Newbie from London just had offer accepted on second property

[I Freeman]

Hi All

 

I'm a newbie to the forum having this year listened to lots of the podcasts, read Rob's books and recently been to a meeting with RMP.

 

I'm in my late 40's, run a small law firm, and have no pension provision whatsoever. So my plan is to create a passive income over the next 5 years of £100k a year, the majority of which I expect to be through property. I started my property investment journey last year.  I live in London and would have liked to invest close to home but put off by prices. So the first property I did was a 6 bed HMO in Bolton. Had a few problems but good learning curve and now fully let and managed by agents and making about £900 profit a month.  

 

I have just had an offer accepted on my second property also in the North West. Its a former pub which has been converted into 4 flats, 3 x 2 bed and 1 x 1 bed. It also has 4 garages with it. The flats are all let out and the annual rent is £19,500. Purchase price is £190,000. Stamp duty and legal fees survey etc about £10,000. My plan is to buy with cash and then split the freehold title into 4 leasehold flats. From my research and speaking to local agents I believe the  2 beds should be valued around £70k and the 1 bed around £60k giving a total value of £270k. If I then get 4 mortgages on the flats at 75% LTV I should be able to extract £202,500 from the deal and leave myself with nothing left in. I appreciate I have to leave the cash in for 6 months from the date I split the titles to when I can get finance. The legal fees for splitting the title have been quoted at £1,500 and there will be 4 arrangement fees for mortgages. 

 

i will be left with the Freehold and possibly 4 garages to either develop or sell if I do not include them with the Leaseholds. I don't know what a garage is worth but they must be £5-£10k each at a guess. After mortgage and insurance I should make around £1250 profit a month from the leaseholds.

 

Seems like a great deal to me but am I missing anything? I'd really value peoples feedback as I do not have much of a property network around me. I have not been to a meet up yet but intend to go to the one at Kings Cross in December and get chatting to some like minded people.

 

look forward to hearing from anybody!

[RogerH]

Hi. I suppose I fall into the category of anybody 

 

If I may be so bold: while you await replies from the experts I'd be interested to know how you managed the setup of your Bolton HMO from 200 miles away.

 

Thanks for any info.

 

Roger

[I Freeman]

Hi rogerh and thanks for the response. 

 

Bought through an agent in Bolton and got them to manage as well.  They got quotes for the work that needed doing (Fire doors, alarms, decorating etc) which I decided was too expensive so found and sorted my own tradesmen. That was a mistake and ended up costing me more and a lot of stress. However agents very helpful in attending property to let trades and delivery people in. Ordered a lot of IKEA furniture and  got a company to put most of it together for 10% of price. I spent a day putting the rest together. I went up there 4 or 5 times in total I think including visiting Bolton housing HMO license people. 

 

Not as hard as you think really. Organise the trips well. Get helpful managing agents. The ones I use did all that work in attending property for nothing whilst I got it all set up which took about 4 months. Now they charge £100 per new tenant plus 6% of rent which is very competitive for an HMO.