Tag Archiv: property investment

Yellow envelopes take over the World | Dave O’Hara

Well, maybe not the whole World, but a very small part of it. Yellow envelopes are our secret weapon though. How many letters do you get every day in yellow envelopes? That’s right. None! If someone sent you a bright yellow letter, would you be intrigued by it’s uniqueness and be compelled to open it? We think so!

The whole point of writing to someone by conventional means is to have your letter read. If you can get them to do that, you are in a perfect position to get your offer across. Stats indicate that for every 100 letters you send, 10 will result in a call back, 3 of those will be seriously interested in the offer and one will actually sign up to your offer. So it’s a numbers game. If you want 10 sign ups, you need to send 1,000 letters. That sounds a lot, but you don’t need to send them all at once! Spread them out so you can take the phone calls, otherwise you’ll be deluged. One deal a month is fine, so send out 100 letters every month. In this particular type of property deal, each sign up should be worth £3,000 per annum, so after 10 deals in a year you’ll be receiving £30k of passive income! Awesome or what?!

Getting started is the hardest part. What should I ask? How do I ask the questions? What if they are hostile, or turn me down flat? Well, i’m no expert, i’ve only been doing this for a few weeks, but i’m getting more confident by the day and, believe it or not, people are usually nice. The fact that they’ve rung the number on your letter means they’re already interested in what you have to say, so don’t be afraid.

My advice, for what it’s worth is, try to strike up a natural conversation. Work your questions into the conversation so they don’t really feel like questions at all. I now say “Tell me about your house”, and folks will generally let you know all there is to know about the property they are selling. To find out if there is a deal to be had, you need to know the details of their mortgage (type, monthly payment, amount remaining) and you also need to find out how motivated they are as a seller.

Once you have gathered all your info (always have a proforma sheet available to fill in the blanks as you talk), thank them for their time and schedule a call back after you’ve crunched the numbers. Always ring them back at the agreed time, it builds trust and let’s them know you’re professional and value their time.

Crunching the numbers is all about working out if there is any money in the deal for you both. It needs to benefit both the seller and you the buyer otherwise there’s no point in making a deal. I’ve learned quickly what sort of nett rent I need for a particular purchase price to make a deal viable. Get used to that too. If you need to cover a £600/month mortgage but local rental income is only £500/month then it makes little sense. Aim for a minimum of £250/month nett positive cashflow (£3,000 per annum) if possible.

Comedy Call

Want to hear about a comedy call from a guy in Middlesbrough? This actually happened recently when we ‘yellow lettered’ the Teesside metropolis. You need to imagine the caller speaking in broad smoggie.

Me: “Hello, Dave O’Hara speaking, how can I help”?

Caller: “Alright mate, i’ve ‘ad a letter off yers”

Me: “Ah yes, we’ve sent a few letters to houses we’re interested in buying, can I ask the address please so I’m certain which house we’re talking about”?

Caller: “Aye, it’s number 10 mate”

Me: “And can you tell me the street name as well?”

Caller: “Aye mate” (long pause)

Me: (quickly realising this might not be straightforward) “OK, tell me about your house”

Caller: “It’s not my house mate, know what am sayin’ ?”

Me: “Are you the tenant?”

Caller: “No mate, it’s me mam and dad’s house like, know what i’m sayin’? ”

Me: “Ah right, well I think it’s them I need to speak to”

Caller: “Aye, probly”

Me: “Can I speak to them please?”

Caller: “Nah, ther in Benidorm mate, know what am sayin’ “?

Me: (knowing what he was saying) “OK”

Caller: “I’ve just split up with me girlfriend like, know what am sayin’ “?

Me: “Sorry to hear that, do you know when I can speak to your parents”?

Caller: “Problys aye. D’yer wanna buy the house like”?

Me: “Yes, I am interested”

Caller: “Me an me mates can buy this house like, know what am sayin’ “?

Me: “When can I speak to your parents please?”

Caller: “After August like”

Me: (with no intention of ever ringing back) “OK, i’ll ring back then”

Caller: “Alright mate, mint”

Thankfully, not all phone calls are like this, but sometimes you get them (know what i’m saying?)

New Advert Board for Property Services

After joining multiple Facebook groups to see what property people are dealing in, it became clear that the different types of investments are scattered into many different places, so I decided to open a free property services directory section on the site to allow people to post their own property services.

If you are a seller, a property you’d like to buy but need sources of finance to allow you to buy, or if you have a lease option you’d like to pass on, then post your service details on the board. You can then link it to Facebook or Twitter and this will help spread the word and hopefully make your property services and your advert visible to many more people.

As we all know, THE most important thing to do in property is to Network and make connections. This becomes easy when like minded people gather in the same place. That’s what i’d like the Property services section to achieve if possible.

Please give it a go. Like I said, it’s free to use and hopefully will help you get your word out and make us all more money 🙂

Advert Board : https://dkohara.com/directory/


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Buying to let as a limited company

Here’s an article which we found very helpful with the decision of whether to buy BTL properties as part of a personal portfolio or as a Limited Company. I hope it’s useful for those looking for information about this.

Buying to let as a limited company By Steven Boyde

There are two ways of owning buy-to-let property: using your personal name, or through a limited company.

Since April 2017, there has been an increase in the number of landlords purchasing buy-to-let investments in a limited company rather than in their personal name. This is largely due to changes set out by the government in the 2017 Budget, including a reduction in the amount of tax relief available for interest on buy-to-let mortgages.

Previously, tax was due on the net rental income after allowable expenses have been deducted, including mortgage interest. This meant higher and additional rate taxpayers could claim relief at their highest rate, 40 per cent and 45 per cent respectively. The government’s announcement means that over the next four years, tax relief will gradually be reduced until only basic rate (20 per cent) relief is available.

One of the primary reasons for the growth in limited company buy-to-let ownership is the different tax treatment. Instead of paying income tax as an individual, a limited company pays corporation tax, which currently sits at 19 per cent. This is reducing to 18 per cent in April 2018 and 17 per cent in April 2019.

The differing tax treatment also means that lenders’ stress testing is often more favourable for lending to limited companies versus ownership in a personal name.

The mechanics behind a limited company purchase are that the borrower sets up a limited company or property special purpose vehicle (SPV), which is purely for the purpose of owning property. The borrower then deposits funds into the limited company and arranges lending to it, which, combined, allows the company to purchase the property.

While increasingly popular, there are several things to consider and it should not be assumed that limited company buy-to-lets are suitable for everyone.

Tax implications

Tax should be favourable in the first instance, but once the income (rent) is paid into an SPV, profits will ultimately be distributed. This is usually done via dividends, which can be more complicated.

Only corporation tax is applicable at first when you do annual company accounts, but if you want to withdraw money, you have to do it in the form of dividends. Dividends are favourable at a low level, because the first £5,000 is tax free [£2,000 from April 2018], but this gets higher the more your draw out.

The latest tax rates according to HMRC are:

Basic rate 7.5%
Higher rate 32.5%
Additional rate 38.1%

Furthermore, when selling a property, the proceeds go into the limited company and there can then be tax efficiency challenges in accessing it.

For UK residents who have purchased in their own name, the sale of the property will be subject to capital gains tax (CGT) at either 18 per cent or 28 per cent. However, if it was bought in a limited company, it will be taxed – as above – at a rate of corporation tax.

Differences in lending

While lenders will still underwrite the director of the company’s circumstances, given that the limited company is legally a separate entity, the stress testing is favourable as a result of its tax position. Lenders tend to relax the stress testing when it comes to rental calculations. Usually, in a personal name, rental income must cover 145 per cent of the mortgage payments stressed at 5.5 per cent, but when lending to a limited company, it is common for this to be stress tested at just 125 per cent.

However, costs vary depending on whether you are buying in a limited company or as an individual. Mortgage costs are often higher for a limited company. Depending on the structure of the company, they will be taxed differently. It is also necessary to take into account things like CGT and additional stamp duty costs before deciding if buying in a limited company is the most appropriate option for you.

For those purchasing in their personal name, generally the monthly rental income must cover the mortgage payment by 140 per cent if the client owns fewer than four properties, increasing to 155 per cent if they own four or more. They also assume a stressed interest rate of 5.5 per cent to protect the borrower should the Bank of England interest rate fluctuate upwards, or the initial rate plus 1.55 per cent, ensuring the mortgage will be covered.

Key points

  • One of the primary reasons for the growth in limited company buy-to-let ownership is the different tax treatment
  • Lenders tend to relax the stress testing when it comes to rental calculations
  • Owners of more than four buy-to-let properties will soon have to disclose all property details.

When buying as a limited company, the monthly rental income only needs to cover the mortgage payment by 125 per cent, with the stress test remaining at 5.5 per cent, or the initial rate product interest rate plus 1.55 per cent. This allows the borrower to fully maximise the borrowing.

There is also the advantage of opting for a five-year fixed rate, which will mean the lender will use the payrate in their rental assessment. The same 125 per cent/140 per cent/155 per cent still applies as this continues to give the lender security by locking the client into the term, so they will not suffer from any rate increases.

Changes to the market

If you own more than four buy-to-let properties (known as a portfolio) at the end of September, you will have to disclose all property details – that is, any income, expenditure or wear and tear – of all properties when it comes to re-mortgaging.

Portfolio landlords will still enjoy the same tax efficiencies, but their portfolio will be assessed as one, rather than on the merit of each individual property. Although the properties will be stress tested at the same rate of 125 per cent, and the process of buying in a limited company remains the same, this will have a big impact on a landlord’s ability to obtain finance.

For example, if one property in the portfolio performs less favourably than the others, this will have an impact on the underwriting of the portfolio as a whole, regardless of whether some are held in a personal name and others in a limited company.

Even with payrate products, it is more challenging to achieve higher loan-to-value loans, particularly for low-yielding properties.

Guiding on options

There are pros and cons to purchasing a buy-to-let in a limited company versus under a personal name. It entirely depends on the circumstances of the individual, particularly in light of recent and upcoming changes set out by both the Prudential Regulation Authority and the government, making the market more complicated to navigate.

An experienced mortgage broker will be able to guide you on your options. While they will not be able to provide tax advice, they will be able to put you in touch with property tax specialists.

This article Originally published by Steve Boyde, FT Adviser. September 20th, 2017
https://www.ftadviser.com/investments/2017/09/20/buying-to-let-as-a-limited-company/


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Review : Samuel Leeds Deal Finding Extravaganza / Never Use Your Own Money Again | Dave O’Hara

picture of Hilton Hall near Walsall

Hilton Hall, nr. Walsall

After waiting for what seemed like an age since we first went on the Samuel Leeds Property Investors Crash Course in Manchester in February, we rocked up to Hilton Hall just outside of Walsall for the next stage on our property journey. What a place to have a training session! It’s set in it’s own grounds with lakes and untold prettiness (squirrels and other furry critters abound). I bet working there is an absolute treat.

One of the first things we noticed was how many familiar faces we recognised from the earlier course. Everyone looked just that little bit more confident than some of the slightly timid characters we first met in the cold days at Salford. Maybe it was just the fact that summer had rolled into town this week that did it, but we got the impression that the crowd were very up for it.

This course was over three days. Everyone had paid a premium for these sessions; they’re more in-depth than the free Crash Course days. You can tell that the people are more committed and convinced that property investing is their future and everyone wanted to learn as much as possible from Samuel. The first day was the Deal Finding Extravaganza and day 2 and 3 were dedicated to Never Use Your Own Money Again, or as it’s catchily abbreviated, ‘NUYOMA’ (sounds like the Japanese teacup guy off Britain’s Got Talent). We all overloaded the Hall’s Wifi connection as the mass of electronic wizardry tried to log on to get access to RightMove, MousePrice and Zoopla.

Now, i’m not going to give away any information that Samuel taught us because that would undermine the integrity and point of the whole thing, but we watched as he found deals live from his computer at the front of the room and then worked out the yields and returns on investment. Very rarely did he turn up anything lower than 25% ROI. Then he set us all off to find our own deals in the lunch break.

The afternoon consisted of people revealing their ‘deals’, and then we all piled out to visit a couple of Samuel’s HMOs in Wolverhampton, followed by a visit to Cosmos Asian Fusion Buffet where I’m sorry to admit we rather stuffed our faces (but Samuel was picking up the bill). It seemed straightforward. We agreed to give a lift to Rob, who was in his camper van, and the idea was that we’d take him to his camp site, drop the van off, then take him to the HMOs, but we lost him in the outskirts of deepest, darkest Walsall and by the time we found him again, we’d missed the first HMO completely, and only got to the second one as everyone else was coming out! The day had been great though, and everyone was still buzzing in Cosmos even after 12 hours of intense property hunting.

NUYOMA

Day 2 opened with the brightest and bushiest tailed people in the room by 8:15am for the nine o’clock start. We were in the Travelodge Southbound on the M6, so frustratingly had to head south to the next junction, then do a U turn and come back again (about 10 miles in total). It was only after we’d done this a couple of times that Zach, a sprightly young student of accountancy, who unknown to us was also at our hotel, revealed a secret service road he’d been walking in on. It was only a mile and a half! We had to go through a no-entry sign, but it saved us loads of time. The second and third days are dedicated to No-Money-Deals. Basically, buying property with other people’s money. Sounds good doesn’t it?

Samuel taught us several ways to do this (a couple of which we’d already successfully done in ‘real life’) and there was a very interesting and valuable presentation by Sarah Poynton-Ryan who took us through Compliance, Bribery and Data Protection Laws amongst others, as well as introducing Deal Sourcing, Deal Packaging, R2R and Serviced Accommodation. (MEGA profits to be made on Serviced Accommodation, must look into that closer to home). The pace remained high until the slightly earlier finish time, with the usual role playing things to get everyone out of their comfort zone and thinking laterally. Thank God for the sandwich van is my only other comment.

On day 3, Zach took us on our little short cut, but the weather had turned foul and it was tipping it down as we got to Hilton Hall. Rob, who’d cycled in on day 2 had resorted back to the camper van. Sensible chap Rob. We again got stuck into some great exercises, real fun stuff, to show us how easy it is to network in a room full of similar minded individuals (and get deals). There was a question and answer session with a very loveable mortgage expert who managed to answer EVERY question thrown at him by the baying hordes (Stop it! – Ed) and by the time the lovely sandwich van came again the punters were salivating for more. Our working lunch was to go away and raise ‘virtual finance’ by thinking of how we could use our friends and countrymen to slip us a quid or two to invest in our property empires. Samuel set a target of £1m. Zach got the job of counting the money.

picture of myself, samuel leeds and deb

Myself, Samuel Leeds and Deb

Going round the room, it was clear that we were going to absolutely smash the target and when the final total was computed it was around the £4.5 million mark. FOUR AND A HALF MILLION POUNDS !! Granted, that was a fantasy fundraising exercise, but it just showed the power of networking and collaborating within a common goal. Summing up the successes and learnings were at the end of it all. When we all broke up I felt like I was leaving old friends. However, I think we’ll be meeting some of you again, maybe in a Joint Venture or maybe we can source a property or two for you ‘up north’.

Altogether, the 3 day course was well worth the money. We filled the gaps in out knowledge that we wanted to fill, and learned a whole lot more as well. Many thanks to Samuel Leeds and his team, the sandwich van, Cosmos and the staff at the Travelodge, as well as Walsall chippy that stopped us eating each other at the end of day3.


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Regional Property Trends May 2018

Looking at the Rightmove regional trend data for May 2018, the only area of the country where prices dropped from the previous month is our beloved North East (although the annual change is still marginally positive). The North East is also the slowest region to shift houses, with average time to sell pegged at 75 days. The average gaff here in the North East will cost just a shade under £150k, less than a quarter of the average price in Gtr London!


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Samuel Leeds Property Crash Course Review | Dave O’Hara

If you’ve been following me since I jacked in the day job you’ll know that I’ve been hanging my hat on property as a sure-fire way of trumping the banks for making an income.

samuel leeds pictureOne thing you can never do too much of is research. The interweb is a dream for this, but sometimes it’s difficult to see the wood from the trees. Of course we watch all the property programmes on the telly as well, but realise they paint a rosy and very simplistic picture of what it takes to buy a house and make it work for you business-wise. There was a programme on last year where landlords and tenants would swap places, finding out what it was really like to live in the properties they were renting out.

Samuel Leeds

One of the landlords appearing on the programme was a guy called Samuel Leeds. He was a really humble guy and did his very best on the programme to help out his tenant, a lady who was worried about being evicted because she was struggling a bit. It turned out when he visited that she had a big hole in her roof, but didn’t report it because she thought he would put her rent up! I was impressed with the sympathetic way he treated her. In the end she had to leave for another reason, but only after Samuel bent over backwards to try to help her.

He turned up later in a Google search when we started looking for authorities on the subject of buying property. We recognised him from the programme and found out he had a good samuel leeds and sir richard branson picturebusiness going, mentoring and teaching other people how to make a living from property. He’s a Property multi-millionaire in fact, at less than half my age! Samuel Leeds rubs shoulders with the likes of Sir Alan Sugar, Sir Richard Branson and Arnold Schwarzenegger. He’s a little bit ‘evangelical’ at times in his presentation, not surprising considering he started as a church person, but his huge enthusiasm comes through loud and clear and he clearly knows his stuff. He’s also very ethical; ten per cent of his business profits go to charity.

Samuel has an excellent book published ‘Buy Low Rent High’, in which he outlines his strategy for property investment.

So, we’re booked on a two day property crash course with him in February in Salford, Manchester to educate ourselves further about property investment.


Samuel Leeds on Twitter

[custom-twitter-feeds screenname=samuel_leeds num=3]

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