Archive for the ‘Diary of a UK Property Investor - www.hbfinvestments.co.uk’ Category

How much attention do you pay to the energy efficiency of the properties you’re letting out? According to a new poll, this is something that many tenants are now paying attention to and would even be willing to pay more for energy efficient rental properties.

UK energy supplier E.ON, in conjunction with the National Landlord Association, recently surveyed tenants and landlords and found that 75% of UK tenants regard energy efficiency as a key factor when choosing where to live. Almost half of those – 48% – also said they’d be prepared to pay a higher rent for a more efficient home.

Of those interested in energy efficient homes, 60% were in the 25 to 34 year old age group and two thirds (66%) had higher budgets and were looking for properties at the top end of the market.

However, despite this interest in paying more for energy efficient rental properties, 43% of respondents said that they didn’t feel their landlord cared about this issue and didn’t seem to want to spend money on improving energy efficiency.

With energy efficiency clearly becoming a new selling point for rental properties, there’s scope for landlords to get more savvy and include this in their marketing. It doesn’t have to mean lots of extra expense – you can start with simple measures, such as using energy saving light bulbs and putting in extra insulation.

“Collectively, buildings are responsible for almost half of the UK’s carbon emissions, so home improvements benefit not only tenants, but also help all of us reduce our impact on the environment,” commented John Fawcitt, Energy Efficiency Manager at E.ON.

If you want to explore energy issues more, then E.ON have produced a new Landlord Information Pack – http://www.eonenergy.com/NR/rdonlyres/8ADF860A-EB4C-496A-8DBE-68C605793B39/0/Landlordpack_Layout1.pdf

Diary of a UK Property Investor – The great Lease Option miss-selling scam!

I have been speaking to many investors about Lease Options and I firmly believe they are a disaster waiting to happen.

What are lease options?  Simply put, instead of investors actually buying a property, with lease options they take control [an option to buy] over it and lease/rent the property out.  A vendor would move out of the property to their new home and the investor would pay the mortgage and collect rent from either a tenant or a 1st time buyer who wants to rent and eventually buy the property.  A 1st time buyer may pay the investor a fee and extra rent in order to get this opportunity to buy this property in future – maybe at a discount.

Investors use this strategy to obtain profits from the rent and also a potential future sale of the property.  They also avoid the costs/risk/necessity of buying the property themselves. 
Vendors accept the lease option usually because they have no other solution to move on and because they are told they will eventually get the price they want for their property. 

Sounds great?  In theory it is BUT in practice something often goes wrong! 

For example;

• An investor tight on cash flow [which seems to be everyone interested in LO's] takes over a mortgage so they can make a few quid on the rent and by selling a LO to a 1st time buyer.
• The vendor moves out and takes out another mortgage on their new property.
• Several months down the line, the 1st time buyer runs into trouble paying their rent.
• Not only that, but the cash-poor investor also runs into trouble with his other properties because he isn’t getting rent on them and because rates are increasing. Triple-whammy!
• So the investor keeps the whatever rent he is getting on the LO to prop up his own portfolio/debts and the mortgage doesn’t get paid on the LO property (after all, they have no legal responsibility or financial motivation to pay the vendors mortgage ahead of their own!)
• The vendor of this property cannot afford to pay this mortgage as well as their new one and so risks losing both homes and may definitely lose one if the mess isn’t sorted out in time!
• OR all goes well but the vendor decides not to sell the property [LO's are a waste of paper legally - you cannot force someone to sell a property even if they have exchanged] and the investor has spent all the extra rent and fees they pocketed from the 1st time buyer propping up their cash flow and so the 1st time buyer who now cannot buy is now owed £1000’s by the investor who has no money!!

At least with SARB the vendor only risked losing one home but now they risk losing 2, and investors are now also risking the 1st time buyer’s money and not just theirs!  Truly nightmarish stuff!

The risks with these deals will run into a high percentage and most investors will not have cash buffers to cover the loss-making eventualities.  This being the case, many vendors will be hurt by this in future.

I am sending out this newsletter as too many investors and too many courses are touting the benefits of this without explaining ANY of the pitfalls.  The strategy is not sustainable and it is not the investor who is at risk.  Don’t gamble with other people’s money!   BUYERS BEWARE!

Investors should focus on sustainable property investment strategies: buying, selling, letting, trading and investing in ‘bricks and mortar’ and in a sustainable way;  i.e.  ONLY invest in what you understand and in amounts YOU can afford to lose!

Source: David Coughlin – HBF Investments

Diary of a UK Property Investor – www.hbfinvestments.co.uk

How would you like FREE cash, FREE leads, FREE marketing and FREE overheads!!!  As crazy as this might sound, it is possible for your property business!

One of the most difficult ‘nuts to crack’ is how to make money from all the leads that your business generates and not just from the core sales.  Making money from core sales is the ‘bread and butter’ and the ‘cash cow’ but if you can find a way of generating money from the leads you would normally reject you can generate this FREE extra revenue that will fund parts of your business such as marketing and overheads.

It is frustratingly easy to focus on generating leads in and converting them into core sales and allowing all the other leads that do not turn into core sales go to waste.  The hard thing is putting the procedures and business model in place to make money from the waste.  The best companies in the world have little or no waste and/or make money from the waste that they do produce, and this principle should apply to your property business.

In the business of generating distressed property-sale leads there are plenty of opportunities to generate business from the vendors who may turn your initial offer to buy their property down.  Lease-options and debt negotiations with lenders are two great examples that really work in those simple cases when vendors cannot afford to accept your initial discounted offer.

Some companies specialise in negotiating with 1st and 2nd charge lenders to reduce debt of homeowners so they can afford to sell and accept your offer.  This is absolutely the case in the current market – lenders are willing to negotiate now that previously would not entertain doing a deal.

Other companies are specialising in lease-options and right-to-buy where vendors can sell their houses to people willing to pay more than investors’ usual discount prices – deals can even be done where the vendor cannot afford to sell at any discount.

HBFi have partnered up with excellent professional companies to help us to provide these additional services and the money we make is money we never had.  This enables us to have advertising, marketing and overheads for FREE.

The key to making this work is finding the right partners you can work with that specialise in providing these services and ensuring you stick at it.

Source: David Coughlin – HBF Investments

Diary of a UK Property Investor – www.hbfinvestments.co.uk

The business world of LPA Receivers and their repossession of investment properties is booming thanks to the credit crunch!  Receivers are another fantastic source of discounted property deals.

This is a red hot topic currently and is one which provides both massive opportunities for bargain hunters with the right LPA contacts but also poses serious risks to property investors who are struggling with their mortgage payments!

Many property investors are having their investment property portfolios effectively repossessed immediately even if they miss just one mortgage payment.  Simply 10,000’s of Buy to Let properties will be repossessed during the credit crunch by LPA Receivers in this way!

Until recently, lenders would apply to the courts for possession of properties but this process can take months.  Lenders short cut this process instantly by utilising the Land and Property Act 1925 to appoint LPA Receivers to effectively repossess a property or property portfolio.  By instructing the LPA Receiver, the lender effectively redirects & collects rents and is able sell a property almost at will and at any price they want to accept and as quickly as possible.

There are many investors who have been caught in this trap and they appear to have no recourse to challenge the LPA Receivers actions:  please see forums: Consumer Action Group and Money Saving Expert. It appears that if landlords get into short term trouble they can lose all their equity and cash flow from their rents and there is little if anything they can do about it.

On the flip side, LPA Receivers need to find buyers for all these properties and this presents a massive opportunity for property investors with the right contacts.

HBF Investments is a company working with LPA Receivers to source properties and trade them with property investors.  Most of the properties come tenanted and at 25% discounts. 

I personally see this environment and opportunity persisting for 24 months as when interest rates rise from 0.5% far more investors are going to have their portfolios repossessed.

Receivers can be found by searching for LPA Receivers on google.

Riding the Property Investment Wave

The current economic climate may have dampened the spirits of some in the property investing world, but there are silver linings to be found. David Coughlin, Managing Director of HBF Investments, explores the current residential property market and offers his insight into why the current market offers a unique time to buy, what investors should be looking for, what to buy and the yields that could be achieved. 

The property market in the UK has undoubtedly suffered due to the recession, but compared to other forms of investments, such as stocks and shares, investing in property is still a very viable option. In fact, there are still plenty of benefits to be had from buying property now – if you have the relevant knowledge and know how about where and what to buy.

The property market has hit rock bottom this year and, although this isn’t great for anyone trying to sell a property, it’s these unique circumstances that have created a prime opportunity for savvy property investors. In fact, investors are able to purchase property at 25% to 50% discount, which offers a fantastic property investment deal. For investors keen to make the most of the market situation, then now is a great time to purchase property.

Property discounts are available on a range of different types of residential property.

Outside London, many new build developers are selling properties at a discount and they can typically be purchased for 35% to 50% discount. In places like Leeds, Barretts have been selling off their stock, for example at the Echo development, for up to 40% to 60% off previous list prices.

Lenders are very willing to sell repossessed portfolios at 25% to 40% discounts. Individual residential property vendors are willing to accept 20% to 30% off the asking price for a quick sale, even when they’re not in financial difficulty.

Exactly what investors should buy will depend on their own investment portfolio and property investment aims. If they’re interested in discounted property, then there are some really good deals on quality tenanted property available, many of which can’t be sourced through traditional estate agents and need the help of a specialist company, like ours, to acquire. 

The yields are now fantastic and stand at about 8% to 12% for many northern towns. This is especially true for three to four bedroom terrace houses that can be purchased for a discount for around £60,000 to £80,000. The local housing allowance (which increases as the number of bedrooms increase) will pay on average £500 to £750pcm – in some cases, a figure that’s far higher than private lets – which gives investors both security of rent and great yields. With mortgage rates standing at about 6%, investors end up with a healthy profit.

Not surprisingly, London still seems to be a location that many property investors are interested in, but there are very few rock bottom deals to be had in the city. Many investors are still willing to pay a premium for property in London and seem keen to buy without a discount, as long as the yield is good (8% to 10%) 

Generally speaking, we find there is also a lot of interest in property in all southern locations. In the north, properties are generally easier to source and there’s a lot of choice for investors in the North West and North East, where prices are cheaper. We’ve noticed that investors want to balance their portfolios by purchasing properties in potentially higher growth and more affluent areas in the south with lower priced and higher yielding properties in the north.

By and large, we only see lower interest in poorer northern towns and very remote areas where properties are difficult to rent.

At HBF Investments, we’re currently seeing a massive upturn in investors wanting to buy into the property market. In fact, with the increased demand, many sourcing companies and investors are reporting a lack of available property stock. This reflects what is being seen by estate agents and is slowly driving up property prices as a whole.

However, a lack of mortgage lending means that it’s still only a very small group of investors who are able to fully take advantage of the current discounts available to property buyers. When mortgage lending begins to return to normalised levels, the 20-255% discounts being achieved currently will begin to reduce and prices will start to increase again. 

The overall situation we’re seeing today creates a great opportunity for savvy investors to buy in at the bottom of the market at great discounts and catch the next wave of price increases – a scenario that only comes around once or twice in an investor’s lifetime. The question is, will you be riding that wave?

Source:   David Coughlin is Managing Director of HBF Investments

Diary of a UK Property Investor – www.hbfinvestments.co.uk

Once property investors have their great discounted investment property leads coming in from newspapers and referrals and they are buying properties and making money, it is then essential to build an online marketing presence.

I have put online marketing as a lower priority for generating leads from newspapers for a number of reasons:

1. it takes allot of knowledge, cash, skill and resilience to build a great website that actually generates business.   So it takes time for property investors to build the cash flows necessary for the investment and also to find the right people to build your site in the right way so it makes you money!
2. you need to be in a position to operate nationally if you are to make the most from online marketing.  If you are not able to operate nationally as effectively as you are locally then you will be wasting your time and money. 
3. it’s far tougher on the internet than in the local papers.  The competition you will have to beat to clinch deals from leads generated online leads is usually much better organised and equipped than the local guys in the newspapers.  You will have to really sharpen your customer service pencil if you are to compete effectively online.
4. Online marketing is a ‘black art’.  Adwords, pay per click, search engine optimisation, anaylitics etc  are all the buzzwords in the online marketing game.  People who want your money to build you a website will blind you with buzzwords and you risk wasting your money.  Some web designers will build your site to generate leads. Others will build your website so it is informative or looks good. Be very clear about what you want your website to achieve and then be even more canny and careful about who you choose to partner with to do your online marketing!

My advice is once you have an efficient and scalable business system that is generating good profits from local advertising AND you have the right partner you trust to build your online markeing plan, then [and only then], consider scaling up nationally and build yourself a great website.

Source:  David Coughlin – HBF Investments

Diary of a UK Property Investor – www.hbfinvestments.co.uk

Once property investors are up and running with their business and are sourcing and buying property investments through advertising, my 5th successful method of generating deals is through referrals.

A referral is as good as a done deal!  I offer all the vendors of properties I buy  a referral fee if they pass any other vendors on to me and I agree a deal with them.  I have done dozens of deals which have often been some of my best deals with the biggest discounts in this way.  I didn’t even have to try hard as the previous vendors told them how great our company was and they were sold on us and sold on the discount.  They were, and are, easy deals!

Also, by simply making it known to friends and family as well as contacts from advertising that you are in the market to buy property, you will generate property investment deals. 

So, property investors, to do more deals, first get round the estate agents, then start advertising, and begin to get successful referrals and your business really is off to a great start.

Source:  David Coughlin – HBF Investments

Diary of a UK Property Investor – www.hbfinvestments.co.uk

Number 4 on my top list for generating fantastic property investment deals is through newspaper advertising.  We have tried all forms of media to advertise for investment properties from motivated sellers and we’ve found newspapers to be the best, especially as it enables investors to focus heavily in a specific area – unlike the internet.

The great thing is that you don’t need a website to advertise in newspapers.  You simply need a small 6×2 advert [no need for fancy full colour pages!] with a telephone number and believe me you will generate leads.

We have found the average cost per lead to be no higher than £50 so if you are able to convert 1:20 of your leads into an agreed deal, you will be generating deals for no higher than £1,000.  That is probably the cheapest way to generate property investment deals and what a deal!  For just £1,000 you will have purchased a property with 25% (£25K) equity – what a return on investment that is!

There are lots of great strategies the  property investors adopt with newspapers.  for example, it is absolutely essential to measure results so you are able to reduce costs and maximise returns.  The key is to determine exactly which newspapers generate the most leads and to measure the costs per lead.  Simply ditch the papers that don’t perform quickly (within 2-4 weeks) and stick with those that do perform.

Once your campaign is in full swing you are now on the way to building a scalable and profitable property investment business.

Source:  David Coughlin – HBF Investments

Diary of a UK Property Investor – www.hbfinvestments.co.uk

A third great way for property investors to source fantastic investment properties is through auction websites such as E.I.Group (EIG).  

EIG lists 1000’s of investment properties available at auctions located all round the UK.  It is simply impossible not to be able to use this site to pick up a bargain investment property exactly where you want to buy one!

The great thing about EIG is that you do not even have to go to the auctions to buy the properties!  You can use EIG to check for properties that did not sell at auctions and put in your offers post auction.  If your offer is accepted you will have the cash available to put down a 10% deposit and be in a confident position to pay the rest of the cash to complete within 28 days.

Before you pay over your 10% deposit you have to ensure that (i) if you are buying with a mortgage, that you have your ‘decision in principle’ in place already with a lender who will give you a mortgage offer within a week or two so you can complete within 28 days; (ii) you use an experienced auction solicitor and broker to ensure that the legal title is acceptable for mortgage lending and who will complete in the required timescales; and (iii) that you have had the property surveyed so it is structurally sound and in acceptable condition – you do not want any nasty surprises!

Many property investors I know use EIG to do 2 or 3 deals a month to source fantastic deals at about 35-40% discounts. AND they do all this from their armchairs! 

Source:  David Coughlin – HBF Investments

Diary of a UK Property Investor – www.hbfinvestments.co.uk

The second great way I found to finding investment properties came from building relationships with one particular estate agent that I clicked with.  I bought my next fantastic deal in Loughborough in this way – a student house with 5 lettable rooms making me an £800pcm profit!

Better still; the estate agent that sold it to me also rents it out for me through their letting agency, so I have no hassle collecting rents on a room by room basis.  This perceived hassle is the greatest deterrent to property investors buying HMO’s and managing room rentals – so also I had a bit of luck!

It took a few months [not a long time] and a bit persistent endeavour with the estate agency to eventually get the nod from the agent to buy this investment property deal.  It was simple perseverance but also having the mortgage and funds in place ready to buy quickly that eventually got me this deal.

Building relationships with agents is not easy and it takes time but if you are in a position to buy and you are determined and they come to like you – trust me it will pay off and it does not take long for the estate agent to try and find you the deal you are looking for.  After all, they want their commission!