Josh, our avid investor, needs to build his portfolio faster and to create funds for his new great idea to invest in multi-let properties. Follow him on his journey to attract investors.
He wants to create some more income as his enthusiasm for his job just hit rock bottom. He has found an area near where he lives that has 3 bedroom properties for about £100,000 and if he multi-lets them he can get about £550 NET per property. If he has that much left over then he can afford to get some investors involved and offer them a good interest rate for borrowing their money.
He is a very organised guy and so he writes out the details of the deal in full.
Examples of purchase figures
Purchase Price £100,000
Actual Value £115,000
Deposit Required @ 75% = £25,000
Refurbishment costs £4,750
Furniture costs £4,580
Legal fees £1,500
Total required £35,830 @ 75% LTV
Potential to revalue and remove equity may be possible when value reaches £120,000. Estimated amount to be released £15,000
If he rents each room to individuals he can bring in the following amounts:
2 Rooms x £ 75 per week
2 Rooms x £68 per week
Income would be:
Gross £286 per week
Gross £1,239 per month
Gross £14,872 per annum
Outgoings – monthly
Gas and Electric; Water; Council Tax; Insurance; Broadband £275
Mortgage @ 6% £375 (less initially as interest rate below 6%
Total monthly £650
Gross income £1,239
Less outgoings £650
NET income £589
If Josh can borrow £25,000 at 10% per annum he would have to repay at £208 per month or £2,500 at the end of the year, then his NET monthly income would still be £381.
He can’t advertise for investors, but he does know several people who would like to get a better return on their money than they do in the bank – not difficult really.
Because he’s worked out the figures it means that he can explain to the investors what he is going to do and that their money is secure. He needs to convince them they need to leave their money with him for at least 3 years and preferably 5 years with a proper loan agreement in place as that is what has attracted the higher interest payment.
The best thing about these 3 bed properties is that there are three ways to use them which makes them very flexible and allows Josh to make a profit on them whichever way he chooses to use them.
Firstly – even if he had to put a family into the property the income would exceed the mortgage payments. He wouldn’t have to do any major work, just redecorate and he wouldn’t have to furnish or pay the bills. This keeps the outgoings right down and the property is easy to sell on to a family at any point.
Secondly – he could turn one of the downstairs reception rooms into another bedroom by putting in a stud wall which allowed all occupants to exit to the rear of the property without going through that downstairs room. He can then let the property to LHA claimants who are 25 and over (soon going up to 35). They get two rooms each and attract the full single allowance – he will get higher rent than if he just lets to a family. The stud wall is easily removed if a family want to buy the property at a later date.
Thirdly – he can rent this out as a multi-let property without needing a licence in most areas because there are only 4 tenants. He’ll still need to put in the stud wall, but he can show from his figures that this will give him the highest profit.
If he can get 4 of these properties then he’ll have covered his wages, and 6 would clear a host of other luxury expenses too. He has worked out the tax breaks he can get and this will help to keep the income from the properties too.
The more detail he has for investors the more they seem interested in getting involved. It really shows that Josh has done his homework and that he is trustworthy. It also shows the value of the property so that the investor has confidence that they have something to show for their money too, which they wouldn’t have with some ordinary investments.
For doing all his due diligence he always uses Yvonne Emery’s e-book ‘ Due Diligence in 15 minutes’ and this saves him lots of time. Go to http://www.yvonneemerycoaching.co.uk/due-diligence-in-15-minutes/
Josh has proved it works for himself and now his friends and family are starting to get interested. He’s set himself up with another bank account for all his properties and is keeping very good records using property portfolio software which warns him when they need gas certificates and insurance renewals, as well as keeps track of all the tenant’s payments and their tenancy agreements.
He’s really enjoying this new business venture and it’s giving him the enthusiasm he craves that his job isn’t doing any more.
If you want to learn how to use Josh’s system and find places like this near you, then call 01733 689567 and get onto a Property Achievement Group starting in Birmingham in February or London in March, or talk to Yvonne about how she can help you to invest in a way that gets you fired up and ready for action. Download Yvonne’s FREE guide to Investing Your Way.