Investment Strategies

COMPLIANT PROPERTY SOURCING & DEAL PACKAGING AGENTS

Purchase Lease Option

A Lease Option Agreement is a legal agreement that allows you to control a property and generate income from it, with the right (but not the obligation to buy)

Lease: You agree a monthly payment to the property owner, which allows you to manage the property and rent it out to tenants for a profit

Option: You agree a price at which you can buy the property later, if you want to.

At the heart of any lease option agreement, there are 4 main terms that need to be agreed:

The monthly payment – which is usually whatever the owner needs to cover their mortgage and any other costs
The purchase price - that you have the option to buy the property for in the future
The length of the agreement – after which you have to hand the property back if you haven't used the option to buy
The upfront payment you'll give them in exchange for the option (which in law is called a consideration)

For the agreement to be legally binding there needs to be at least some upfront payment – but this can be as little as £1. Example…

Let's say you agree a lease option with the following terms:

You rent the property out for £600 per month, and on average your monthly expenses (repairs etc.) come to £100. So every month, you make £200 profit.

Fast-forward 5 years, and there are 3 possible scenarios:

The property is still worth £90,000. Obviously you wouldn't want to buy it for £100,000, so you let the option expire and give the property back.
In this case you have still made £12,000 in rental profit, minus the £1 you paid up front, for a total profit of £11,999!
The property is now worth £110,000. You take out a mortgage and buy the property in the normal way for the £100,000 that was agreed.
You just bought a house at a £10,000 discount…and have made £12,000 in rent in the meantime.
You could sell the option for £10,000 to someone who wants to buy the property; they would pay £10,000 to you and £100,000 to the property owner, and end up buying the property for its current value. You would walk away with £22,000 in cash: £12,000 from the rent, and £10,000 from selling the option.
An option allows you to buy the property at any point within the option period, not just at the very end.

I am in interested in Purchase Lease Option Properties as part of my Investment Strategy

Rent-to-Rent - (R2R SA) (R2R HMO)

Firstly, Subletting is legal if the tenant obtains the landlords permission to let out the rental property.

Subletting is only illegal when done against the specification of a contract. We always have a contract in place which allows us to use the property for the agreed purpose. The document should specify that you take over the rental payments and bills for a set period (such as 3-5 years) and will maintain the property. The landlord usually still must pay for some maintenance issues above a certain cost (usually we say £200). We also have break clauses in the contract (normally at 6 months) which enables both the landlord and your company to exit the contract early if there are any issues.

It is your responsibility to maintain the correct insurance, the owners responsibility to maintain buildings insurance and the owners responsibility to confirm their mortgage company will allow the property to be used as a HMO, Serviced Accommodation etc.

R2R HMO

Rent to Rent HMO is when you rent a property from a landlord, but instead of living there you let the rooms out individually. You must have the Landlord’s permission and the correct contracts and insurances in place. If you can rent the property for the same price as a normal single let family home (or less) then you should be able to make a profit by then offering the rooms individually. You do need to factor in management, advertising and maintenance costs.

I am in interested in Rent-to-Rent (R2R HMO) Property as part of my Investment Strategy

R2R SA

Rent to Rent SA is when you rent a property from a landlord, but instead of living there you rent the property out on a night by night basis (serviced accommodation). You must have the landlord’s permission and the correct contracts and insurances in place. If you can rent the property for the same price as a normal single let family home (or less) then you should be able to make a profit by then renting the property on a nightly basis. You do need to factor in management fees, advertising and housekeeping costs.

I am in interested in Rent-to-Rent (R2R SA) Property as part of my Investment Strategy

Buy-to-Sell (Flipping) (BRR) (BRRRR)

What’s involved in ‘Flipping Property?’

Buying a property to sell is completely different to buy-to-let, Buy-to-sell is aimed more at short-term or mid-term strategies. There‘s no worrying about rental income or tenants, you’re just simply looking to sell for as much profit as possible. The main attraction of buy-to-sell is the amount of money that can be made quickly. You can buy and sell in a matter of months rather than the long- time frame that comes with a buy-to- let strategy. This type of investment only makes money when you are working. There is no passive income, just the money you make on the sale.

The most important thing to keep in mind when looking at buy-to-sell is location and budget.

You need to ensure you buy at the right price and keep any refurbishments or maintenance within your budget.

Secondly you need to market your property quickly and effectively. Having a good location for this process is ideal and will help the sale immeasurably.

Choosing buy-to-sell for your investment strategy depends entirely on your goals, if you’re looking for something short- term and want to generate a lump sum, its perfect. If you’re in for the long-haul, want to build a portfolio or you’re looking for a passive income, it’s not for you.

Pros:

Cons:

I am in interested in Buy-to-Sell (Refurbish Flip) Property as part of my Investment Strategy

BRR

Buy Refurbish and Refinance are Properties requiring work so you can add value to them. The idea is that you purchase the property via a bridging loan or cash, refurbish the property to add value, refinance the property by using a mortgage (therefore withdrawing most if not all of your intial investment money) and then renting the property out.

BRRRR

The overall idea of the BRRRR method is to add enough value to a property that when you refinance it you will get most if not all of your capital back. This allows you to take your money and use it over and over again to buy deals

B is for Buy: We will Find analyse and close the deal

R is for Renovate: Unless you are doing rentals in the luxury market , less expensive upgrades often have a higher return on investments than expensive upgrades

R is for Rent: Finding great tenants that will pay market (or higher) rents is key to your strategy. The 3 steps are to Find, Screen, and Retain

R is for refinance: The goal is to get your money back, so you can repeat the process which makes this step the most crucial

R is for Repeat: Once you have made most or all of your money back it’s time to find another real estate deal. You will have your cash back and a new stream of income.

I am in interested in Buy-to-Sell (BRR OR BRRRR) Property as part of my Investment Strategy

Buy-to Let

Professional Single Lets - HMO's - Student Lets - Housing Benefit Tenants - Holiday Lets/Service Accommodation

By buying a property to rent out, you aim to make money in two different ways:

There are lots of different varieties to look at but they all share the basic Model: Regular income with the hope of further gains over time We offer all of our clients a confidential customised service to suit individual needs.

professional single lets

This would be considered a ‘’traditional’’ buy to let renting out a property as a single unit to a working family or individual, its been around forever and it’s as simple as it gets. The vast majority of property investors stick to normal buy-to – lets and there is a lot to be said for keeping it simple.

PROS:

CONS:

I am in interested in Buy-to-Let (Professional Single Let) Properties as part of my Investment Strategy

HMO’S

An HMO is basically a ‘’House Share’’ Where a property is rented out room-by-room to unrelated individuals. There are different definitions of what constitutes an HMO.

Renting out a property by the room tends to generate more revenue than letting it as a whole.

PROS:

CONS:

Although they have grown massive in popularity, the knock on effect is that councils are taking more action to regulate them: tightening up existing regulations, increasing the types of HMO that need to be licensed, and refusing permission for new HMO’s to be set up in some areas
There are higher costs, HMO’s tend to be let furnished with bills included, plus there is likely to be more wear and tear. More intensive management is required so more time consuming too, which means either higher letting agent fees or more involvement from the landlord
More regulations to comply with
Harder to get a mortgage than for a single let

I am in interested in Buy-to-Let (HMO) Properties as part of my Investment Strategy contact

STUDENT LETS

Student lets are really a sub-type of HMO’s, but are worth considering separately, because the student market has its own characteristics.

Generally, the management of a student property is more predictable because they sign up for a set amount of time, and you know exactly when they'll be moving in and out. Also, they'll usually be on one joint contract. so if one student leaves, the others will have to continue paying their share of the rent.

PROS:

CONS:

I am in interested in Buy-to-Let Properties for (Student Lets) as part of my Investment Strategy contact

HOUSING BENEFIT TENANTS

The terminology around housing benefit is tricky: it's calculated using something called Local Housing Allowance (LHA), but in some areas it's been rolled into Universal Credit (UC), and many people (tenants included) still refer to it as DSS. You'll see all these terms mentioned, but all mean the same thing: renting to tenants who have their housing paid for by the local authority.

PROS:

CONS:

I am in interested in Buy-to-Let Properties for (DSS Tenants) as part of my Investment Strategy contact

HOLIDAY LETS - SERVICED accommodation

A holiday let is, as the name suggests, a property that's rented out short-term to holidaymakers. You'll also hear about “serviced accommodation”, which is the same thing but aimed more at business travellers in urban areas. There's a lot of crossover in the two terms, and the model is the same: the only difference is the type of customer you target.

PROS:

CONS:

I am in interested in Buy-to-Let (Holiday Lets - Serviced Accommodation) Properties as part of my Investment Strategy contact

JV Partnerships

Fixed Returns & Profit Share

NB: WE ARE ALWAYS LOOKING TO WORK WITH NEW JV PARTNERS FIRSTLY WITH THE RIGHT MINDSET AND FIT, ADDITONALLY THE RIGHT SKILLS, FUNDS, OR/AND EXPERIENCE. IF YOU CAN BRING ALL OF THESE REQUIREMENTS TO THE TABLE BETTER STILL!!

WHY JOINT VENTURE?

Two heads and (wallets) can be better than one! Joint Ventures in property, are a popular form of property funding, and is used when mutually beneficial to all parties in a whole range of situations.

WHAT IS A JOINT VENTURE?

A joint venture is a commercial arrangement between two or more participants who agree to co-operate combining resources or skills to achieve a particular objective. Joint ventures cover a wide range of collaborative business arrangements which involve differing degrees of integration and which may be for a fixed or indefinite duration.

WHY JOINT VENTURE?

There are many reasons why a business may seek a joint venture partner.

The main reasons being is that there is a need to access to what the other person has, which is looking to tap into a prospective partner’s greater or more specialised expertise or resource. Otherwise there is no motivation to participate.

TYPES OF PROPERTY JOINT VENTURE

There are endless variations on how to structure a joint venture, but there are two broad categories; profit share, and fixed interest.

PROFIT SHARE JVS

This is probably what comes to mind when most people think about a joint venture: a project is executed, a profit is made, and that profit is split in pre-agreed shares.

For example, a deal is structured like this:

Then, the project takes place:

Total cost: £130,000

The property is then sold for £160,000. The total profit is £30,000, so Mr A and Ms B each make £15,000.

FIXED INTEREST JVS

If a JV is structured where one party is putting in the money and the other is doing the work – which as I said earlier, is very common – their partner could agree to pay them a fixed rate of interest rather than a percentage split.

For example:

Then we re-run the same project:

Then, the project takes place:

Again, the total cost is £130,000 and the property is sold for £160,000. For simplicity, let’s say that the project takes a year from start to finish.

A GUIDE TO HOW WE STRUCTURE OUR JV AGREEMENTS

We get to know our prospective partners well. We don’t need to be best buddies but we do need to get on
We decide which structure we are going to use. For instance is a profit share or fixed interest model more appropriate.
We get complete clarity as to who will do what, for instance who is putting in the funds, time commitment to project, responsibility for each part of the project: like dealing with legal, project managing, negotiating the sale, and so on, as we don’t want any resentment to creep in later.
We agree on the percentage split or interest rate,
The right deal is one we are both happy with. It’s imperative the project goes well to continue our JV relationship in the future
We will discuss everything that could potentially go wrong. We make sure all of our prospective JV partners join us with complete transparency
Agree on how it will be secured var- within the below options are endless variations
- One person buys the property and the other takes a legal charge over it
- Both partners buy in joint names
- Form a company/SPV with both partners as shareholders, and have the company buy the property
We will get the agreement drawn up by a solicitor
The potential benefits may be easy for those involved to see, but will be difficult to achieve without a clear-cut strategy, mutually understood objectives, thorough documentation and plenty of commitment from all involved.

Joint Ventures can be fantastic, but they are not always suitable for everyone.

Some people thrive in collaborative work. Others like to have full control, and don’t like being answerable to anyone else.

There is no right or wrong; the important thing is to know yourself and understand how you prefer to work.

If you hate the idea of having to run decisions past someone else or get approval for your plans at the outset, or provide them with regular updates… you won’t enjoy the experience of a joint venture , however much financial sense it makes.

I am in interested in Joint Venturing (Profit Share) as part of my Investment Strategy

I am in interested in Joint Venturing (Fixed Interests) as part of my Investment Strategy

Commercial Property

BUY to lease - Commercial to residential

At present, the Government is actively encouraging investors to make use of redundant, obsolete commercial buildings by turning them into residential accommodation. In comparison to recent years, it’s now much easier for investors to obtain planning in a bid to meet the demand for more housing.

Will I always need planning permission?

Not Always. In 2013 the rules changed, which meant some kinds of commercial property could be converted to residential, without the need for full planning permission.

This is under something known as Permitted Development Rights (PDRs) which are granted by parliament rather than local authorities.

Whether you can use PDRs to escape full planning permission will first hinge on which ‘use of class’ the commercial property falls into.

If planning permission is required. You will need to apply direct to the Local Planning Authority (LPA) department of your local council. Application fees vary from between £96 to around £462 for full planning permission change of use. Each LPA operates slightly differently, so be sure to engage with them early on in the process.

There are other advantages of commercial conversions too. And, potential tax advantages, in that you can claim capital allowances. Of course, it all depends on how you structure your deal, but with the right advice from your accountant it might turn out that if you’re doing a deal that’s “big enough”, then your capital allowances could eradicate your income tax. A massive plus!

Commercial conversions are chunky deals that have the potential to make you a lot of money for the same amount of effort. They have the potential to give your cash flow a boost to really help you progress your property business.

Think of it this way. If you’re going to buy a buy to let, this will involve dealing with estate agents and paperwork. It will involve dealing with solicitors and mortgage brokers. Essentially, it will involve doing the same leg work as with a commercial conversion deal. However, when you do a commercial conversion and when the project is complete, your profit should have more zeros on the end of the figure. What’s more, it’s likely it will take the same amount of time and effort as a buy to let.

What is commercial property?

The term commercial property applies to any building designed to turn a profit- a Gym, Warehouse, Supermarket, Cinema or Office Block.

Commercial property is the catch-all term for any physical property used for commercial purposes, such as running a business, shop or hotel, for example.

The market is broadly split into large scale commercial developments, such as shopping malls, industrial units and big multi-storey office buildings, and smaller commercial premises like corner shops, restaurants, garages and other business outlets.

It's the smaller scale commercial property that traditional buy-to-let landlords are beginning to move into.

This is because yields in this sector tend to be higher than in residential property. Rather than letting to just a family as a home would, for instance, a semi-commercial property - such as a shop with a flat above it - generates two rental incomes for a landlord.

Commercial properties are higher risk - hence the higher rents - because they rely not only on a tenant paying each month, but also on the profitability of the business they run in order to generate that rent.

Why are investors turning to commercial property?

Residential buy-to-let has seen considerable regulatory and tax changes since April 2016, when all new purchases became subject to a 3 per cent surcharge on stamp duty.

This was followed in January 2017 by the introduction of tougher affordability checks on buy-to-let mortgages, resulting in most lenders requiring landlords to demonstrate that their rental income covered the mortgage payment by a ratio of 145 per cent at a rate of 5.5 per cent. Previously, this ratio had been 125 per cent at the mortgage pay rate.

In April last year, landlords also began to lose the tax relief they could claim against their mortgage interest, with the switch meaning they are now effectively taxed on their revenue as opposed to their profit.

And in October, landlords with four or more mortgaged properties became subject to further affordability checks by lenders when they remortgaged one property or applied for a new loan.

Rather than the numbers having to stack up for that one property, landlords now have to submit figures for all properties in their portfolio before lenders can approve a loan.

But for those who are prepared to do their homework and treat their investments as a business, the changes have been something of a catalyst for restructuring portfolios to make them more profitable.

Some landlords have opted to sell single-let properties and purchase houses in multiple occupation, as these tend to deliver higher rental incomes and therefore better yields.

Others have begun to invest in commercial and semi-commercial deals.

What are the benefits of commercial?

The yields tend to be higher, as the risk relates not only to the property itself, but also to the viability of the business renting it.

This means that you'll need to be comfortable understanding the tenant's business, as well as having a grip on your own understanding of property investment.

The way mortgage lenders assess commercial property is also different from traditional buy-to-let. The affordability relates to the business as well as the expected rental income, while the portfolio assessment and rental income calculation rules referred to above are not applicable to commercial and semi-commercial properties.

Commercial properties are also usually leased on a long-term basis, with annual rent increases often linked to inflation - thereby providing investors with some additional security for their income.

Additionally, the 3 per cent stamp duty surcharge on buy-to-let is not applied to either commercial or semi-commercial properties.

Direct investment

It's not possible to get a buy-to-let mortgage on a commercial or semi-commercial property - you'll need to apply for a specialist commercial mortgage.

If you've never invested in commercial property before, the number of lenders that will deal with you is limited. Most lenders want to see that you have experience as a commercial landlord before they'll sign off.

Rates are typically higher than in buy-to-let and the mortgage is often linked to the underlying business tenant's lease. For example, some lenders require the tenant to sign a lease that matches the term of the mortgage - 15 years say.

If you're buying a commercial property with vacant possession – i.e. there's no business in it at the time you need the mortgage - you may also really struggle to get a loan.

Nearly all lenders want to see evidence that the business is in situ and trading profitably before they'll approve your mortgage application.

The type of business on the premises is also highly relevant - lenders look for stable businesses with good cash flow; pubs and restaurants and nightclubs are a bit of a turn-off for lenders, as these businesses can have short lifespans and a high rate of going bust.

There are also the outlays to consider - you'll need to pay stamp duty, legal, valuation and broker fees, mortgage fees and there will be maintenance costs.

I am in interested in Commercial Property to Residential Conversions as part of my Investment Strategy

I am in interested in Commercial Property for Commercial use (lease) as part of my Investment Strategy

Buying Off-Plan Property/Off-Market Property

What is Off-Plan Property?

This strategy is not strictly Buy-to-Let or Buy-to-Sell (both are viable), it’s simply a different method of initial purchase. Off-Plan Properties are new-build developments that are not ready for tenants, instead bought by investors before completion. We offer all of our clients a confidential customised service to suit individual needs.

By buying Off-Plan properties you can often find excellent individual discounts. Additionally, Off-Plan properties are often seen as good investments because of the capital growth they can experience between planning and completion. We offer all of our clients a confidential customised service to suit individual needs.

As an investor, you would buy a property unfinished, wait for completion, research the market and decide whether to rent or sell. This offers flexibility in strategy, although it requires a lot of management and due diligence. We offer all of our clients a confidential customised service to suit individual needs.

As always, growth isn’t guaranteed. Investing in Off-Plan property is entirely dependent on the market, particularly if you’re hoping for capital growth during the build period. Be sure to research the area and the market conditions before diving in. We offer all of our clients a confidential customised service to suit individual needs.

PROS:

CONS:

Advanced strategy that requires management and due diligence
Cash often necessary for deposit
Off-Plan property investments are not the most traditional but have become increasingly attractive recently.
Off-Plan can offer excellent capital appreciation during the build period and strong rental yields when it completes. Because most Off-Plan property is new build, the latest services, facilities, build warranties and appliances are provided, creating a more desirable apartment.
With no agent, buying direct from the developer can also help with keeping costs down.
Although every investment comes with its own risks, it can pay to get in early on a development that will either have a transformational impact or benefit from those in the surrounding area.
As always, do your research, check the details or any warranties or guarantees and work with a trusted developer. Remember, in the right circumstances, there can be a lot to gain from securing your investment before it hits open market and increases in price.

I am in interested in Off Plan/Off Market Property as part of my Investment Strategy

Land Opportunities

For the astute investor, whether your plans are to redevelop an existing property or build a new, buying the right land is a sound investment if the research has been done correctly.

Defining your requirements

People buy land for a multitude of reasons. A growing number see it as an alternative investment to property - something that is certainly safer in the medium to long term.

Empty nesters, having built up sufficient equity in a family home that is perhaps now too big may look to acquire land for a bespoke self-build project constructed to their own specifications and lifestyle needs. Others buy land as a gift, maybe to assist their adult children realise the dream of building their own first home - while developers will always be interested in plots to redevelop into flats or houses for a quick profit.

Whatever purpose the land is needed for and whoever buys it, the rule caveat emptor ('let the buyer beware') still applies. The key to successful land acquisition is thorough research to mitigate the risks, and asking yourself four important questions:

Purpose - why do you want to buy land?

Use - Is the land suitable for your plans?

Cost - does your budget cover the cost of the land, building, legal and survey costs, plus a contingency for the unforeseen?

Re-sale - will your project realise a profit?

How Much?

Exactly how much a plot of land will cost depends on several factors, notwithstanding its location, size, proximity to transport links and whether it benefits from any type of planning permission. Land sold with planning permission is always more expensive than that without.

Land values are also relative to the general state of the property market.

Finding the right plot

Land for sale is generally categorised as follows:

Brownfield - land that is or was occupied by a permanent structure that has become vacant or derelict and has redevelopment potential.

Greenfield - undeveloped land, such as parks, forest and countryside.

WE SOURCE AND TAKE ADVANTAGE OF ALL LAND BUYING OPPORTUNITIES

Auctions - land auctions

Local authorities - cash-strapped councils often have parcels of land they are willing to sell.

Utility companies - some utility organisations such as water, gas and electricity companies have surplus land available to buy.

Private enquiries - many private residential homes have large gardens with building potential.

WE TAKE LOCATION INTO CONSIDERATION

The time honoured mantra of location, location, location, applies equally to land acquisition as it does to property. Whether using the land for a self-build project for personal use or redeveloping it for profit, one should always have an eye on re-sale.

You are far more likely to achieve a higher resale value if the location of the plot or development is convenient to transport links, shops and amenities. If the land is for residential redevelopment in a rural location, the property usually has to have exclusivity and uniqueness to realise its full value potential.

WE MAKE SURE THE LAND HAS BEEN SURVEYED BY A QUALIFIED SURVEYOR & IDEALLY MEMBERS OF THE ROYAL INSTITUTION FOR CHARTERED SURVEYORS

A proper survey of the land carried out by a qualified land surveyor is essential and will highlight all boundaries, services, overhead power lines, public or other rights of ways and flood risk. Land surveyors also perform a vital function in carrying out feasibility studies, or environmental impact assessments on potential sites to assess whether plans are workable.

One key advantage of having land properly surveyed is that title deeds are often outdated and boundaries have a habit of changing over the years. A clear, unequivocal land survey will define the lay of the land for the avoidance of any doubt, negating potentially costly neighbour disputes down the line.

PLANNING PERMISSION

There are three basic scenarios when buying land insofar as planning permission is concerned:

The land has no planning permission
The land has outline planning permission
The land has detailed or 'full' planning permission for a building for which a set of plans has been submitted and approved.
Before proceeding to purchase land, it is vital to establish with the local authority that they will ultimately allow you permission to bring your plans to fruition. Otherwise there is no purpose in buying it in the first place.
This said, acquiring land with planning permission already granted doesn't necessarily guarantee that you will be able to build on it. There may be restrictive covenants attached which preclude you. This is an area your lawyer should carefully check.
Buying land with an existing property standing on it provides an easier solution as it benefits from what is referred to as past precedent. In such situations, it is usually easier to get full planning permission if either redeveloping an existing property or demolishing it and rebuilding a new one as per the original style or footprint - in the case of the latter, only of course if your plans are reasonable and in keeping with the neighbourhood.

THE LEGAL PROCESS

The legal procedure for buying land is generally a lot less complicated than buying and selling property. It should always be conducted by a qualified solicitor specialising in land transactions. As land is a valuable commodity often quickly snapped up by other buyers, you should be looking for a lawyer who is energetic and enthusiastic to your cause. Use the lawyer's knowledge and expertise to answer important questions relating to issues such as permitted use, boundaries, footpath or other public access and rights over the land issues, to satisfy yourself that the purchase is a sound one.
Availing your lawyer at an early stage with as much detail about the plot as possible is crucial. This could be in the form of site photographs and your intended plans for its development. You can establish whether an aerial photo of the plot exists by visiting the site www1.getmapping.com.

The lawyer's function will essentially be to check that the land has clear title - i.e. is legitimately for sale - and to initiate searches to see if there is, or has been anything which could affect the stability of the land such as previous mining, flooding etc. They will also check the legal documentation relating to the size, scale and dimensions of the site to ensure that you are buying what is being sold.

Once your lawyer is satisfied that all is in order and you are sure that you have, or will get the necessary approval for your intended use, then it is usually safe to proceed to purchase.

I am in interested in land for sale BMV as part of my Investment Strategy

COMPLIANT PROPERTY SOURCING & DEAL PACKAGING AGENTS