I am looking at buying Freeholds to make some of my property investments make more cash

January 11, 2009

I am making this page about buying freeholds as it could be something to consider especially if you have bough brand new build flats in the last 2-3 years. The advantages are

1. You can get often get a 7%-15% yield ,much easier than owning the flat.

2. You can control the management company of the flats , these mangement companies ‘s manage the hallways,carparks,insurance external building etc.

3. When you have a bad management co and many of them are you then have to get all the landlords together and invoke the RTM (Right to Manage Laws).
Which can take a while , in the meantime as no cleaning or maintenance gets down , your property deteriorates and the management co charges you rip off prices.

OK so buying the fre hold is bit harder to get lending , but isn’t everthing at the moment jan 2009. To buy a freehold usually is about £1100-£1500 per flat in a PBB (purpose built block) each flat these days has to pay what is called ground rent usually about £150 a year , so you can see roughly the yield is around 10% – costs which is ususally the cost of collecting the ground rent from each flat (you will need professional legal advice on all this stufff , this is just an outline) .

The freeholder has quite strong power to collect the money as he also controls the leases , eg when the come up for renewal he gets a piece of the action so ona 99 year lease , mortgage companies hate leases less than 70 years, so in 29 years you can also get a renawal fee.

OK so your cash is tied up but thinking laterally if you can put this deal together you can offer someone a guaranteed ,secured return of 5% which is big bucks these days keep the extra 5% which can be offset against your outgoings on your prbably loss making flat. It is also possible to do a few things by becoming your own building management company.

This is one of the more unorthodox ways of making more money from your loss making purpose built flat.

Making Money out of existing BTL Property

January 9, 2009

My Mission is to share what I have learn’t and maybe it will help others in the same situation and turnaround their portfolios.

Check the cash coming in from your porfolio.

Control the cash..

I’ve found the following that can eat away .

1.Some letting agents were not paying regularly, missing months great excuses of course.
If payments are not coming regularly this could be due to the council or DSS taking variable time to pay the letting agent. If you have private tenants not paying regularly 9 time out of ten you will be heading for trouble, when the agreement expires get a new tenant, the promise to make the rent up in the future is usually worth nothing.

2.Some letting agents collected the rent and kept it .
Letting agents may be hiiting the wall and going out of business , so they may be funding their lifestyle with your rent, if you dn’t notice they will assume you are an easy target and more months will dissapear, same as above get a new letting agent it will pay in the end.

3.Some letting agents forgot to tell me a property was empty, or going to be empty.
This is a real pain , if a letting agent doesn’t let you know ,for 2 weeks it can take another 2 weeks to get a tennant in all referenced and deposited up. That going cost you the mortgage for the 4 weeks,+ Council Tax + , some utilities. Usual reasons for not having a tenant are the property is in a bad state or their is a lot of competition like a flat where there are a couple of hundred other new builds, both problems can be mitigated.

Mitigation

1. Make sure you are getting all the rental money in.
2. Make sure you costs are at a minimum ,question everything.
3. Minimise excess payments , eg fines.
4. Try to get everything on terms paid monthly, to prevent major outgoings.
5. Take rental advances not deposits.
6. Turn properties into HMO’s (more on this shortly)
7. Turn your expensive debt into a cash flow earner. (more on this shortly)
8. Get the most reliable tenants there are who pay no matter what (more coming)
9. Look for other properties that are cash positive HMO’s .
10. If you are in permanent employmnet check your tax code as you maybe being taxed on properties that are making a loss.
11 Furnish your properties cheaply.(more on this)
12. Get another investor to join you bit be carefull( More on this soon).
13. How to get rid of trouble tenants quickly(more on this shortly)
14. Unorthodox methods of making more (more on this shortly)
15. Get rid of some debt (some unorthodox methods shortly)

It is possible to minimise your out goings and build a stable portfolio for the future.

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