Property financing is one of THE most important topics we could cover in property investing. It’s not just about cash and buy-to-let mortgages either, although, in order to do the series justice, we shall spend a little time talking about these options too.
However, what I really want to get into in this series are the alternative and creative financing techniques that allow us to go beyond cash and buy-to-let mortgages. Today’s show is an introduction to series 3 and sets the scene for the coming weeks as we talk property financing!
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Resources mentioned
Hometrack & Mouseprice Pro property valuation reports
Today’s must do’s
Put Wednesday back into your diary to make sure you don't miss an episode of series 3: property financing
Subscribe to and review the show in iTunes…and while you are at it please help us to spread the word by telling all your friends too!
Send in your property stories, questions or moans to podcast@thepropertyvoice.net and we will try and feature YOU on the show too!
Property Investor Toolkit – here is the book link on amazon.co.uk & amazon.com in case you would like to get yourself a copy to accompany this series
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Join in the discussion, either here in the comments section below, or by emailing us at podcast@thepropertyvoice.net
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Transcription of the show
Did you miss me then? Or if not me, at least another opportunity to immerse yourself in more property content over the past few weeks? My name is Richard Brown and as always it is a pleasure to have you join me again on the show today.
You may have noticed that I have taken an extended break from the podcast over the summer and I am now ready to go with a brand new series of The Property Voice Podcast.
I will give you a brief insight on one aspect of what I have been up to…which is definitely on topic…before sharing an outline of what we can expect from this third themed series on the subject of property financing.
Let’s get straight on with the show then.
Property Chatter
Property financing is one of THE most important topics we could cover in property investing. Even if you happen to be the Sultan of Brunei, you will want to know and understand all of the different ways in which you can apply financing techniques to your property business.
It’s not just about cash and buy-to-let mortgages either, although, in order to do the series justice, we shall spend a little time talking about these options.
However, what I really want to get into in this series are the alternative and creative financing techniques that allow us to go beyond cash and buy-to-let mortgages. Here are just some of the different ways that we can fund our property investments:
- Cash
- Institutional finance – including buy-to-let mortgages obviously, but also extending to financing from other financial institutions such as bridging finance, commercial loans, second charge loans, equity release and so on.
- Alternative finance – which is finance provided by other entities and people that are not always mainstream. This can include crowdfunding and peer-to-peer lending, angel finance, joint ventures and so on.
- Creative finance – which at first glance is often not considered to be a form of financing at all. This will include options, lease and rent-to-rent structures, assisted sale, delayed completion and instalment contracts and ‘sweat equity’ among others.
I don’t plan on spending too long in this introductory episode on the subject as I am still shaking off the recording cobwebs and getting back into the swing of things.
However, if the idea of acquiring an investment property using little or none of your own money sounds appealing, then you need to make a date to listen to each new episode in the series every Wednesday for the next month or two. We will cover some topics with just me, but equally, I have a range of different ‘subject matter expert’ guests lined up to share their wisdom too. Having already recorded some of these interviews, I can tell you that there are some real gems of information, tips and real life experience that we shall share together in the coming weeks.
Here is one from me in the meantime to whet your appetite. I am currently competing on a 3-bed property in Chicago, USA, which has required none of my own money to acquire, outside of some fees and expenses. In 15 years I will own this property outright, having made 180 monthly payments and without taking on a mortgage either. The property is tenanted and the rental income will cover the full cost of acquisition and operating expenses over the term, leaving me with a fully paid off property to boot. In the US this is called a lease-purchase agreement, similar to an instalment contract agreement in the UK. It is an example of creative financing in action using what is known as ‘vendor finance’.
Keep in mind, however, that it is also an advanced strategy and as such it carries quite a few more risks, which conventional BTL in the UK does not have. A different contract structure, legal and tax system currency risk and a property on a different continent all add to the complexity here. I reject far more of this type of structure than I take on, so the devil really is in the detail as far as due diligence is concerned.
That all said, as one component of my own property portfolio, these properties do provide me with an interesting way of acquiring assets in a less than conventional way.
This is just one example of one of the many types of alternative and creative property financing that I plan to share with you over the coming weeks, so if that hasn’t caught your attention, then I don’t know what will!
OK, so moving on with today’s show then, let’s hear a little more from you…
Your Voice
As you may know by now, I have been writing a column in Your Property Network magazine for a few months now with a regular feature under the umbrella of ‘New Beginnings in Property’. A new beginning, need not be a brand investor, although that is certainly within the scope of my audience.
In addition to newbies, I am interested in people who are seeking a new beginning having already been involved in property for some time. It could even be people looking for alternative ways to finance their property activities, as we are going to cover over the next few weeks in the podcast.
With that in mind, I have opened a section of the YPN column aimed at dealing with reader questions. Here are some of the themes of those questions featured since I have started the column:
- Am I on ‘The Danger List’ of vulnerable property investors following the recent swathe of Government policy & tax changes?
- How can I make myself attractive to a finance provider and become more ‘bankable’, which looks at traditional lenders as well as non-traditional ones, such as JV partners?
- Should I invest in off-plan property?
- How do I work out which properties, out of the hundreds or thousands out there to view and then make offers on?
- I will also try and address a rather large series of questions, which is all about taking our strategy into a detailed, daily activity plan in a forthcoming issue.
All of these reader questions are answered through the column using text, audio and sometimes also video. So, as a loyal podcast listener, if you want to see my exchanges on these topics and more from YPN readers, then just drop me a quick email: podcast@thepropertyvoice.net with YPN in the subject line and I will add you into the subscription-free content that covers these.
If you happen to be a YPN subscriber already, then why not drop me a quick line, including your questions for me to consider answering, using the same email address and subject line. You never know, the next video I shoot could feature your question!
Shout Out
I haven’t had a Shout Out for a little while now either, so here’s one for today that could be very useful when you are next evaluating a property investment opportunity.
Valuing a property can be a tricky business. I plan to write a blog post on the topic in the next few weeks or so. However, in the meantime, here are a couple of places you can go to get a pretty decent ‘desktop valuation’ on a property for around £20.
A lot of lenders and professional property investors use services by Hometrack and Mouseprice Pro for a pretty decent evaluation of a property value based on local market sales and in some cases mortgage valuation purposes.
There is no substitute for doing your own due diligence, or sometimes spending the several hundred or even thousands of pounds with an RICS surveyor for a professional opinion, but these valuation reports are a useful middle ground solution to help us along.
We recently completed a quick flip project, where these reports provided some very useful pointers on the ‘street value’ of our property. One of the reports, in particular, suggested a sale value of £180,000 for a property we paid £135,000 for…we ended up selling after a refurb for £185,000 within 7 months end-to-end. The desktop appraisals assisted with our due diligence process.
I have provided links to both Hometrack and Mouseprice Pro in the show notes for you.
OK, so that’s me back in the recording saddle again then and another episode of the Property Voice podcast in the bag. Next week we will start to drill down a little more into the subject of financing our property acquisitions. We will look at some the conventional, alternative and even creative financing methods that are open to us over the course of this series.
Don’t forget to drop me an email personally, if you want to talk property to podcast@thepropertyvoice.net
Meanwhile, the show notes will be over at the website www.thepropertyvoice.net
Right now, though, I would like to thank you very much for listening again this week and until next time on The Property Voice Podcast…it’s ciao-ciao
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