Putting it all together; are the common themes, benefits, pitfalls & lessons in terms of property financing. This is a long overdue wrap up to this latest series of the podcast, so please tune in and help us all to get back into The Property Voice Podcast groove!
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Resources mentioned:
Link to the free 3-Step Property Sourcing Training
Link to the new Deal Tips Service
Link to the Podcast feedback survey
Today’s must do’s
Review all of the episodes in this series on property financing and determine which one(s) best suit you.
Check out our free property sourcing training as per the links in the resources section above.
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
Get talking!
Join in the discussion, either here in the comments section below, or by emailing us at podcast@thepropertyvoice.net
Start a conversation on Twitter with us @PropertyVoiceUK or on our Facebook page
Transcription of the show
I’m back! Did you miss me?
Hello, and welcome to another episode of The Property Voice podcast. My name is Richard Brown and it’s a pleasure to have you join me on the show again today.
I know, I know…it’s been a while and I have not exactly stuck to my ‘be right back’ statement either! A short explanation is therefore in order, but not one I want any of us all to dwell on too much…
The long and short of it is that my father sadly passed away, you can probably peg the date back to the gap in recording. As a result, I simply wanted to take a little time out as you might expect.
To be honest with you, I have wanted to get back in the saddle for about a month now, but isn’t it amazing how habits and routine can work both with you and also against you? Man, it’s been a challenge to get back into the groove…but here I am as imperfect as this rusty podcast host might be…I am starting a new rhythm…with this first step to draw a line under Series 3 of the podcast on the various methods of financing a property.
Right, enough of that…let’s get into the show and keep moving forward then shall we?
Property Chatter
Newsflash: property financing is not only about cash and BTL mortgages! But, by now I guess you know that pretty well right?
So, what are the variations of property financing we have covered off during the course of this series? Here you go in a summary list…and if my memory has not deserted me:
Cash (1)
Institutional finance (6) - including both residential & buy-to-let mortgages, bridging finance, commercial loans, second charge loans & equity release.
Alternative finance (5) – including equity crowdfunding, peer-to-peer lending, development finance, angel finance and developer joint ventures.
Creative finance (18) – including options, lease and rent-to-rent structures, pension finance, sweat equity, HMRC tax credit, intercompany loans and a Hybrid ownership model, 100% vendor, developer, & bank finance, assisted sale, instalment contracts and exchange with delayed completion, adverse possession, credit cards & personal loans, assignable off-plan contracts and finally…friends and family and joint ventures.
Now, if I am not mistaken, that adds up to 30 different forms of property financing! Wow, yes…we have at least 30 different ways to fund our property interests! I often say that there are 3 main trade-offs in property: time, know-how and money. Well, after this series…if you can’t see a fix to a money-challenge, then you really better have plenty of time or knowhow that’s for sure lol.
In fact, that wasn’t just a cheeky way to bring in that reference to trade-offs again. You see, in my humble opinion, the biggest single factor that can help us all to scale our property interests is knowhow, or knowledge, skills and contacts to give it a fuller definition.
You see, in the area of property financing there is so much that we can learn and this series really has only just scratched the surface when you think about it. Just think about some of my guests during the series, many of them are specialists in just one aspect of property financing. Some may have a deep understanding in one or two areas, but not many will know all 30 property financing strategies inside out…including me obviously.
That’s the first observation really…that we need to deepen our own knowledge and understanding of the art of the possible. Of course, that doesn’t mean that we then have to embark on an intense study programme to cover 30 or more property financing strategies. Nor does it mean that we have to try each and every single one!
You see, to me awareness is part of the knowhow resource element. Let’s not forget another really important element either…contacts. If we are aware of what is possible AND who we can to find the expertise and the solutions, then we have great power to call upon. We can become problem solvers, connectors and trouble-shooters if we want to be. If someone expresses a financial challenge, or if we have one of our own, then we now have an array of different approaches we can take to address it. I know this, as during the course of this series, several people have contacted me personally and a number of my subject matter expert guests to discuss their personal challenges. Many have found a solution as a result.
So, let’s turn our attention to the benefits for a moment then…
OK, here’s an easy one…with at least 30 different ways to help fund our property activities, we really should have few excuses as to the choice of options open to us. OK, so you may not want to sit in the lounge with a homeowner in negative equity discussing a lease option, or a tired landlord at an NLA meeting one evening exploring a rent-to-rent deal but that’s not the point…you can if you want to, or if you need to. Don’t forget that if you want to replace the average salary in the UK, you will probably need around half a million in cash to fund enough deposits and entry fees using a traditional buy-to-let model…yes half a million quid…possibly more if you are a high rate taxpayer and invest in lower yield locations. That’s a sobering thought I know, sorry about that…
Fitting to you own style, personality, lifestyle and preferences is another benefit…there really should be something in here for everyone. Young or old, extrovert or introvert, working or unemployed, rich or poor, hands on or hands off and so on…there is something for YOU in this list dear listener trust me.
Money, money, money…what I mean is…there is money out there available to fund our property aspirations…we just need to figure out the best one for us, make sure we are well-suited to attracting it and then adopt a professional approach to go out and get it. I call this becoming bankable…we need to become bankable or investable if we are to attract the financing that we require. Quite a few people overlook that fact though.
That’s all I really want to say about the benefits.
OK, so there are some potential pitfalls or downsides to watch out for as well…and if you know me at all, you will know that I like to give a balanced opinion on pretty much everything I share, so here goes...
Number 1 – has to be don’t become shark bait! Honestly, some of these financing options are like a magic spell from a master magician that can draw us in with all the shiny golden objects and before we know it…boom, we are poorer and no further forward than we were before we started. I may be contributing to this situation by the very fact of making you aware of what is out there, sorry for that. But, if you do one thing do this…think! Think long and hard before you do anything…to be honest, not just with regard to financing but with everything in property. I hear of so many stories where people have been eaten by the sharks. I mean, I have had a few close shaves myself at times and I consider myself to be pretty savvy and sophisticated, so take care out there.
Next, has to be: act commercially – many of these financing techniques are non-standard and have various commercial risks that we may not have thought of. For example, with rent-to-rent there are loads of lender, insurance and potentially planning risks to consider, bridging lenders can move very quickly not only to lend you the money to buy that dreamy auction lot you paid over the odds for but also to take it back again when you don’t flip it on in the 3 months your promised you would and with commercial loans you are usually exposed to both interest rate risk and a small print clause that allows the lender to call in their debt under seemingly unfair reasons with next to no notice. These are just some of the potential commercial realities that you need to navigate. I could add research and due diligence in here, being commercial also means understanding what exactly we are getting into and that’s why we need to always be asking questions…especially: ‘what’s in it for them?’. Ask and answer that question in all your property dealings and you won’t go too far wrong.
Finally, the shiny penny syndrome, which is the opposite to the benefit of having at least 30 different options to choose from. You can become paralysed by over-analysing everything, you can also become overwhelmed by the sheer range of choice and you can become like a butterfly flitting from financing strategy to financing strategy, novice of all and master of none. All of these things can stunt your growth, clip your wings or cause you more trouble than it’s worth. So, sometimes a simple singular option followed through diligently and repeatedly is the best one to ensure enduring success. Focus, secure yourself and only then consider pivoting into a new area once you have mastered the first one is my best advice here.
That’s all I wanted to say really, I rather suspect that I have left something on the table today if I’m honest. However, the slight distraction of the glass of Malbec in my hand and the experimental jazz in the background may have allured me too much for now…hoping that’s good enough for you to feel a closure to this series at least.
The Shout Out
I have not exactly been a sofa-bound wreck over these past couple of months and have lots to update you on, so I shall return next week with a soundbite episode to give you an insight into some of that…including how I am applying what I am learning about alternative property financing techniques myself!
However, one resource I do want to share with you is a fantastic new training & service if you want some help in finding profitable property projects. We have put on a training webinar that walks you through our 3-Step property sourcer process. This is totally free and if you want to see it, just visit the show notes or ping me a quick email and I will share the link with you personally.
We also have a property sourcing subscription service, which we are imaginatively calling a Deal Tips Service, where we share genuine property projects with the capability of delivering returns of up to 15% or even more Return on Investment (ROI)…in the real world.
I can’t promise you what we experienced just today every day but I have literally signed of and shared 3 deals with ROIs of 15%, 19% and a whopping 24% to the subscribers to the service. Honestly, I think we may have made a mistake in doing that when a deal sourcer may be looking to charge something like £3k, £5k or sometimes even more for these exact deals.
However, we have decided to change our model a little bit and so that means simplifying some of our offerings and also working only with a limited number of people in the process. It’s not a sales message, neither Damien nor I ‘need’ to work or run a business at breakneck speed and so we have decided to do more of what we like and want to do with people we know, like and trust and frankly less of what we don’t. I shall give a more complete update on that soon, so stay tuned.
Anyway, the links to the Deal Tips Service will also be in the show notes or if you email me podcast@thepropertyvoice.net I will reply to you personally with all you need to know.
Finally and as always, do email me if you want to talk about anything from today’s show or more generally in property investing, the show notes will be over at the website www.thepropertyvoice.net
But for now, all I want to say is thank you very much for listening once again this week and until next time on The Property Voice Podcast…it’s ciao-ciao.