captured in a Heads of Terms Agreement. This simply lays out the roles and responsibilities that the partners in the agreement will take. This needs to be signed and each partner should have a copy. The Heads of Terms Agreement then forms the basis for your legal documentation. I always advise people to take legal advice on any deal. However, it’s worth bearing in mind that many general property solicitors are not well-versed in creative deal strategies. You may have to refer your specialists to your vendor in order for the deal to proceed.

4. Persistence. Sourcing an attractive deal takes patience and determination. It takes time to set up the pipeline, and time to negotiate with the vendor. It may take a few weeks before you see results from your persistence. You may get a few phonecalls that lead nowhere. You may feel like you’re wasting your time and money. However, in property, like investing generally, persistence pays off. Don’t let your early failures or lack of progress set you back.

After a number of months being seen and heard in our local area, telling people what we were doing and what I was looking for, I hadn’t seen much progress. I began to wonder whether it was worth all the effort and time I was putting in. I was sitting at my desk one day when I received a phonecall from a man who didn’t want to pay for an estate agent to sell his house. The house was a great size and in a good location for an HMO. I was first in the queue! By being known in my local area, I had a distinct advantage when it came to buying or negotiating a deal. He and his wife wanted to downsize, having raised their family in this spacious terraced property. However, the house needed some work to make it attractive to a family buyer – cash he didn’t have. I was able to sit down with him and work out exactly what he needed to move on, and how we could benefit too by creating a win-win solution that worked for us both. He was delighted to save the money that otherwise he would have spent with an agent, leaving him more to put towards a smaller house. In this situation, knowing the strategies that can be used in property deals is paramount, as a simple purchase transaction is only one of many that can be employed to buy and secure property.

So remember Edison’s famous words when you’re tired and feel like you’re getting nowhere, and when you’ve had little results from your efforts:

‘Our greatest weakness lies in giving up. The most certain way to succeed is always to try just one more time’ ―Thomas Edison

Are you spending too much time watching TV?

Posted on by Wendy

According to a recent survey* adults in the UK spend nearly four hours a day watching TV. This doesn’t account for the time they’re spending on social media sites like Facebook and Instagram.

I’ve got nothing against TV; in fact I can really enjoy a good Scandi murder series like anyone else! At the end of a long day, an hour relaxing in front of the telly can be an ideal way to relax before bed. The issue here is not whether to watch, but how much.

If you find you’re watching a lot of TV, you might ask yourself why? Is it valuable food for your mind? Is it just passing time, or moving wallpaper? Is it a distraction from what you really should be doing? Or is it a way of ignoring the little voice in your head that tells you your life is worth more than this?

It’s so immediate, it’s really easy to find that we just flick the switch (or these days say ‘Telly On’), slouch down on the sofa and a few hours pass by. Is it really worthwhile though? Many of us want to run away from the pain of our daily lives by escaping into other people’s lives. It’s well known that soap operas and dramas are designed to include a cliffhanger deliberately to keep us addicted to the storyline, and stay watching.

It’s often more interesting to see other people’s problems so that we don’t have to face our own. Sadly, all this does is drive us further and further away from creating a solution to our own issues.

I would like to offer you a challenge if you know this is you. I would like you to think of designing your own life so that it has all the excitement of a soap opera with less of the drama! How can you feel more alive, do something that gets you up in the morning with joy, and enables you to create the life of your dreams?

The biggest problem that stops most people doing this is money. If this is you, you will fully appreciate how much of a challenge it is to change your life, ditch your job and do what you feel passionate about. Who will pay the mortgage and the bills? Who will take on board all your responsibilities?

How would it be if you could find another way to create income that doesn’t rely on your time? What about if you gave up a couple of hours of telly watching to learn how to invest in property so that you could make money without a job?

Investing in property allows you to make money without a job. It relies instead on your insider knowledge, your expertise and your contacts. If, through what you knew you could make a thousand, five thousand or ten thousand extra pounds per month how would that change your life? You may think this is ‘pie in the sky’ but I have seen ordinary people, like you, with families, children, jobs and mortgages create thousands of pounds of extra income per month.

How? They’ve done this through investing in HMOs. Houses of Multiple Occupation. I’d love to share with you how I took an ordinary house and turned it into a 7 bed HMO making me over £1500 income per month. And how I did this with very little of my own money.

If you’d be prepared to give up a couple of hours next Sunday night at 7.30pm I’ll be sharing with you – – Why you feel stuck if you are in a job – How to buy property with other people’s money – How to achieve financial freedom with just 5 properties – How to use a simple 5 step system to build your property portfolio.

In addition, for attending the webinar I will send you my unique 7-Step ‘Investor-Ready’ Process to make sure you are prepared for raising all the money for all the property you ever want!

I look forward to seeing you there. Sunday 24th February at 7.30pm.

Please Register for your place by clicking here

What can I do if my partner won’t support me investing in HMOs?

Posted on by Wendy

My son Tom is ten years old, and for Christmas last year he got a magic set. He spent the first few days learning all the tricks in the box so that he could amaze all the family with his skills. A few weeks later and there are really only about three tricks that he’s remembered but he’s already close to auditioning for the magic circle. He can summon up these tricks at will, and all he needs is a pack of cards and a one pound coin.

Isn’t it great when you discover something new and exciting? When you learn a new trick, or a new approach? Especially when it’s something that will really help your family like learning how to make money or how to invest in property.

When I learned all about HMOs and realised the amazing cashflow I could make in comparison to my single buy-to-lets I was gobsmacked. I just KNEW that by hook or by crook, I HAD to get into HMOs. My nice little portfolio of buy-to-lets was never gonna make me enough money to leave my job. I just wasn’t making enough money.

So I was committed to getting into HMOs. I was certain. I knew that the way ahead was HMOs. There was just one problem. My problem wasn’t money, it wasn’t time. It was my Darling Husband, Andy! Love him to bits, but cautious? Sheesh, he redefines the meaning of the word. He was SOOOO uncertain it was untrue!! “But what if it doesn’t work, what if we can’t get tenants, what if we run out of money?” he said, his voice laden with doubts.

Ever heard those things from your partner? Or ever thought those thoughts too? Andy was exactly the same.

What I wondered was whether I could ever make this plan work without my husband’s backing. There were risks in going it alone, and I wasn’t sure that I was ready to risk my marriage for money. Deep down I needed to know that he was at least ok with me investing in HMOs, even if he wasn’t willing to do any of the work.

If you’re finding that your partner is less than enthusiastic about your new-found desire to create HMO magic, I might be able to help you.

  1. Don’t rush it. You’ve had more time to let your ideas and your new-found enthusiasm settle than your partner has. He/ she is way behind you in their thinking. They need to learn for themselves. The one way to put someone off something fast is to impose your ideas too fast, too forcibly.
  2. Make time to discuss your ideas. If your partner refuses to listen, ask them if they would allow you 30 minutes to explain your ideas and why you want to invest, without them interrupting or arguing with you. Then you give them 30 minutes to explain why they have misgivings. Then take 15 minutes to calmly discuss your feelings together. After you’ve each shared, leave the discussion for 24 hours. This takes discipline and commitment, but will let your partner see that you are as committed to them as you are to the whole idea of investing in HMOs
  3. Show them you’ve considered their objections by writing out a clear plan. In my experience, people who are cautious tend to be people who like clarity and structure. With a written plan and some thought behind it, your partner may well realise you are serious and have thought about the risks. This alone can shift their mindset.
  4. Accept that your partner’s objections could strengthen your business. Take them seriously and consider whether their reasons have weight. You might realise that if you work on addressing their objections, you could have a stronger business as a result.
  5. Don’t give up on your dream to practice HMO magic. If you are in the right relationship and your partner really respects and loves you, your persistence will pay off.

 

After a few weeks of doing none of the above and frankly nagging Andy to death, he made an excellent suggestion. Being an IT geek, he was used to launching new projects as ‘beta’ projects – trial ones that tested the core idea to see if it would work.

So we agreed that I would launch a ‘beta’ HMO – a trial small four bed HMO. It was the best way to test my idea out and see if it would work, with little risk. It made me happy and it satisfied Andy’s aversion to risk.

Thankfully the project was a huge success, and soon afterwards I could really press on with my goal to create enough HMOs to achieve financial freedom. Our marriage not only stayed intact, but was made stronger as a result.

You can create a magical income from HMOs and you can do it with your partner’s support if you are patient and kind. You never know, in future, they will probably thank you for it.

 

How Can I Get My Money Out? A guide to adding the most value to your HMO.

Posted on by Wendy
I speak to a lot of people investing in HMOs and one of their biggest questions at the point of buying a property is ‘How can I be sure to get all my money out?’.
Many of us have been educated to realise that the momentum of releasing money from one deal to use as capital for the next creates momentum for effective wealth-building. Changes to the marketplace, regulation and government towards investors means it is becoming increasingly difficult for investors to pull all their money out of HMO developments, especially if they are new to the market. Many lenders have tightened their criteria so that there is some ‘skin left in the game’ by the investor after the development has been completed – meaning that no matter what you do, you will NOT be able to recycle all your cash when you re-finance after the development is completed. So what can you do to avoid getting stuck with capital left in a project? And how can you best insure yourself against that happening?
Having bought, sold and refurbished nearly 35 properties worth over £5m, we have plenty of experience of developing properties that have valued up thus allowing all the money to be pulled out of the development. We have also had some developments where we have left money in the deal. I wouldn’t necessarily say that the latter were ‘worse deals’ than the former. There are ways to assess and evaluate a project which consider more than just whether you have pulled all your money out. However, there are a few key areas, that when actioned, can create a far better chance of getting all your money out.
1. You make money when you buy, not when you sell. It’s an adage that seems rather counter-intuitive, but it’s absolutely true. Buying a property at the right price is a fundamental first step to adding value. When you buy below market value, you immediately lock in value as comparative to other properties of a similar size, age and state you are already making money by buying below market value. Relying on capital gains is not a sound strategy for HMOs because it can be so volatile. There are clever ways to find properties below market value but they all depend on finding a buyer who is motivated. I suggest rather than looking for properties you look for buyers. We once bought a single buy to let at a considerably reduced price (about 24% below market value) because the tenant had moved out of the house and the landlord had no cash to bring it up to a standard whereby it would re-rent. He therefore had to sell. After we had carried out some basic renovations costing roughly £6k (new kitchen and decoration plus carpets throughout), the house valued up at over £32k more than we had paid for it, allowing us to re-mortgage and pull all our money out. During the conveyancing process on another property which we bought for development as an HMO, we discovered that the garden was hiding Japanese Knotweed! We had a full survey which estimated the cost of complete removal and destruction of the knotweed, plus remedial work on the garden, to be in the thousands of pounds. By taking this figure back to the vendor we reduced the price of the house accordingly. Once the work was completed and insured (very important if you are removing JKW) we were easily able to re-finance the HMO on a commercial basis. If you can find problems with properties, you will find deals. If you can find motivated sellers you can find deals. If you become a problem solver rather than a problem creator, you will find LOTS of deals and this is still the first and the best strategy for creating long term value.
2. Substantially alter the layout. This is a second approach which relies on heavy capital investment and thus is not always possible for investors who are starting out on their HMO investment journey. I’m referring here to putting ensuites in all of the rooms, perhaps even small kitchenettes, moving walls and re-configuring the layout so that the property is clearly only for use as an HMO and without serious work will never be used as a family house again. Getting good plans drawn up by a technically competent person (such as an architectural technician) will also allow you to explore other creative options for the property which a trained eye can spot. Larger properties would be eligible for this undertaking as you will not get the sizes required from smaller houses to make this worthwhile. There is though another risk, which is that in doing so you incur the risk of revaluation of the rooms as single buy-to-let units which in turn become eligible for council tax on their own merits. You need to know the local market sufficiently well to understand how likely this is. When HMOs have planning permission (required for properties with 7 or more bedrooms), a license (currently for properties over three storeys) and full building regulation certification, this can also help to increase the likelihood of a valuation that will recognise the value of the property as a commercial venture.
3. Extend the property. As is the case in standard residential properties, adding extra space to a house can add significant value when designed and executed well. You could add a loft extension, cellar room, or a rear extension to the property, all increasing the rental yield of the house, and adding space. Assuming your costs do not exceed more than 75% of the added value, (i.e. if the added space can add £20k in value to the property, you need to spend 75% or less of that figure to create the space or you will be leaving money in the deal). Space that is already attached to buildings such as garages, workshops or conservatory lean-tos can also be used for conversion (subject to getting the necessary consents). The use of redundant but pre-established space on the footprint of a property has been a well-used hack that developers have historically used to add many thousands of pounds of income to an HMO property. Some of our best performing HMOs are ones we have bought with additional space such as this and converted into additional living or bedroom areas.
4. Great design. Creating beautiful, contemporary and exceptional spaces in which tenants can live is an aspiration for many HMO investors. There are many inspirational ideas you can apply to do this without spending the earth. Lighting, colour, clever use of space, creative touches and unique details can all create a ‘WOW’ factor in an HMO which even valuers are impressed by! Minor improvements such as bathrooms and kitchens of course also improve the look and feel of an HMO. However, in terms of assuring cash out of the deal, this approach is more tricky and may require you to combine this with one of the other approaches I’ve outlined above to maximise the impact that good interior design can have. We developed a small ‘mini-mo’ in Stoke-on-Trent which was bought below market value at £61,000. We spent £26,000 on the refurb which was a huge amount of money comparative to its value. However, the property valued up at £100,000 on a bricks and mortar basis. We left just £2k in the deal and it nets us a profit of £650 per month. This for a small three-bedroom house! The valuer was delighted when he turned up and said it was one of the best-looking properties in Stoke he had ever seen.
5. Experience. If you are brand new to HMOs this is the one area you won’t easily be able to demonstrate evidence of – that is, running and managing HMOs. If you don’t already have other buy-to-let properties this can also be a stumbling block, which is a reason why I advise anyone to get a couple of vanilla buy-to-lets under their belt before embarking on HMOs. Lenders like to see that you are approaching this as a business not a hobby, and have considered maintenance, repairs, voids and local market conditions in your approach to the property. Writing a business plan is becoming a necessity for many lenders to ask for to know that their money is in safe hands (as well as having first charge on the property). This document will become a selling point as you can use it to create the correct impression and build a strong relationship with the lender. It will help you to consider how you will manage the HMO in detail and analyse the risks and rewards if you haven’t already done so. When we put our first business plan in place and gave it to the lender as part of the application, we had excellent feedback which assured us that this was not the normal standard of application they received. Since then we have built a great relationship with this lender, allowing us to access lower fees, lower interest rates and better deals. This takes time and is a huge benefit of HMOs that is not often discussed. Although on your very first deal you may not find that this adds any value at all to the building, as time goes on, the leverage you create when you have a positive and reciprocally beneficial relationship with a lender is huge. Remember you can re-mortgage a property more than once. Property is a long game and having a sound perspective will mean that you can plan when the next round of re-financing can take place. This strategy has tax implications that you should understand and consider, so take tax advice for your business before implementing this approach.
6. Choose the right lender. Using an experienced and well-connected mortgage broker is crucial to get the best valuation on a property. Without experience and specialist knowledge of the marketplace you may end up with an offer and a valuation that does not fully reflect the value you’ve created. By working closely with your mortgage broker they will fully understand your business, your personal situation and agree an approach to risk (again often not discussed but vital when it comes to deciding on your HMO borrowing strategy). Some lenders are happy to value on a full commercial basis (i.e. on a net income multiplier). Others are more cautious and prefer what I call a ‘hybrid’ valuation approach – a mid-way figure that sits roughly half-way between bricks and mortar and commercial. Each lender has their own policy guidance that they use to advise valuers on their panel. While this is not something you can easily influence, you can reject a valuation of a property if you feel it is not reflective of the value you have created. If you are buying with a mortgage and then plan to re-finance after the development is completed, a good plan to make this strategy work will ensure you meet all the lender’s requirements before and afterwards (especially if there is a possibility of re-financing onto a new HMO mortgage product with a different lender).
For example, Precise mortgage’s requirements include:
a. Experience: experienced landlords only. Applicants must have held a current buy to let for at least 12 months prior to application. No first time landlords
b) Occupancy: properties with up to 8 bedrooms accepted
c) Minimum valuation: £250k in London, £100k elsewhere.
d) Rental cover – Interest Cover Ratio: Bespoke ICRs based on individual circumstances to help you to maximise the loan size.
(Taken from http://www.precisemortgages.co.uk/BuyToLet/HMOLimitedCompany accessed 23.3.18)
If you don’t meet these requirements you won’t be able to access this mortgage product. Another option is a bridge to term product which allows you to buy, develop and then re-finance with an end valuation in mind. Although this is not completely reliable as a determined end value, it will give you some comfort as to a potential figure. As they say, forewarned is forearmed!
7. Finally, do the maths! Do you really want a commercial revaluation to pull out all of your money? In some areas, it would be preferable NOT to get a commercial valuation if the bricks and mortar value of the property is higher than the commercial multiplier of net rents. Also you must consider the impact on your cash flow if you gear your portfolio highly. By increasing the value of a property you may be able to pull out all of your seed capital, but does it make sense to do it? If the mortgage payments result in creating a risk for your business if your HMO is not fully occupied 100% of the time, is it really right to take out all your money? If you do get a valuation that allows you to withdraw all the added value you have created what is your plan for the money? Having a good accountant and tax specialist at this stage will be vital so that you maximise the positive result you have created. Your age, attitude to risk and overall strategy will help determine the answers to these questions.
Wendy Whittaker-Large
If you would like to find out more about how I can help you realise your HMO ambitions, why not join me on my two-day ‘Multilet Income Multiplier’ Event on 2-3rd March 2019.
At a special donation price of £400 (saving £900 on RRP), with all proceeds going to the YMCA, there is no better time to learn how to systemise your HMO business for success.
For more info, please visit https://hmosuccess.lpages.co/multilet-income-multiplier2/