You only have part of the jig saw, you need the right tenant in the right property. We all want an easy life and by not doing the basics right, it could lead to more trouble than it’s worth

How to find tenants
This will depend on what type you are trying to attract. Since we started Castledene over 2 years ago, pretty much every tenant that has come through our doors, we have asked how you came to hear about us or where did you see the property you want, advertised.

You will be surprised to hear that only 28% saw it on the internet and 65% saw it in the paper or a “To let” board. The remainder were told about it or phoned up on the off chance etc.

We find that, our type of tenants, are best found in traditional paper advertising but why? You have to understand your target market. At Castledene, our bread and butter property is the investment property and our investors want the best return they can get. LHA rents are higher (even after the cuts in April) than professional in our area and that is if you can get a professionally paying tenant to live in an investment property in the first place.

Once you understand your target market you can start to see where they would look for properties. Most of our tenants get a “free paper” of some sorts every week, with quite a large property section, these normally come out towards the back end of the week in most areas and i guarantee that on Thursdays and Fridays our phones ring off the hook.

Now internet advertising does have its place and we do subscribe to the main property portals and ill cover those later in this article, just don’t be fooled into using these companies that use 100 property portals and think you will find a tenant IF your target market is at the lower end. Despite what the government and these companies are telling you, not everyone uses the internet, it’s simply not true, although subscribing to the main ones is recommended.

Advertising in the paper is expensive, especially if you advertise in several papers on a weekly basis as we do. However you do need to advertise every week, if you can afford it, in order to get the trusted response from the tenants. Our response rate, since we stepped up are paper advertising has been tremendous and has easily paid for the additional costs.

Internet portals
Internet portals do have their place and are extremely useful. One of the agencies we recently acquired deals with higher end properties and mostly professional tenants. This agency gets most of its tenants via its website and also the main property portals or Rightmove, Find me a property and Zoopla. The type of tenant they are aiming for DO use the internet (apart from LHA tenants who seem to use it for facebook)so do place more emphasis on the internet to find properties. Since we took over in August we have not got enough data to give a true representation of the percentage of tenants searching on the internet but so far around 80% look on the Internet to find a tenant either on our website or the property portals we use.

The main property portals that we use, collectively have over 76% of the internet portal market. There are other ones but they are so small and not well known so in my opinion not worth using. Yet again it comes down to return on investment, time putting properties on the portals being the investment against the leads you get from it. We have used them in the past but get very little from them.

So you have to make a choice, and its always going to be based on cost and benefit. Do i spend money on these property portals or on paper advertising or both. There is no magic formula and what works for us might not work for you. It will be a learning process, but all i can say is do the market research. When a tenant phones up ask how they heard about you, its imperative you know what works and what doesn’t. It will save you money in the long run

Non traditional Methods
Due to the type of properties Castledene manage we employ some tenant finding methods less well known. We have links to several charities and homeless organisations around the North East and if we have any properties that are in less desirable areas, we work with these charities to find a suitable solution. These organisations more often than not, offer bonds and other securities, against rent or damage. Its obviously horses for courses and we only use this route if the traditional methods don’t work. Some of the investors we are coming across have been terribly mis-sold properties back in the day from unscrupulous sourcing companies and have bought real “dogs” in rough areas, so we have to consider all methods to get the property back in use. Don’t forget whilst they are untenanted, the landlord is responsible for council tax, service charge on utilities and the property is open for vandalism.

We also offer incentives to existing tenants if they can put us in touch with family or friends looking for a house and they pass our checks etc.  If we have an empty house, we will also introduce our self to the neighbours and see if they know anyone who may want to take the property. This works extremely well as it not only gets the neighbour to act as a temporary security guard as they now know you and put a face to the company name but also they are trying desperately to find a tenant as they are now in control of who they get as a neighbour, plus they earn a little for doing it.

The Paperwork
As with everything in business, paperwork is of paramount importance. As a letting agent the more you know about your tenant the better. Not only does the landlord want an easy life as in the tenant stays and courses no trouble but also as a letting agent you want a well behaved tenant who pays their rent on time. We don’t get paid any more for visiting the tenant or for phoning them up asking them to behave. So the initial selection process is important for both Landlord and Letting agent.

Vetting and References
When dealing with LHA tenants the traditional Credit checks are not the ideal tool to use. The majority of tenants, who we have come across, that claim housing benefit have in some point in their life had bad or poor credit and this will come back on their credit report and they will fail, so as an indicator of how good they will be as a potential tenant, its not ideal.

One of the more appropriate methods, which i highly recommend is ask for Landlords references.  Ask the previous Landlord by all means but also ask the landlord before that as they are more likely to give a true representation of the tenant. The previous landlord might say anything you want to hear so their tenant moves into your property. You could ask for a full housing history from the tenant and ask the council and ask the neighbours and ask everyone else who ever knew the tenant but whilst this is going on the landlord is losing out. Don’t forget, this is at the lower end of the property ladder so the chances of you getting a doctor or lawyer wanting to live in a 2 bed house in “Billy Elliot” country are pretty slim. The likelihood that once you say no to this tenant the next one will fall down on your “extensive checks” for the same reasons.

Bonds and Guarantors
This is another part of the business that is horses for courses. We have several agents in our area dealing in the types of property we do, that say tenants MUST have a bond. Guess what? Their properties are still empty. As an agent it’s our job to get a suitable tenant into the property so that the Landlord gets the rent to pay his mortgage. By making it difficult to match a tenant to a property its the landlord who suffers. I don’t mean put any drug addict in a property, we all have procedures to follow, and if you don’t you should, but we have to be flexible and more importantly realistic.

At Castledene we don’t take bonds unless instructed by the Landlord, which is almost never, we always give the landlord the choice though. What we do ask for is a home owner as a guarantor. We need to meet the Guarantor, visit them at their property as we do with ALL our prospective tenants, and also ask for a copy of title deeds for the property they own or a solicitors letter confirming this. We explain the guarantor agreement fully explaining that they are fully responsible for arrears or any damage. We used to ask for a guarantor in full time employment, but quickly realised that if they lost their job, some are in no rush to get another one and they are basically useless as a guarantor. By having a home owner guarantor and explain the seriousness of it, in our experience they are more reasonable when it comes to paying of rent arrears. We have NEVER chased a home owner guarantor and not got a payment plan in place.

At the “higher end” agency we have, we ask for 1 months rent up front and 1 months bond AND a home owner guarantor but we have great success with it. We can afford to ask for those things as the properties we manage at this agency are the higher end and attract professional tenants with more money

The Inventory
One article i recently read was that 95% of inventories will NOT stand up in court if challenged for very simple reasons such as no photographs, not signed, photographs were not date stamped, hand written inventory that could have been done any time. We have introduced a “tablet” inventory system that you can take date stamped photographs, complete a template inventory and get the tenant to sign for it there and then. You can then download the inventory and a comprehensive report that independent solicitors have said they would go to court based on it. We are fortunate never to have to go to court to present it, but its a comforting thought that should the situation arise we are covered.

Hope these articles give you an insight into setting up and running a letting agency and the potential pit falls you may face. It is hard work but also a lot of fun and if done correctly can be financially beneficial. If you have any comments or queries about this or any previous articles please contact me on john@thecastledenegroup.com Don’t forget to follow me on twitter and facebook.

John has recently opened an agency in Halifax and one is planned to open in Leeds in April, if you have any properties in those areas and would like to talk to John about managing your properties please get in touch.

This article appears in Your Property Network Magazine, April 2011

From April 2011 a number of changes will be introduced to the Local Housing Allowance (LHA) scheme.

The majority of Housing Benefit (HB) customers who are assessed under LHA arrangements will see a reduction in the amount of benefit they receive.

There are three changes being introduced that will lower the levels of LHA we pay in County Durham:

•    the removal of the £15.00 top up
•    the setting of LHA rates at the 30th percentile
•    the removal of the 5 bedroom LHA rate

Customers affected by the last two changes will be given some transitional protection.

Please click here to download information document outlining full details and how it could affect you

At the moment, anyone can set up a lettings agency, which in my mind is completely ludicrous. There is no legislation or regulation governing the industry, which is the reason why so many investors have so many horror stories. Apart from the fact this needs to change, there is also no regulation for training some one either.

As an investor you are giving control of your most expensive asset to some one hundreds of miles away who may think section 21 is a new boy band! And yet investors do it every day. How many times has anyone at Castledene been asked, What training do you have to manage my property? Have you been on any external courses? What organisations are you members of? Not very often I can tell you. Now obviously we are members of organisations and every single employee is or has been through NVQ’s and Diplomas etc but the point is we are too trusting with our property, considering we don’t know the person on the other end of the telephone or computer

As a letting agent you need to take responsibility for not only yourself but also the investors property and the only way to do that is by continually improving and updating your knowledge. It doesn’t mean you have to become a solicitor, but you need to know the basics.

How do we improve our knowledge?
There are so many good courses out there that can vastly improve your knowledge and make lettings so much easier. Anything by ARLA or the Letting Centre are very good and im sure there are many more. The point is you must take the time and effort to improve your knowledge base, I personally think you have a responsibility and whilst there is nor regulation, its down to us as responsible business people.

I’ve mentioned in previous articles that by joining the likes of ARLA and NALS you are initially putting your head above the parapet with regard to letting agents and you should be commended on that. But it doesn’t stop there. You must keep up the development of your staff, just as rules and regulations change, your training will also change.

We have individual training programmes that every person must adhere to in order to be a part of the company. Whether its Sage or customer admin or lettings based, we sit down plan out a training schedule based on the individual’s role and experience and that’s just courses carried out by external companies. We also train the staff on the software systems and internal policies and procedures. No one will be great the day they start or know everything immediately but by having a training programme in place you are improving your staff, your business and therefore the service you provide to your clients.

We have set up a training and development company that provides apprenticeships in residential sales or residential lettings for FREE and its NATIONWIDE.

What is an apprenticeship?
Its for any one at any age. The old preconception was that it was for 16-18 year olds, is still true but you can also be 100 and still be an apprentice. There is no age limit.

An apprenticeship is made up of 3 parts
•    NVQ
•    Key skills (English, Maths and IT – This is just to see what level NVQ you take)
•    Technical Knowledge of the subject, which in this case is the technical award in lettings or sales

The advantage of the apprenticeship scheme is that you “earn while you learn” it is not class room based so its ideal for people already working in an agency and not wanting to take much time off to do the qualification. We come to your work place so there is little or no disruption

Who is it aimed at?
Every letting agent, every estate agent and every property investor who self manages in the country can benefit from this qualification

How is it funded?
The training is 100% funded by government (one of the few things they got right)
There is a small cost to take the Technical diploma exam that is not covered by the funding, but the cost is minimal

What do I get at the end?
You get an NVQ and a Technical Diploma in Residential Lettings or Sales. It’s a government backed qualification and is recognised as such.

What can I do with it?
Apart from the obvious that you, your company and your clients are benefitting, on successful completion, you can join Association or Residential Letting agents ARLA or National Association of Estate Agents NAEA. This alone gives you credibility and standing amongst your piers.

This article appears in Your Property Network Magazine, March 2011

Well, as I mentioned in the previous article we picked a niche. Our niches was LHA, very few people at the time knew anything about it (many still don’t). It was this taboo subject that even the councils were unsure about.

We increased our knowledge and implemented systems that could cope with the procedures necessary to run and effectively manage LHA tenants and properties.

That aside we had to tell everyone, what we did and how we did it. After all you can’t buy something from some one if you don’t know they exist….right?

We quickly worked out that in our business, like many other in the property game, an important part of success is the size and quality of your database. We had to increase our database and fast, if we were to have the success we wanted. How did we do it?

Hitting the Boards
Hitting the boards is where, you see a rival letting agents “To Let” board outside a property and you find out who the owners are by going on the land registry. You have to pay £4 but you get some useful information as to who owns it, their home address, who the mortgage company was and how much they bought it for.

We then write a very professional letter explaining who we are, and that we can help in the managing and letting of their property. I will say that success will depend on how you come across in the letter. We have evolved the letter and we get a pretty good response. In our early days we got very little from hitting the boards, but as we achieve more, the more information that you can put in the letter.

You will get some landlords who have nothing better to do with their time, and they will either phone you up to ask that you don’t contact them and some even take the time to write an angry letter back saying the same thing. If they put the same amount of time into chasing their own letting agent to get the property let as they did telling us they were not interested in our services, they wouldn’t have any voids!

Some people, have said this isn’t the most ethical way to get business and that we shouldn’t be stepping on other letting agents toes. WAKE UP, if a letting agent isn’t delivering the goods then I will. This is business and its not all sunshine and rainbows out there.

Even if you don’t get any response initially, send them letters or leaflets every couple of months until they either tell you to stop or you get their business.

We get quite a lot of business from using this method for a pretty small initial outlay.

We do have relationships with some letting agents and they are off bounds but the majority are fair game in my mind.

Networking Events
These are an extremely important tool in increasing your business. It isn’t a quick fix though and can be hard and tiring work. You can go to 6,7,8 or even a dozen networking events and not meet any one who has any intention of letting you manage their properties. You have to be ready for long drives homes, chewing the fat with seminar junkies who have spent tens of thousand s of pounds on courses but don’t own any property. What it does do is get your face known, and people do recognise you.

In this game, referrals are extremely important and it might be that they don’t have any properties but they know some one who does have some in the North East. You then have to follow up the meeting over the next couple of days, some thing which systems will certainly help.

Advertising
We started advertising in UK Landlord magazine which was the NLA own magazine. We did this for 6 months and didn’t get a single call from any one with properties in the North East. Coincidently we did get calls from landlords asking us to manage their properties in London, even though it clearly said North East in our advert!!!

Personally I like the magazine and being a member of the NLA, look forward to getting it; however it didn’t work for us. There is no way of telling what will work for you and what won’t before you try. I know many people who advertise in industry magazines and swear by it. It just didn’t work for us

Even, dare I say it, the advertising in YPN doesn’t open the flood gates (although we do get quite a few properties to manage) but what is does do is increase our profile and that is of the utmost importance. You need to be known in your chosen subject, whether your being controversial, boring or you just pop up everywhere, being known in this industry is important (for the right reasons of course)

Because the YPN magazine goes out to so many people, who know so many more property investors it does bring us other business opportunities and we do get a lot of e-mails, some simply asking for advice, some asking if we can manage their properties and some wanting to do JV’s. It’s a great way of getting you known.

Use your Database
As you increase your database it’s extremely important to use it to its potential. You don’t want to be sending e-mails to your investors every day, as they will just get sick and unsubscribe. What you can do is send them special offers for referrals, say a free CP12 or EPC if they refer other landlords or give £50 for every property that their referral brings across.

Social Media
You have to get yourself known if you expect to pick up lots of business. Something that I have just started to do is Social media. I’m a big fan of Facebook, LinkedIn, and Twitter and whilst it isn’t everyone’s cup of tea it does have its place along side the more traditional methods of marketing.

After only being on Twitter for a couple of weeks we picked up a landlord with 5 properties, on Facebook we picked up a landlord with 3, its not exactly setting the world alight, but everything helps in this industry. I’m also telling you what has worked for us, it might not necessarily work for you, but if you don’t give it a go, how will you ever know?

Social Media is on the increase and will be a major force in the future, like it or loathe it, if you don’t embrace it; you’re immediately cutting off a major marketing option. To me that’s ridiculous, you don’t have to understand why it works, just that it does work.

We are in the process of getting a new website made with the emphasis on technology. We will have video blogs, word blogs, links to Facebook etc new content on the site will increase our ranking and make us even more accessible to our target market.

Do Something Different
You need to standout from the crowd if you’re going to get noticed. I wrote an e-book and was very quickly known as the LHA expert, whilst im not comfortable with calling myself that, it was purely and simply a marketing gimmick which has worked.

As im not a marketing guy, although I am getting better, I was also told I had to stick my head above the parapet with regard to my chosen subject otherwise id be like all the other letting agents. It was some great advice and has certainly worked. I now get asked to speak at networking events or can I do some consultation on LHA and the proposed changes, even from councils and landlord groups.

Another angle which we came from was that we found a legal loophole in the overpayment regulation. The fact that we found this and have used it to full effect with 100% success rate has dramatically increased our standing with Landlords and councils alike. Look for things that other letting agent do and see what you can do differently, so long as it increases business.

I get a lot of e-mails every week asking for help and advice on LHA problems from investors around the country. I even get them from local landlords and on many occasions after I’ve explained what they need to do; they have said “Castledene might as well manage my property”, which is obviously great for us.

Conclusion
You will get different results to what we did and you probably have other avenues of getting business. The point is you have to get off your arse and go get it. Work won’t come to you if you just sit there.

If you try something that works, drop me an e-mail, we might use it. Also get yourself on Facebook and twitter etc if you already are, follow me, you never know we might do some business.

This article appears in Your Property Network Magazine, February 2011

Anyone can set up a lettings agency but it takes a certain kind of some one to make it successful. Its not a case of I’ve got nothing to do or I fancy a stab at that. To be successful in lettings, as with any business, you have to be knowledgeable on not only the practical side of property management but also the legal side. It can be a minefield and if not correctly handled a very expensive learning curve.

Why set up a Lettings Agency
There are many reasons why you could set up an agency, some better than others and believe me I’ve heard them all. I would suggest sitting down and analysing the reasons why you want to set up an agency and what qualities you possess as a person.

To run a successful agency some of the skill set you need are:

• Good communicator – speak to investors and landlords as well as tenants
• Customer orientated –both your landlords AND your tenants are your customers, so you need to find a happy balance
• Analytical – especially if your dealing with the rents
• Systematic – follow systems and deals with problems
• Sales – you need to sell your services to prospective landlords and tenants

Unless you are in the fortunate position of being able to employ staff from day one and outsource the skill sets needed to them, you will need to be master of all of these or at least be competent other wise your failings in an area will lose you business.

I set up Castledene for a number of reasons:-

Armchair Service
We had started sourcing properties for investors and wanted to offer them a complete service. Most of our investors were based too far away to manage their properties so managing their properties seemed the next logical step. By offering the management service not only did we retain the investors as clients but we were also first choice if they wanted to sell any of their portfolio, which is another potential revenue stream.

Start and grow Castledene
As a portfolio landlord I was very hands on and getting phone calls at late hours or on week ends was normal. It’s very hard to start and run a business effectively, when you get out of hours phone calls. To be honest I didn’t like managing my properties, it was a necessary evil for me so setting up Castledene was a life saver that allowed me to spend more time on other things.

Had to change my strategy
After the mortgage companies essentially stopped lending, I couldn’t get a mortgage so I was forced to stop buying property. I wanted something that if done correctly could provide me with a healthy income but if and when I decided to sell, would give me a reasonable amount of cash that I could wither purchase properties outright or pay my existing debt down.

Pick a Niche
There are thousands of letting agents out there managing billions of pounds worth of property, what separates you from them? Why should landlords choose you instead of any one else? Are you a HMO specialist, do you manage top end properties? Do you deal with LHA tenants?

As everyone knows we picked LHA tenants or LHA tenants picked me as I tell myself. My portfolio is in the middle of an area dominated by LHA tenants so from the national introduction of the LHA system in April 2008 this was mostly the only type of tenant I had dealt with. I have been through and seen pretty much every problem that can occur with LHA tenants and also the problems dealing with the council, which can be a much bigger problem than any tenant, they included;

• Paying the tenant direct
• Overpayments
• Taking too long to pay
• Not enough information
• Wouldn’t deal with Landlord
• Lost information
• Wrong advice

Because of the problems I experienced personally on my portfolio, I was in a position that when I decided to set up the letting agency, landlords could benefit from my mistakes and experiences. It seemed logical that even before I decided to go into the lettings game, my experiences and knowledge could be monetised in some way, whether it is consultancy or lettings or mentoring.

Another thing to mention here is that monetising your skills or knowledge is not a crime. As the saying goes, “it’s nice to be nice, but nice doesn’t pay the bills” I enjoy helping people but it comes to a point where you need to take advantage of your skills and make money from them.

Having knowledge and experience is key to a successful lettings agency. Having the odd property and waking up one day with the attitude “I think Ill get into lettings today” is not a sustainable attitude to have.

We all fancy giving things a go in life, but we need to seriously sit down and decide whether our life experiences and knowledge (which can be improved) are suitable for the business we are about to undertake.

Business Strategy
When setting any type of business, you need to know what your main aims and objectives are. If you don’t, how can you expect to be able to push the business forward and in the right direction?

You obviously always want to be on top of your game with regard to service and productivity, but are you happy running a small business or have you got aspirations to own a huge corporate monster? Where do you want to be in 5, 10 even 20 years? Do you want to be an owner operator? Or hire in a manager?

I know how many branches I want in what areas and even have a plan as to what order I want to open them in. we have 3 branches in the North East have 3 planned for next year (2 by acquisition, 1 organic growth in Hartlepool) and I don’t mind telling you, we eventually plan to have 20 branches all over the North East within 10 years, and we will achieve this, through hard work and determination. This is our strategy

Now this is easier said than done, but now I have an overall aim or objective i can break it down into smaller aims, such as how many properties do I need to manage in a certain area before I can open up an office or how much revenue I need to produce? How do I aim to get these properties etc?

Now to some people they will see blind ambition and boasting but to me I call it goal setting and objectifying the aims of the business, which is a must for any successful business, no matter how small they are. As Rudy Giuliani the former mayor of New York said “change is not a destination, just as hope is not a strategy”

I have this written down in detail in my top drawer and I constantly look at it. We all need reminding now and again and it spurs us on to achieve our goals.

Knowledge is power
Now you have picked your niche and come up with aims and objectives you need to become as knowledgeable as possible on your subject. Your probably an investor or have partnered up with some one who has dabbled in property before but that doesn’t mean you’re the oracle on all things letting.

When I set up, I joined property associations and bought as many books on property management as I could find. You need to be up to date as possible on the legal aspect of property management as soon as possible; otherwise it could be a costly mistake.

I’ll be honest I cheated…… bit of a sweeping remark, but I did. Instead of learning everything about everything which is impossible, I realised where my knowledge was lacking and plugged the holes with employees or other members of my support network, such as solicitors, insurance brokers, mortgage advisor, builders etc

I knew the basics and understood them, but in my opinion taking a night course in the correct way to evict some one or dealing with selective licensing issues is not going to make me a success, so I either employed some one who was great at that sort of thing or started worked closely with a solicitor with the experience I was looking for.

I think many people fall down when they are afraid to let go, I don’t mean delegate everything out, just delegate the majority of things that don’t make you money directly. Do not try and be all things to all people, you can’t. Accept this and use other people and acknowledge your lack of experience.

Accreditations
Another great way to get help is to join a professional letting group of some sorts. The two main ones at the moment are the National Approves Letting Scheme (NALS) and the Association of Residential Letting Agents (ARLA). There are others but these are by far the two heavy weights of the industry. As members of both I am in a unique position to comment on both of them from an unbiased point of view.

NALS
NALS is easier to join to be honest; it’s more like a best practice guide. You need the usual professional indemnity cover, company insurance, separate bank accounts but essentially any one can join. I think it’s aimed at people new in the industry, those with little or no lettings experience but recognise by joining an association it will give your business a professional advantage over the competition.

The back up service from NALS is small but quite good. You can have access to their legal service and they are always willing to help. They stay in contact with you quite regularly through e-mails and leaflets.

ARLA
Is the largest and most widely recognised. It’s a bigger organisation than NALS and has a bimonthly member magazine that contains very useful updates on legislation and best practice.

The joining of ARLA is a bit more complicated. There are a few routes in to ARLA such as being an existing member of RICS but the most common entry route is once you pass the Technical award in residential sales and lettings, which is a four part multi choice exam, but well worth doing.

National Landlord Association
Whether you’re a single landlord or a chain of letting agents I can’t recommend joining the NLA highly enough. The advice line on its own is worth the joining fee on its own, which is a very reasonable £98 for the first year.

You get access to so much more, such as Courses, development manual, special rates for lenders, and as mentioned before the advice line is invaluable. In the early days of Castledene the NLA helped me with more sound advice than I care to remember.

Next months article I will be talking about systemising the letting agent and what most people want to here, how to get those landlords.

This article appears in Your Property Network Magazine, January 2011

The answer is simple, to make it run easier for all concerned. Now that does not mean we don’t have problems and make mistakes, of course we do we are all human, but what systemising a business does it dramatically cut down on most of the more common and simple mistakes, and it does work.

Why systemise?
As mentioned it makes running a business far simpler, especially if you employ staff. It allows you to differentiate who does what and when, which as everyone who has employed staff knows is a major problem.

You always get a cross over of responsibilities where staff are concerned and if they don’t have clear defined roles and responsibilities then I guarantee you will here this excuse “ I thought he / she was going to do it”. It’s an age old classic, if you have two people supposed to do the same task; it’s a great possibility that no one will do it.

By systemising you business and informing the staff of their roles, they have no excuse not to carry out certain tasks, you are essentially writing an idiots guide to your business and how it works.

Systemising is more that just writing a manual though. Its much more of a powerful tool than that:-

It makes you fully aware of how YOUR business works and if things need to be improved.
When we first systemised Castledene it highlighted the amount of time it took to get quotes back for building work, far too long. What we then did is set a limit of how long it took, thus improving the response time. I also got a good over view of every aspect of the business. When you employ staff, you can’t know everything about everything but it does allow you to sit back and see if any of the processes are lacking or need to be improved, which we did do.

Increases productivity
This is an obvious one, but sometimes overlooked. Systemising your business will definitely reduce the mistakes made by staff to the point where you will not know how you operated without it. We saw immediate results when we gave each person defined roles, we managed to not only increase the amount of properties a portfolio manager could manage, but they also were more effective and efficient in looking after their portfolios

Stops Bull Sh*£
This is a favourite of mine. If your manual is well written, you will be able to see through pretty much any excuse or reason as to why a task was not completed. We originally trained all the staff in the procedures and carry out continual training when any amendments occur, they then sign to say they understand and will carry out the procedures. People will always make mistakes, and if they say they don’t their lying or not trying. However I would rather have a staff member make an honest mistake and hold their hands up than try and lie their way out of it, which does happen. By having an operations manual and training the staff, there is no excuse, other than an honest mistake.

What businesses can be systemised?
Any business can be improved by systemisation; we have done it on a property management, construction and a property sourcing company so it can be done. Obviously it will vary from business to business, but essentially what you are doing is writing the best practice way of operation and running your business, so as long as you have a business it can be systemised and improved.

When should I systemise?
From day one! Bit blunt I know, but after being involved in business in the past that have not been systemised compared to now, I can honestly say that systemising the my business’s is one of the most important things I have ever done and is a major reason, apart from my staff, as to why we have been successful to date.

It makes life so much easier straight away, and as mentioned before, if productivity increases then you will have to be systemised to cope with the increased work load. It’s like a viscous circle.

You’re never too small to start, when I had my portfolio and only I was looking after it, I was running around trying to collect rent, carry out repairs, deal with councils and loads of other stuff that seemed to get on top of me, I also had another 2 jobs to contend with. I then decided to try and simplify things; I hadn’t read the E-myth yet, so didn’t know that I was unofficially systemising the business. I made sure I only did viewings on certain days, went to visit the council every other day, graded the repairs into urgent and non urgent and by tweaking a few things, made life a lot easier.

It wasn’t until I read the E-Myth by Michael Gerber that I had the light bulb moment. Things just clicked and I wrote the manual in a couple of months. At that time, Castledene was still quite small, I think we managed around 200 properties, the construction company only had a few extensions and investment side had only sold 20 odd houses. I still feel to this day that I should have done it earlier but was glad when I eventually got round to it.

It’s too complicated
You should always try and improve your business from the start, always evolving and changing for the better. It doesn’t have to be a complicated manual with charts and diagrams, just a few pages of do’s and don’ts that you must follow religiously to get the best effect for your business. Once your business grows you can increase the complexity of the manual, and if you employ staff its imperative that roles are clearly defined and your staff know implicitly what is expected of them. No stone should be left unturned when you employ staff. The more information you have the less chance there is of staff making mistakes or blaming each other.

If any one has had a franchise before they will know all about systemising a business and the operations manual. It’s the bible and the life blood of running the business. It can be made as complicated or simple as you want. The purpose of it is too making life easier for you.

Is it worth the hassle?
Let me put it this way, is it worth the hassle NOT to systemise your business. I can only speak from personal experience when I say it’s definitely worth it. The way we have systemised Castledene, I don’t get involved in the day to day running of the offices, I have employed managers for that. This allows me to get involved in other parts of the business such as acquisitions, we have now bought a third letting agent and are in talks with another 2, something which I certainly couldn’t have done if I was working in the business rather than on it. I do like to keep an eye on what is going on and have regular meeting with the managers but because we are systemised and employ great staff I don’t have to worry about anything, but they do know I’m only on the end of a phone if needed.

As you have probably guessed by now I’m a big fan of systemising business’s but can honestly say it has improved our business no end and highly recommend it. You’re never too small and never too late to start, and once you take the plunge I guarantee you will wonder how you ever ran your business with out it

This article appears in Your Property Network Magazine, November 2010

Ant Lyons has told me I’m not allowed to swear, so ill be as polite as possible – Get a grip and stop moaning !

If your one of this people who have every excuse under the sun why you cant make any money, you need to stop feeling sorry for yourself and make up your mind if you want to be in property or not. This isn’t targeted to just property investors but to any one who wants to make money in a property related business. It is possible, I did it, and I have come up against some pretty big obstacles.

Lets look at some of the most common excuses why you cant make money in property:-

Bad credit
When the banks tightened their belts it made sense to restrict the amount of borrowing by increasing the lending criteria to potential borrowers, thus making it harder to get a mortgage. From now on you had to be squeaky clean to get any borrowing and even then it depended what side of the bed the mortgage companies got up on.

I must admit it hasn’t been easy but you can continue to buy using JV’s with other investors, putting the mortgages in partners or family names. You can also use Lease options to control properties etc all these you don’t have to have an excellent credit rating.

Also if you can use commercial borrowing, they look at things a little differently, although you still have to be credit checked, the lenders look at the deal more to see if it stacks and the affordability of the repayment.

I have a CCJ and a default against my name, courtesy of an ex partner and a banking admin error so I do speak from experience when I say it can be done with a less than perfect credit score.

Mindset
I think this is extremely important in business, without a strong mind you WILL fail. You need to keep a positive outlook even when things get stressful. I debated for quite a while if I should tell you the following story as its quite personal, but I feel if it can help in any way and prove that you can be successful when you feel the world is against you, then it would be worth sharing:-

My father had quite a successful engineering business in Co Durham, we had nice cars, nice house and a good life. Then in 2002 he asked to see myself and my younger brother. He then told us he had terminal cancer and had 6 – 12 months to live. My mother had recently had cancer and had beaten it, so I was confident he would do the same. It was not to be, 12 days later he fell into a coma after catching an infection and died 2 days after that. It was the lowest point I had been in my entire life. To make things worse, there was no one to run the company and basically 6 months later the receivers were called in, we lost everything. The cars we repossessed, my mother had to sell the house, and we were all out of jobs, not just me but my family as well.

We all had to start again, losing my father was bad enough but to see my mother being kicked out of her home was also a huge blow.

I started work for a foundry as a Health and Safety Manager and just tried to keep my head above water for a couple of years. I worked 2 other jobs on evenings and weekends to make extra money to help my family. It was hard and at times I didn’t think it would get any better but I kept going, always thinking that my luck would change as I’m a big believer in that you make your own luck.

I had toyed with the idea of getting into property when my father was alive but didn’t take it any further, I revisited it a few years later and started reading as much as I could about the subject in particular the Rich Dad Poor Dad series of books regarding passive income. Then in 2005 I took the plunge and i remortgaged my house releasing £27,000 to buy cheap high yielding properties. Within 2 years I was making enough money to be financially free and live a very comfortable lifestyle. I have never looked back since.

The reason I have shared this very private story is to show no matter how low you think you are, there is always a way out. Its all about having a positive outlook and mindset. Mindset is crucial to success in business.

Out of all of the excuses why you can not make money in property, this one can only be solved by you. Some one can give you a good idea, you can do JV with other investors, even get some one else to run your business for you once its established but only you can make sure you have the right mind set.

The idea
Ok, so opening a letting agent is not a new idea, however having a letting agent that specialises in LHA and has a systemised and unique approach to property management is new.

We saw an opportunity not only to deal with the DSS market, but to design a management system that works. As I’ve mentioned in previous articles, so long as you have knowledge, a system in place and carefully monitor and review it, you will be streets ahead of your competitors.

You have to keep thinking outside the box, what separates you from all the other letting agents, is it cost? Service? some fancy new technology? You need to have an edge over the competition. Find your USP (unique selling point) and shout about it.

Deliver what you promise
You will never please all of the people, all of the time as we all make mistakes and peoples expectations do change on a day to day basis when property is concerned. However that said, you really need to make sure if you promise something, you deliver it in the agreed timescale at the agreed price.

We have set prices for everything, so that way all our investors know where they are. You have to be as transparent as possible, no hidden charges or fictitious invoices regarding repairs. We have had landlords just turn up unannounced asking to see his property or standard of our work to their property, none have ever been disappointed.

Be honest
If you make a mistake, hold your hands up and admit it. The property community is quite a close bunch, thanks to the internet and networking, so you can quickly get a bad name in a very short space of time.

Just look at how many sourcing companies or managing agents have felt many an investors wrath on Property Tribes or Property tycoon. Even another well know property forum had been heavily criticised (rightly in my opinion) on its rival forums.

Have Fun
Business should be fun. If your not enjoying it or not having fun, get out. Its not for you. Whether it’s the buzz of negotiating a deal, or the satisfaction of selling a property or even helping out a motivated seller, you should always enjoy work. This doesn’t mean you will never get down or depressed about something but if your constantly dreading going to work and avoiding phone calls, then be honest this is not for you. We all have off days, and that’s normal, just do not make them a habit.

Overall you can make money in this climate, I know a lot of people that are doing very well, not because they are geniuses or they have millions of pounds from backers, but they have an idea that they are passionate about, good business sense, bit of hard work and honesty. This combination and a bit of luck, all rolled into one make being successful in business not only a realistic possibility but also an enjoyable one.

Castledene Property Management has just been shortlisted for the Landlord and Lettings show 2010 in the North East Letting agent Category

This article appears in Your Property Network Magazine, October 2010

Background
I had known the owners for a good few years from when I used to trawl the estate agents for looking for property deals, as they also own a chain of Estate Agents. They had a great reputation of being ethical and professional and so did their letting agent Interlet North East (NE).
Interlet NE has been trading since 1992 and managed over 400 properties, mostly mid to higher end in value, which is pretty much the opposite to what we manage at Castledene so it was a nice variation. They are ARLA accredited which is widely regarded as one of the most professional of accreditation bodies but most importantly, in my opinion, had been producing consistent profit over the last 3 years.

I immediately saw the potential of joining Castledene and the Interlet together. There would obviously be savings on certain items and since we have our own repairs department, we could obviously pass on those saving to the Landlords.

I approached them and asked if they would be interested in selling, I hadn’t the finance in place, but I didn’t want to waste time getting the finance if the business wasn’t even up for sale. It wasn’t actually up for sale, but had been speaking to interested parties over the previous few years when ever some one had asked them, but as a general rule were happy to keep trading as it.

We had a few initial meetings discussing price and details of the deal, which went remarkably well. They told me what they wanted and we went away to see if the business was worth it. I cant divulge any exact figures due to contractual constraints but I think it was great value for money.

Getting the Finance
Buying a business was very new for me and to be honest, when it came to raising finance, I wasn’t sure who could help. Initially I thought my broker would be the person to speak to, but he said very few commercial lenders are lending for this type of business at present. Then by sheer chance I was at a networking event (See it does work) and got speaking to an accountant. It turns out that quite a few medium to large accountancy firms have corporate financing departments which specialise in these sorts of transactions.

I met with four firms to get an idea of what to expect and charges etc and picked one that I felt comfortable with. This is extremely important, as this can be a very stressful and tense time so you need some one on your side, who you feel at ease with and also to be open and honest with you.

The accountant helped put together a very comprehensive business plan, much more in depth and impressive than I ever could. They write it in such a way that it makes more of an opportunity for the banks and at least gets you through the door, which these days is hard enough.

Now if any bank manager says to you that they are open for business as usual, I can tell you, that in general, they are not. We initially had 25% deposit to put down and a few years ago this would have been enough for the purchase. Unfortunately the banks are extremely risk averse and politely declined.

We therefore had to go down the EFG (Enterprise Finance Guarantee) route, which is the old small firms loan guarantee scheme. This scheme is a fantastic idea where, in a nut shell, the government guarantees 75% of individual loans made by participating banks to SME’s. The only problem is that banks are not fully aware of the finer details of the EFG, to the point that some of the banks we spoke to didn’t think that it applied to property even though we pointed out that it did.

We eventually spoke to Lloyds who were very keen to help, and after many meetings with them, they came back and made us an offer. They would lend us 50% of what we were asking for. To be honest I was very disappointed as it was no where near we needed to be with regard to our initial deposit.

We went back to the owners, explained the situation and asked for some deferment over a set period of time. They were very understanding of banks reluctance to lend and we agreed on 15% over a two year period, which still meant we had to come up with an extra 10%.

It wasn’t easy but we tightened our belts and managed to come up with the additional 10%. We then had mountains of paperwork, guarantees, etc to complete in order that the banks were happy with everything.

Due Dilligence
Once we had the offer letter, we could then carry out the due diligence part of the transaction and after signing confidentiality agreements we then got straight into it, which I can honestly say was a real eye opener.

As a potential purchaser of a new business, you have to keep a cool head on your shoulders and not get excited by potentially YOUR new business. You have to stay impartial and be open and honest in your findings, ask as many questions as you feel necessary, so that you completely understand how the business runs and why it runs the way it does.

Don’t feel as though you can’t ask a question as you might offend some one. It’s a lot of money what your paying and if your not 100% right you might end up with a dog of a business. I basically asked as many questions as I could until I knew the business inside out. When I eventually took over the business and walked through the door as its new owner I felt as though I knew how it was run already (although there will always be surprises)

Be Patient
Another part of the process that I wasn’t expecting was the length of time it took for the solicitors to finalise agreements and contracts. You feel as though things are dragging on and want them to just get on with it. However they take their time for a reason, they should always have your best interests at heart and if their not happy about something, take notice of them and let them sort it out with the other side.

I was very fortunate that both sets of solicitors were not only good and proficient at their job but also realists. I would ask for certain points and my solicitor would say “ill ask, but you don’t really need to push that point” or “ let them have that one, we can use it as a bargaining tool”. It was a fun experience although I think ive aged 10 years during the whole process.
To buy or not to Buy

Whether you buy a business or not is really down to two things:-

1.    Your individual strategy
What do you want from it? Is growing the business this fast, really what you want?
Are you prepared for the extra work, and it will be extra work?
Are you cut out for the extra work, it can be very stressful?
Have you got your team in place to help, solicitors, accountant, business advisors etc?
If the business is to be integrated, have you got the systems in place to do so?

2.    Can you raise the finance
Bear in mind the banks are not lending as much as they like to tell us
You might be able to get private finance but at what cost?

Its not just a case of wanting a business and going out and buying one, I think that’s a lot of people downfall. You have to seriously weigh up both sides of the deal and see if its worth it.

In this instance I felt that buying this agent was a great move for many of the mentioned reasons:-
•    Established business with superb reputation
•    Profitable business that can be improved
•    Great staff who are good at their jobs and motivated
•    Gets us to our goal quicker
•    Increase the reputation and market share of Castledene

Over all it was a great experience and I can say I have learnt an awful lot. We are actually in talks with another, smaller, letting agent and hope to have that deal completed within a couple of months so you could probably say I’ve got the bug

It has certainly improved me in many ways, as a businessman but also a person. Patience was never one of my strong points, but I have learnt that in life, you can’t rush certain things.

“Price is what you pay, Value is what you get” – Warren Buffett

This article appears in Your Property Network Magazine, September 2010

Background
The old RAFA club was a derelict and disused working mans club in Easington. It had stood empty for about 12 years and was a well known congregation point for the local chavs and a bone of contention for the local residents, which happen to be mostly of retirement age in the immediate area.

The local residents had been trying for years to get something done about it, it was tired looking to say the least and
causing a real headache for the council.

There had been many potential ideas as what to do with the building over the years such as flats, a spar shop, flatten and build residential, but nothing viable could ever be made of it. As our lettings company grew and we took on more and more properties in the immediate area, it made sense to have an office right in the middle of our properties. At first I was looking at something smaller but decided, after carefully working out the figures, that this project would definitely work. I also decided to put a first floor in the building so that we could let out the top floor so that it produced rental income.

The Refurb
I bought the property for 110k, which looking back on it, I think I should of negotiated a bit harder since no one else was interested, it was initially up for 150k, but hindsight is a great thing. I had been talking with my architect throughout the whole purchase, so when it came to me actually owning the building, we already had draft plans drawn up.

We decided to build high specification offices, which Castledene would take half and we would rent the other out to business start ups. There are two other local business centres much bigger and in better locations than us, so in order to compete with them we had to make the finish much better and offer them something the others didn’t.

The plans flew through the planning process with no objection at all, the locals just wanted something doing about this unsightly building, which was quite a relief.

The initial clearing out and structural work took 2 months, we had a few disagreements with the building inspector but these got ironed out. We then had to put over 20 tonnes of steel in as supports for the 1st floor, this was a big job and took good old fashioned man power as we couldn’t get cranes into the building.

From then on the building flew up and within 4 months it was complete. It did help that we had people on site from 6am to 10am so the site was always busy and work progressed very quickly.

As I mentioned earlier, the standard of the finish had to be excellent in order to attract new tenants. All the woodwork was oak finished, aluminium window frames, good quality kitchens and the toilets ,so I have been told, look something out of a Mal Maison.

We had also put kitchens and toilets on both floors, something which we found was unusual, when we did market research on our competitors. I found that in all business centres there were large number of offices using a tiny kitchen or a small toilet.

We sacrificed office space in order to make a lounge for the tenants, that has free Wi-Fi, we also built a conference room that the tenants and local business can hire. Basically we made the building as comfortable as we could for the tenants and since we will be working from there, it had to be impressive and make a statement as to the type of company Castledene is.

The refurb cost came in at £170,000, which was about £8,000 over budget, as we had a few unexpected surprises and the planning dept changing their minds on a few things mid build didn’t help, but overall, and for the finish of the building I was very pleased.

Finding Tenants
Now I must admit building a business centre is a little new to me so finding business start ups and expanding business’s was a little daunting. We had a lot of publicity from the local council, were in all the local press, radio stations etc so that helped immensely.

I also contacted a Carl Hopkins who had appeared on the “Secret Millionaire”. Carl spent a few weeks in Easington back in April 2009 and has kept in touch with the four causes that he donated money too. I found him to be very approachable and a genuinely nice guy who cared for the area. The press loved the fact he was coming back, and also how it had changed so we had some great exposure from that. Three of our current tenants came as a result of this marketing, who previously had not known about the project.

The Remortgage
As this is not your typical remortgage I went down the commercial route. Now as in my last article on HMO, the rent has a major impact as to the valuation of a building.

In this instance when fully let the Business centre will produce annual rental income of £65,000 when considering my annual mortgage on the property currently stands at £7,200 it wouldn’t be that bad if I left my money in. Obviously I want to release some money i spent on the project and hopefully a bit more to finance other projects.

Initial purchase prices £110,000
Refurb costs £170,000
Annual rent £65,000
Commercial Valuation £650,000
Less 10% for costs £585,000
65% LTV £380,000
Profit (minus 5k costs) £95,000
Mortgage – £3,400
Repayment over 20 years
Monthly rental income £5,400

After talking to a few commercial lenders as to their LTV, fees, Interest rates etc I decided to go with my bank. Its very important to way up all options as a project of this size could go dramatically wrong if you pick the wrong lender. I chose 65% loan to Value (even
though 70% was available) for two reasons. Firstly I was offered a much better rate. Secondly I didn’t want to gear the property up to its maximum, I wanted to leave some real equity in the building. I can hear all the property investors saying “Have you gone mad?” “Leverage is the key to property investing” “Gearing is the way forward”.

Well my answer to that is that’s what got a lot of investors into this mess in the first place. Gearing up their properties to the max and living the millionaires lifestyle, not only is it very bad business sense its irresponsible and gave rational and sensible property  nvestors a bad name.

I cant complain, i’ve made a decent profit in under a year and positive cash flows £2,000 per month I want to be able to sleep at night when the interest rate rises (even though I got a 5 year fixed rate).

Conclusion
Overall it was a great project, I’ve made money from refinancing and also  monthly cash flow, got an appreciating asset, provided a superb building for my companies to operate from and helped get a derelict building back into use.

It did have its ups and downs like every project but that’s the beauty of property investing, no two days are the same, if they were id think I would get bored. As always, if you have the drive, determination and vision go for it, don’t sit on the fence The way to get started is to quit talking and begin doing.

This article appears in Your Property Network Magazine – August 2010

The reason we thought this particular article may be of interest or useful to some of YPN’s readers is that I actually practice what I preach. Theory is all well and good but without putting it into practice is useless I network quite a bit and it always amazes me when I speak to people who have been property investing for 2 or 3 years and have still only got one or two properties but have signed up to mentor programs costing thousand upon thousands of pounds. Hopefully this will show people that property is not that hard, you don’t need to spend thousand of pounds to have your ego massaged and there is no magic formula that makes me more successful  than any one else. Its all about having the guts to go for it. This particular project was quite profitable and continues to provide a generous positive cash flow each month. My staff are hardly ever there and we never here from the tenants because we refurbed the property.

The Project
I bought my HMO project in April 2008 for £117,000. It was in terrible condition, it had already been used as a HMO by the previous owner but when the regulations came in with regard to licensing, it was 6 rooms, he basically kicked a few tenants out or just didn’t replace them when they left so eventually he had just three tenants paying £60 per week.

The initial plan was to get planning permission and turn it into 3 flats and sell them on. We got the planning permission after a battle with the council (over where the wheely bins were to be collected, I kid you not) but by then the bottom of the market had fell out and there was no way I could sell the flats. So I had to adapt and keep the property as a HMO, and give it a much needed refurb.

The Refurb
The property hadn’t had any decoration or new kitchens etc since the mid 1970’s. The state of it was unbelievable. At one point we had 15 layers of wall paper to take off. The property was built around 1810 and had some great features, 14” skirting boards, decorative mouldings, huge entrance doorway, so I wanted to keep as much of them as possible.

We really went to town on the refurb, we put in either a small kitchenette in the rooms or where there was a separate room for a kitchen we replaced it. We also built ensuite shower facilities in 4 of the 6 rooms and the other two rooms that already had their own bathrooms we simply replaced them. The reasons for such a high spec will become apparent later in the article.

The whole building was rewired and re-plumbed to conform to new standards and hard wired fire detection was also fitted. It was a costly process but once it’s been done you feel safe in the knowledge you shouldn’t be getting leaks or lights going out for at least a few years as well as knowing you have conformed to all legal requirements.

We also put down laminate flooring in all the rooms as I feel it much more hard wearing and for the market of tenant I knew we would get, it was by far the best option. Hard wearing brown carpets were put on the stairs and the communal areas, and still looks brand new to this day.

We also gravelled the small front garden and tidied up all the guttering and replaced it, if it was necessary. We wanted as little maintenance for us as possible.

I always wanted it to be of a higher standard than other HMO’s in the area, as you are never short of tenants and you will also achieve
higher than average market rates. If things are slow you can always lower the rent to market
rate (not a bad position to be in).

The entire refurb cost me around £25,000 but as I have my own construction company you could probably put that figure up to around £40,000 if we were to do the job for some one else.

The Tenants
Bearing in mind ive put all my hard earned cash into this property and even dabbled with a bit painting myself, what sort of tenant do you think I put in? No prizes for guessing it was LHA tenants.

The property was always going to have LHA tenants in, the market is too huge to ignore and the returns that are possible are too great. As with any LHA tenant there are checks and procedures to follow and providing they come up trumps then there is no reason as to why they can’t be one of your tenants. If your letting agent says you shouldn’t take LHA tenants despite the fact that LHA tenants would achieve more rent, they normally say this for 2 reasons. Firstly they have not got a clue how LHA works and secondly they haven’t got any systems or procedures in place to deal with them. Do you really want to be dealing with letting agents with no systems?

Because the property was to a high standard and the council were very happy with it (they actually said it was the highest standard of HMO in Cleveland) the council even put forward a couple of prospective tenants, of which two are still my tenants today.

I can not stress how important it is to keep the council on side at all points of the process, the planning, the building, the regulation, the checks etc for that little extra paperwork and time that they require, the benefits and reputation you receive are far greater.

LHA
If the tenants have their own cooking facilities and washing facilities they qualify for the single person rate, which is around £90 per week per person. I always ask for £10 top up to take it to an even £100.

Another advantage of this is the council class these as bedsits and therefore the tenant is responsible for paying any council tax and not the Landlord, but the tenants are DSS they do not pay there own council tax. This increases the cash flow even further. The only downfall is if you have any voids then you are responsible for paying the council tax, so make sure you are proactive and don’t have any.

Another good point is that the majority of people who are prepared to live in bedsits (in my experience) and who are on LHA are young to middle aged men with a vulnerable status i.e. debt or drink problems. This is an ideal way of getting paid direct from the council.

The Remortgage
I remortgaged the property using commercial finance. The set up fees are more expensive but the value of the property can be increased greatly. The basic way to work out a valuation, is the gross yearly rent is approx 10% of the value, which is £312,000.

The bank who remortgaged the property took a further 20% off the valuation for voids, management charges and repairs, thought it
was a bit steep but I’m not going to argue, leaving a valuation of £249,000.

I was then able to remortgage at 70% of the valuation which meant (after fees) I received £170,000 less my refurb costs and initial
mortgage meant I had £28,000 for my troubles.

My payments are £1300 pcm and my rent is £2600pcm, after all bills etc I’m receiving around £1000 per month.

The area that I have the HMO in is a slightly run down area and there are quite a lot of HMO’s (albeit to a much poorer standard) so I will be doing a couple more like this but certainly not flooding the market.

Initial Purchase Cost £117,000
Refurb £25,000
Annual Rent £31,200
Commercial Valuation £312,000
Less 20% for Costs £249,000
70% LTV £174,000
Profit (minus 4k costs) £28,000
Mortgage – Repayment £1300
over 15 years
Rent (minus utilities) £2300
Cashflow £1000 pcm

John has written a fantastic e-book on LHA detailing everything you need to know on how to get paid direct, get paid in four weeks or
less and loads of other great tips and tricks, a real must for any landlord with LHA tenants. Its available from www.theLHAexpert.com

You can also follow him on twitter and facebook
– the lha expert

This article appears in Your Property Network Magazine – July 2010