The Property Voice Podcast - Series 2: Property Cycles - The Investment Property Lifecycle - Acquire Part 2
In today’s show, we take a closer look at property investment acquisition. We can buy property in the conventional way, however, we can also acquire investment property in other ways as well. We walk through various ways of acquiring investment property such as agents, property portals & aggregators, administrators, direct to vendor and deal sourcers. We also look at some less common ways of accessing investment property such as lease options, vendor finance, instalment contracts and joint ventures. Join me then, as we explore these various methods of acquiring property, sometimes with none of our own funds. Then, we have a special bonus for January…so tune in, enjoy and be richly rewarded too!
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Resources mentioned
Shout Out resource mentioned is IQ Matrix, a collection of over 300 mindmaps covering all aspects of personal development and growth
Today’s must do’s
Consider: how many different ways are you familiar with when it comes to acquiring investment property? Could you do more in your property journey if you utilised some of the other less common or mainstream methods…?
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Transcription of the show
Hello and welcome to another edition of The Property Voice Podcast, my name is Richard Brown and as always it is a pleasure to have you join me again on the show today.
And may I take this opportunity of wishing you a very Happy New Year. More importantly, let’s hope that this year will be a great year for you in property!
We continue with our current theme of cycles in property and the investment property lifecycle in particular. Last time out in the series proper, we started to look at the acquire phase of the investment property lifecycle and we also had Mark Lloyd in as our guest.
Mark mentioned a number of ways in which we can acquire property and we had a longer discussion around deal sourcers. So, let’s take a closer look at all of those other methods of acquiring property then now shall we?
Property Chatter
When it comes to getting hold of property for investment purposes, you may recall me deliberately using the word ‘acquire’ rather than ‘buy’. Yes, by far the most common method of getting involved in property investing is to actually buy a property, however, there are ways that we can acquire properties without actually buying them as well as we shall see.
Let is start with buying property however. The most common ways that we can access investment property to buy are as follows:
- Estate Agents
- Auctions
- The Property Portals
- Letting Agents
- Administrators
- Direct to Vendor
- Deal Sourcers
By far the largest source of property will be via estate agents – as Mark suggested last time out, some 90% of all property deals will be marketed via an estate agent one way or another.
Auction is another popular route and very often auction properties are also marketed via estate agents as well
Then, we start to get into the niche methods, which will largely fall into one of these categories:
Letting agents – who may find properties from existing landlord investors looking to sell
The Property Portals are listed as a separate category, as the main ones of Rightmove, Zoopla and to a lesser extent Prime Location & On The Market will sweep up most of the listings from estate agents and many auction properties as well. However, there are now a range of smaller, more specialised portals, which can be used to locate properties as we shall see.
Administrators – who are appointed to handle an individual or company’s affairs, usually if they have encountered some kind of financial distress, such as defaulting on a mortgage, liquidation or bankruptcy and so on. However, administrators could also include organisations such as legal firms dealing with a deceased estate and to keep the list simple I shall include asset management companies under this sub-heading too.
Direct to vendor – where we find and negotiate a deal directly with the owner or that property, be they a homeowner or a landlord / investor.
Deal sourcers – people who specialise in finding deals, often through one or more of the above routes themselves.
I would imagine that most of us will know that we can locate a property investment by using either a High Street agent directly, or by searching one of the major portals such as Rightmove and Zoopla. Equally, auctions are held across the country, some of these properties are also advertised via estate agents and the portals but by no means all. A company that provides a lot of information on auction property listings is called the EI Group, which holds all legal packs online for auction property and also provides a subscription service for all auction property listings.
I want to reemphasise the point that came up in the conversation with Mark previously, however. That as individual property investors, potentially acquiring one or maybe two properties a year, that we may not carry a lot of weight when dealing with an estate agent. Frankly, there will be bigger cats out there ahead of us in the queue ready to pounce on the juicy deals should they become available. Now, that does not mean that we cannot find good deals via agents and portals, it is just a case of recognising our standing should this be the case.
We can however improve our standing with an estate agent in a number of ways.
First, estate and letting agents are also people! Yes, that may come as something of a shock but they are and as people they just like you and I, like to have personal relationships with other people too. So, start to develop a relationship with the agents in your target investment area. Visit their office and not just once. Get to know them a little and they you. Equally, be professional as well as personable. We can do this by being clear on what we are looking for – so not ‘anything goes’ but this type of property, in this sort of condition at this sort of price range instead. Equally, do not overpromise what you can do but do ensure you carry out any commitment that you make. Don’t forget that in addition to sales results, agents are sometimes measured on viewings and offers…so you can win over a few brownie points just by helping an agent to increase their scores here. Finally, here, be clear of your buying position and have proof of funds or finance approval status ready to share to show you are a serious buyer.
With auctions, always, always, I repeat ALWAYS read the legal pack for an auction property. Properties are in an auction for a reason…our job is therefore to establish what that reason is and then calculate whether or not we can live with it. Sometimes the full legal pack is not available until just before the auction, so be warned!
Do a viewing, you will get more insight into the property and the area. Set your maximum bid and stick to it. Ideally, do not bid by proxy as the auctioneer will probably just ensure the bidding reaches your maximum bid on your behalf…they are skilled at ensuring the best price is achieved for a property! Do not let emotion get in the way and don’t be competitive in the room either – our caveman and cavewoman instincts are hard to shake off! Always have your ID and finances in place and remember that when the hammer falls that is when exchange of contracts takes place, so you are obliged to complete regardless. Finally, pay careful attention to the completion timescale as many sales need to be completed within 21-28 days, so arrange the appropriate finance in advance, or use a fast financing method such as cash or bridging finance instead.
Returning to the property portals, we mentioned that the bigger ones, such as Rightmove & Zoopla, will collect property listings from most estate agents and auction listings. Some of these will still be listed via auction or an agent, but not all. Indeed, some portals are aggregators of listings such as from EI Group for all auction listings in the UK. Then we have sites such as Renovate Alerts, Repolist, Property to Renovate & White Hot Properties, which focus on more investment oriented properties such as repossessions, auction listings and refurbishment properties. There are a couple of smaller portals, such as Home.co.uk & Mouseprice, but many of these properties will also be available on the main portals as well. Finally, there are a number of newer DIY property listing sales sites now, such as Easy Property, Trepilo, Emoov, Hatched & The House Shop, among others, where homeowners can list a property for sale without using an estate agent. Some of these listings will also appear in the main portals, but not all and so they come into their own when looking for direct to vendor types of opportunity.
With regard to dealing with the various types of administrator mentioned, this is a specialist and niche area and so one which requires special skills and often contacts to succeed. The main administrators that get involved with property sales would be probate solicitors, asset management companies and insolvency practitioners, although many of these will ultimately use the services of one of the other channels, like estate agents, auctions and so on. The key here is to build a relationship and then try to access opportunities early and / or off market as well. I would suggest that anyone looking to access investment property through this channel on any regular basis, either gets educated and trained in how to do so, or uses a deal sourcer to access them instead…after all you will probably be competing with them anyway!
Direct to vendor is another niche area, as there are often not thousands of property owners that will sell or pass over control of their property without using an agent. However, some may for, example, if they wanted a discrete sale, or needed to move quickly for some reason, or wanted a DIY sale say. Equally, certain structures, such as lease options, won’t be suitable to be marketed via traditional routes. Typical ways of getting access directly to a vendor are: DIY sales listings, room rental listings like Gumtree & Spareroom. Letting agents and property networking meetings for let property. Then a range of approaches marketing direct to vendor, such as leafletting, direct mail & local signs, newspaper ads and online ‘sell your house fast’ websites for example.
Given the specialism of finding, structuring and negotiating with a vendor directly, I would highly recommend getting some formal education or training in this regard. I would also suggest that anyone dealing directly with a vendor is aware of certain legislation that seeks to protect certain owner-occupiers, such as sale and rent back and equity release as two specific areas that come to mind here.
With regard to deal sourcers. We covered a lot of this ground in the conversation with Mark previously. However, as with auction property and property via an administrator, there is often a reason for a deal to go through a deal sourcer rather than the estate agents and portals. That reason could simply be speed of sale or structure, such as a lease option for example. However, it could be for other less obvious reasons such as structural problems, poor areas or at the worst extreme fraud. So, always undertake your own full due diligence on both the sourcer and indeed the property concerned. Finally, as a word of caution, some lenders will not lend on properties that are not marketed on the open market via an estate agent or DIY house sale site, so ensure you understand this when arranging your finances.
Many of the steps I have outlined would capture property purchases, however, let us not forget that there are other ways to acquire a property as I previously mentioned
Whilst, in many cases we will actually buy an investment property to form a part of our investment portfolio, or property business if selling it on, we could acquire control of a property without actually buying it.
Here are just some of the alternative ways in which we can acquire property general speaking:
We can indeed buy it – there are on-market and off-market routes to buying investment property and we can buy directly, or via an intermediary or agent of some description as well. Whichever route we take, we will end up owning the property in one way or another.
We could also acquire a property or land through an option agreement instead. Here, we will not buy the property, at least not initially. We will however, secure an option to purchase it at some stage in the future by paying the Option Fee. We may do this with a view to gaining value by the time the option date comes around for example by getting planning permission, by adding value to the property, or simply by waiting for the market cycle to lift the value over time.
Another way to acquire property is via some kind of lease, management agreement or other sub-letting type of structure. Rent to rent, and variations of this strategy, is one such example here, where we reach an agreement with a property owner to use their property for a period of time in return for paying them some sort of regular payment.
An assisted sale may mean that we do not acquire a property using any of the above routes and instead have an agreement to participate in the sale proceeds based on another type of agreement structure…a commission or profit share arrangement with the owner for example.
Delayed completion & instalment contracts are where we do still buy the property, however, here we use a legal structure to either delay or spread the payments in some way. Again this is a very specialist area and requires technical skill as well as a good support team, especially a solicitor with knowledge of these structures.
Lease purchase & vendor finance are similar to lease options but instead of some kind of rental payment over time and a purchase option payment at the end, here the property is actually bought in stage payments over time. The advantage of these types of arrangements is that often the purchase price reduces as each instalment is paid and that means more equity is built into the property as time goes by. However, yet another specialist area that requires a lot more investigation, education, advice & support before venturing in too far.
Joint-ventures are where we can sometimes collaborate with other investors to participate in the profit of an investment property, with or without owning it via some kind of joint venture agreement. For example, one party could bring in money and another skills, contacts, experience and so on. The parties can protect themselves via joint-venture agreements, declarations or deeds of trust, restrictions on title, legal charges and so on. There are lots of ways to potentially structure a joint-venture agreement, which goes beyond the scope of today’s discussion.
So, as we can see, when it comes to get involved in investment property there are many ways to ‘acquire’ an investment property. We can buy it, or we can use alternative ways to participate in property investments too.
As with all aspects of property investing, there is more to it than meets the eye and so I highly suggest taking steps to both educate and protect ourselves through undertaking due diligence first.
But I will leave you with this thought…how much more could you achieve in your property investing exploits if you could access and leverage some of the other methods of acquiring investment property?
I will leave it there for now…next time, we shall be looking at financing our property investments.
Your Voice
We have not shared a 5-star review of the podcast for a little while now, so it’s high time that we do again I think!
Excellent property podcast  |
| Tonks1984 |
| Fantastic new property podcast which has a fresh and interesting format. Richard does an excellent job of delivering good quality content throughout. Highly recommended if you have any interest in property. |
Thank you very much for that very kind review Tonks1984, I really do appreciate that.
I have noticed a few more reviews landing in iTunes of late and these really do help me to promote the show I have to say. So my BIG ask of you this week is to please consider leaving a podcast review in iTunes if you have not already done so.
For all new reviews received in January 2016, I would like to say a big thank you by sending you a sample chapter from my new book on financing your property investments. All you have to do is email me: podcast@thepropertyvoice.net with a note of your iTunes review and I will let you have the sample book chapter with my compliments. I can’t be any fairer than that now can I?
Shout Out
If you are in any way into self-development and personal growth, then today’s Shout Out is absolutely awesome! I have never seen anything like this in my life before…now that’s quite a build-up isn’t it?
So, what is it then…? Well it’s a collection of over 300 mind maps that pulls together all of the elements of self-development and personal growth psychology in one place. In fact, there is also a Master Mindmap to get a consolidated view – well worth spending 30 mins watching the online video that works through this I would say. Not only that, but there is a blog and a whole range of other resources that pulls together all of the elements you could ever wish for when looking at personal growth and development.
Oh, it’s from a website called IQ Matrix and what appears to be its rather humble Aussie founder: Adam Sicinski.
I discovered this over Christmas and have been having a little play with the mindmaps and other resources on and off since then…check it out for yourself, I doubt you will have seen anything else quite like it in the area of self-development.
And on that major big up of a Shout Out resource, we bring another week on the Property Voice Podcast to a close. Join me next time as we look into financing our investment properties a little more closely.
By all means, drop me an email personally to podcast@thepropertyvoice.net if you would simply to start a conversation and don’t forget to get an iTunes review done in January and claim your free sample book chapter either will you? Meanwhile, the show notes will be over at the website www.thepropertyvoice.net
Thank you very much for listening to me once again this week and until next time on The Property Voice Podcast…it’s ciao-ciao