How to source your first investment property | 6 easy tips | Be recession proof!

Introduction:

I’ve just sourced my first investment property using these tips, you can too let here is how I did it…!

Tip 1: Finances

• Understand your finances! I am a huge believer in doing your research before you do anything! If you have a problem you need to research in order to come up with a solution, understanding your finishes is no different!
• disclaimer: I am not a financial advisor and anything I say is not financial advice by no means I would get some expert help on this.

But…

• When you understand your finances you can then establish a purchasing budget and build a property profile based on your affordability and funds available to you

Now you understand your finances …

• You can see if you need to do some work on your credit if you intend on leveraging like I did. In my case I had investment from an investor as well a funds from a remortgage

Tip 2: Strategy

Understanding your finance will determine what strategy you want to go with:

What I mean by this is do you have funds to go straight into BRRR - Buy, Refurbish, Refinance, rent

If you have available funds from remortgage, savings or even an investor you might want to with BRRR which is to what I’m doing, where you buy a property that you can add value to (and I’ll go over this in more detail later on in the video) then fix it up and remortgage for. a higher amount, rent to get the residual income and then repeat….

If you need to do work to the property you would have to get a Bridge to loan, where you get a bridge loan and provide a 25% deposit, then once the works where complete you then take out a mortgage at the properties new value!

If it’s in a 'let’able' condition from the feet go you can just remortgage, if it needs work not lettable its current condition you would do a bridge to loan

Lease Option Agreements

Where you find landlord (by sending letters to landlords). Agree to rent that property for a set negotiated price, then fix up the property and rent out for a higher amount, with the view to purchasing the property at a later date for an agreed amount.

You could do this on a room by room basis as a HMO or if the property is close to point of interest or the town centre you could rent it out for serviced accommodation

The main thing is that you benefit from capital appertain of the property increases in value as you would have signed a contract with the landlord to do so.

But

If you don’t have access to large funds, lets face it most of us don't you can do other strategies like rent rent to fast track saving for a deposit….

Rent 2 rent

Similar to lease option where you are subletting. Agreeing to rent from the landlord in order to rent on a room by room basis either HMO or SA. More strategies that property Investors use but these are the ones that I hear most information on.

Tip 3: Adding Value:

How are you actually going to add value to in order to pull out a tangible profit to go again! If you can't pull money out to the end of the project you will come to complete stand still WHICH IS NOT GOOD!

So you need to workout your figures which I will go into depth later ronin the video! But for now you need to understand how you are going to add value…

• BMV - Through buying BELOW MARKET VALUE so making a profit before you’ve even done anything (harder said than done in this climate!)
• Adding additional spaces, another bedroom
• Adding an extension or reconfiguring a property
• Modernising
• Buy a commercial and convert to residential (exciting videos on this coming hint hint!)
• Spilt titles and break properties up if possible, convert to HMO let on a room by room basis
• extending expiring titles of a flat!

Think out side the box in order to add value but know your strategy for adding value from the get go!

Tip 4: Understand your location

• This is going to be dictated by your available funds for example if your budget is around £30k for example you might be priced out of London.
• Your location is all based a bit on you preference and location knowledge.
• What I mean is that my location preference is my home town of Nottingham as I know areas very well so I know what areas I would prefer to invest, sometimes if you work out your yield or ROCE (which I will talk about later on in the video) the numbers might show you it would be a good investment but in reality the type of tenant might not fit your criteria and the estate agents not going to tell you so don't underestimate the value of local knowledge!

For example: I would love to invest further up north where you would on paper get a very profitable investment, however I don't know the areas personally and could unknowingly invest in an area that's has a lot of anti-social behaviour and put potential high value tenants off, which does make me hesitant to invest!

Tip 5: Understanding your Figures

You have to understand your figures

• Your Yield - is worked out by dividing your yearly rental income with your total investment.
• Your ROCE Return on Capitol Employed - Tells you how well your initial investment is performing
• Your refurbishment costs - specified based on your property
• Your Potential Risk costs - You need to prepare yourselves as much as you can against potential risk and have money set aside for those costs, I tend to cost in a contingency percentage and have a risk register for a new roof or extra ground works and you can discuss with your builder on these costs

 I’ll go over these in costs and how to work them out in another blog can download my excel project plan template spreadsheet, which calculates your yield, ROCE, specification costs with Risk Register and other cost are worked out for you. This free project plan can help you run your project. Right now you can down load this template for FREE! in the footer

 Tip 6: Build a good team

I will be doing a future blog on this where I go into more detail but you need to build a good team:

• A good mortgage broker and or a financial adviser
• A good solicitor - although if you are going for mortgage or bridge loans you lender might have a set list or panel off solicitors to go to
• A good Architect - If you run the East midland Area I do offer Architectural services link to in the description box!
• A good builder
• A good property management company if you are remote investing

These a few tips to get started I'm a big advocate for doing your own research so please look into this more with financial advisor  

Watch the full YouTube video