INTRODUCTION
This week marks the fourth consecutive in nationwide lockdown. The global economic repercussions of the Covid-19 (Coronavirus) crisis are the great unknown for both individuals and businesses alike, but speaking solely about JL Property Solutions we’ve simply tried to keep a positive mindset and continue to run projects with as much normality as possible.
I decided I’d take the time spent self-isolating to write ten blogs which deliver a warts-and-all insight into the life of a self-employed professional property investor. If nothing else, it’s 10 minutes to fill your day! These blogs delve into individual deals we have completed on our way to amassing a £1.3million property portfolio in little over two years.
So, let’s get into deal number six! Deal number six that I’ve picked out to share was an off-market deal that we acquired via our letting agent, First4Rentals with a fellow landlord in their portfolio offloading a project that was simply too big for him to take on.
PROPERTY DESCRIPTION
This three-bedroomed, mid-terraced property in the village of Bedlinog, not far from Merthyr Tydfil, was in a derelict condition. The landlord who bought it was intending to carry out a large-scale refurbishment, but what he uncovered after an initial strip-out was more than he felt he could do himself. Not willing to pay for trades, he simply wanted to get rid of it. The house had previously had a rear extension meaning the lounge was large and there was a kitchen and small ground floor shower room to the rear – albeit barely recognisable in the state it was in!
I knew from Rightmove, Land Registry and Mouseprice comparables that houses in the street would fetch between £80,000-£85,000, and the landlord who we purchased from had actually renovated the house next door and sold it for £85,000 so we had a great marker. What we also knew was that this village had just seen a spike in prices with our letting agent showing us two similar properties being marketed over £100,000. It didn’t fit our usual buy-to-hold cashflow strategy, but it would certainly work as a flip.
SOURCE OF DEAL
Given that we had direct access to the vendor via First4Rentals we didn’t have to do a great deal of negotiating for the property. Our initial offer of £45,000 was rejected, however we settled on a price of £48,500 for a property which was previously marketed at £60,000.
We picked up deal number six, our three-bedroomed, mid-terraced property in Bedlinog, completed in July 2019 for the sum of £48,500 with the conveyancing done by our trusted family solicitor - Kenneth Curtis LLP.
FUNDING
We purchase our properties under ownership of our Ltd company - JL Property Solutions. With flip purchases this is particularly important for us because of tax purposes and Capital Gains. Rather than buying for cashflow we were buying for capital appreciation.
Our normal business model is to raise OPM (Other People’s Money). We work with sophisticated investors and high net worth individuals (HNWI) to secure private funding that we use to invest in property. For that privilege we create WIN-WIN deals that benefit us, the investor, local tenants, local trade, local letting agents – it’s a chain of winning. We pay investors between 5-10% depending largely on the deal. Find out more about investing here.
For deal number six, however, we utilised a technique we learned during our Asset Academy training whereby it is possible to have almost 100% LTV on a BTL mortgage using a second charge. Using The Loan Partnership as a broker, we managed to vastly reduce the amount of deposit we had to pay on that basis.
REFURBISHMENT
As you will have seen from the pictures dotted around the blog, this house really was in a complete state of dereliction. What happens with properties in that state, as experienced investors reading this will attest to, is that problems will arise the second your build team start to hammer around. As it transpired – this house was no different! Leaking roof, rotten timbers, damp, rotten joists – it was everything and more! However, our Power Team Maintenance Solutions Wales, powered through and the end result is a really striking transformation.
The big change that I instigated in this property was a rethink of the ground floor. We knocked out the wall dividing the current kitchen and bathroom to open up a much larger and more functional kitchen space and allowed us to install large French doors to soak up the sun and the views. We moved the bathroom into the back of the lounge space and create a lobby/dining area in between. A full rewire was carried out along with new lighting, carpets, paint, ceilings, damp proofing and replastering.
This refurbishment was excellent and, importantly, on budget.
EXIT STRATEGY
As always, we made sure before entering this deal that we had our pre-requisite MULTIPLE EXIT STRATEGIES. We had the option of renting for around £495 but we chose selling to suit our capital exit strategy.
For deal number six, we got an offer in relatively quickly because of the popularity of the area, via our lettings agent First4Rentals of £102,500.
The deal is currently paused in line with the government guidelines on conveyancing during Covid-19, however we expect to complete in August at the very latest.
THAT’S A WHOOPING 111% INCREASE IN VALUE IN JUST SIX MONTHS.
THE NUMBERS
Purchase Price: £48,500
Deposit: £14,478
SDLT (Stamp Duty): £1,455
Legal & Broker Fees: £2,000
Original Mortgage: £43,857
Refurbishment: £30,000
Total Money Used to Buy: £47,933
Sale Agreed: £102,500
Less Original Mortgage: £58,643
Less Total Money Used to Buy: £10,710
Total Profit: £10,710
CONCLUSION
This deal really was another great addition to the portfolio!
You can follow JL Property Solutions on Instagram and Facebook or check us out on our website www.jlpropertysolutions.com