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I need a strategy - What would you do?


Richard Jones

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This is where I am.

 

I live in Newport, South Wales and would like to invest in a 15 mile radius area. I have a £150,000 deposit. I am a teacher as is my wife (part time) what we want is to eventually get out of teaching by creating enough cash flow of initially £1000pcm so my wife can leave teaching and eventually making £3200pcm so I can leave teaching. Ideally i would to achieve this in 4 years.

 

My dilemma is what kind of property to buy. Being new the game do I go small and gradually buy more over the years or go larger?

Based on 75% LTV - Do I:

a) look for 1-2 bed flats (nett income approx £146 pcm / cash investment approx £11,700 )

B) look for 2 bed terraced houses (nett income approx £186 / cash investment approx £20,000)

c) 2 bed new builds (nett income £209 / cash invested £32,000)

c) 3/4 bed house (nett income approx £600 / cash investment £29000)

d) 5 bed HMO (nett income £900 / cash investment £58000)

 

Any advice would be greatly welcome.

 

Rich

 

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Hi Rich

Your thinking runs along the standard train of though that most investors have. I would suggest an alternative, slightly more radical but definitely more productive strategy. I have detailed it extensively in my answers to another post on the HUB ...search for the title of the post in the general discussion section

 

If you won £500,000, how would you invest it to maximise your monthly cash flow

 

In summary it would be

  1. buy one property at a time
  2. but buy it for cash, as you have £150k of the stuff
  3. target solely properties that are in poor condition and need a good refurb
  4. even better if the current condition means they are unmortgageable
  5. negotiate how cash buyers do it, politely but aggressively, using the leverage that you can complete in a couple of weeks or so, not a couple of months like mortgage buyers do
  6. now you have made the property mortgageable, refinance on a 75% mortgage but at the uplifted value you have created
  7. that should get almost all of your original cash investment back into your bank account
  8. with one cash flowing property with next to none of your own cash still in it and pretty much all your £150k sitting back in your bank account, go back to 1. and repeat as often as you wish to until your create your desired income

Kevin Wright

Positive Property Finance

Telephone: 01206 586586

Email: inspireme@thinkpositively.co.uk

Brokerage website: www.positivepropertyfinance.co.uk

Workshop website: www.ninjainvestorprogramme.co.uk

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Hi Kevin, as lovely as standard buy to let is I think for most people starting with a small amount of spare capital and aggressive goals this sounds like a good approach. I always wondered how people managed to get such big portfolios so quickly with saving the deposits being the big problem.

I think this is a strategy I will need to employ and now need to find out how is best to find this type of investment opportunity. With this approach you would need to make sure your first property works according to plan otherwise you'll soon become stuck with the money stored that purchase. If you make sure the numbers stack up then plan B could be to buy and hold as a B2L.

Kish

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You make a very good point Kish re the need to make sure you don't trap too much cash in your first deal, or in fact in any deal. I see far too many investors doing exactly that. The cause for this is almost always insufficient, or the wrong kind of due diligence.

Mostly they check out the prices sold in the area and when it comes to revaluing the property at point of refinance, they do little more than cross their fingers and hope the surveyor agreed with their sold comparables.

This stacks the odds massively against getting the cash out because surveyors are minded to value at or close to the purchase price paid...unless they are given compelling reasons not to.

One of the learning modules on the Recycle Your Cash workshops I run is the Cash Minimiser Blueprint. This gives investors a clear strategy which, when followed, minimises not only the risk of the refinance not valuing up but of de-risking before you commit to buy.
 

Kevin Wright

Positive Property Finance

Telephone: 01206 586586

Email: inspireme@thinkpositively.co.uk

Brokerage website: www.positivepropertyfinance.co.uk

Workshop website: www.ninjainvestorprogramme.co.uk

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  • 9 months later...

Hi Chris

Investors continually need to be aware of changing conditions and adapt accordingly. That will probably never change and those that survive be will be those most comfortable with and willing to change; I think that applies a lot wider than just property investing. Usually as one door closes, another one opens; the trick is to be aware enough to spot it. The key, I think, is to arm yourself with sufficient knowledge to be able to make informed choices on how you need to adapt. As the changes are mostly tax related, seeking the advice of an accountant would be key to understanding how the changes will play out. Better still if that is a property savvy accountant who is also an investor. I can name some if you don't know any.

Kevin Wright

Positive Property Finance

Telephone: 01206 586586

Email: inspireme@thinkpositively.co.uk

Brokerage website: www.positivepropertyfinance.co.uk

Workshop website: www.ninjainvestorprogramme.co.uk

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