034: Bonus April Property Update with Mike Stenhouse

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Home Sweet Home

Hey property insiders, Mike Stenhouse here and it’s that time of the month again where rather than interviewing another inspiring property investor, I’m going to talk through my trials and tribulations over the past 30 days to give a bit of front-line insight into the strategies I’m focussing on, what’s working, what’s not working, and what we want to do next month.

This month, we’ve completed on one purchase, are days away from exchanging on another, changed our strategy on the 2 bed terrace we had on the market, among a few other exciting events.

I can’t promise we’ll achieve our goals, but I hope that by putting them out there in the public domain it’ll make us more accountable and strive that little bit harder to make sure we succeed every month.

As always, I’d love to hear what your own property goals are whether they’re short or long term, financial or otherwise. Get in touch in the comments section of this page, post on our facebook page, or send me an email via the contact page and I’ll do whatever I can to help you succeed.

Our Own Home

The first thing of significance that happened once we got back from Shanghai was that we completed on our own house. It’s a 4 bedroom Edwardian house in South Manchester that needs completely gutted. In the few weeks we’ve had the keys, we’ve spent basically every night and weekend there stripping wallpaper, kitchens, bathrooms and floorings whilst we decide and finalise the plans for it. The architects drawings are done, the steel work has been designed, building control have been notified and the quotes are coming in vaguely on budget – so far at least.

The builders will start demolishing the walls to open up the living space this weekend, and it’ll all move pretty quickly from there. We want to be in by the end of June which I know is never going to happen, but if I keep telling myself it’s possible I know we’ll at least be close.

From a financial point of view, we bought it for £320,000 and plan on spending £55,000 on the refurb. Whilst we’re not doing this one to make money on, it’s nice to know that the house directly opposite ours has just had a sale agreed at £375,000 and is nowhere near the standard ours will be finished too. A valuation of £400,000 in 6 months should allow us to pull some money back out of it and use that to reinvest into one or two more buy to lets.

HMO Repossession

The other deal which has taken up a huge amount of my time this month is a repossession we had an offer accepted on before we went to Shanghai. As you might know, repossessions are typically sold under similar conditions as auction properties, with the expectation that you complete on it in 28 days. I was a little nervous heading off to China for 2 crucial weeks of the process, but our solicitor and estate agent are both great so I trusted them to get on with it, and I was only at the end of an email if something urgent came up.

All was a little too quiet though, and I got home to find out the vendor’s solicitor didn’t have half of the paperwork needed so things had ground to a halt. They accepted it was their problem, so the 28 day exchange requirement was waived whilst they figured out where the documents had ended up.

In the meantime, another offer had been put forward through a second agent that was also advertising the property. We didn’t see the point in increasing our offer until we knew everything was in order, as we didn’t want to get into a bidding war before we even knew what we were buying. The plan was to keep the price as low as possible until we were in a position to exchange, and then snipe it with a slightly higher bid.

It didn’t quite go to plan, and they accepted the other offer despite still not having the documents in order. We backed off for a week until the paperwork was found, at which point we got into a mini bidding war but ultimately secured the property again for £5,000 higher than our initial bid. It still makes a lot of sense at that price, but the fat lady hasn’t sung yet.

The vendor’s solicitor released the new contracts today, and hopefully with any luck we’ll be exchanging tomorrow. It’ll be a massive relief – it’s always the ones you think are going to be quick and simple that turn out to be a pain.

On the plus side though, the delays have saved us a chunk of money in finance fees. The original plan was to use our first investor’s money for the deposit and renovations, and get bridging for the rest of the purchase price. If you remember from last month, they lent us £40,000 on a personal loan basis.

Within the last week our second investor has come through and given us a further £60,000 which will cover the rest of the purchase price and mean we don’t need hefty bridging fees. It brings our total outside investment up to £100,000 in the space of about 8 weeks of searching, and we’ll continue to look for further funding on a similar basis from more passive investors.

The good thing is, even if we need more money quickly, we can always rearrange the bridging against the property and release some of the investor money for the next deal. I’d hoped to be in a position to share the full financial breakdown of the deal this month, but until we have exchanged it still feels a bit premature, so I’ll save that for next month. If I’m not here next month, you’ll know something has gone wrong and I’m crying myself to sleep somewhere.

From Flip to Rental

The third deal worth touching on briefly is the two bed terrace that we’ve been trying to sell for 2 months now. It’s a great little house and the cheapest house of that quality in the area, but the parking situation is a nightmare at times and it’s really affecting peoples desire to buy it.

I kind of thought about parking at the time we were buying it, but I was a little cocky given everything else we had flipped sold within days, so figured this wouldn’t be an issue. It’s taught me a huge lesson in not just assessing the property but also the surrounding area, the facilities like parking, and what our prospective buyers might be put off by.

Anyway, life goes on so we’re now working on plan B. We bought this one for £80,000 and spent £15,000 renovating it, bringing our total investment to £95,000. We had hoped to sell it for £110-150,000, giving us well in excess of £10,000 profit after selling fees, but now we are going to refinance it as a buy to let and add it to the long term portfolio.

If we can get it valued at £115,000, we’ll be able to borrow £86,000, leaving us with £9,000 left in the property which isn’t ideal, but more importantly it’ll give us £16,000 cash out of it after we’ve paid off the existing mortgage.

That’s money that’ll certainly come in handy for future projects, and renting out the house will give us over £3,000 a year income, or in excess of a 30% ROI on the £9,000 left in it, so it’s not going to set the world on fire but it’ll tick away nicely in the background and means we’ll be £250 per month closer to our goal of £2,000 monthly income by the end of 2015.

Lead Generation for Lease Options

We haven’t been doing much else in the way of lead generation activities for new deals as we’ve been pretty swamped this month between our new house, dealing with the repossession, and wedding planning thrown in to the mix, but in May I really need to pick up my game when it comes to finding a couple of lease option deals that can help us generate some income without significant investment on our part.

Of course if we can find some new investors looking for a great return in that time, we might just look to buy another project, but I’m keen to get our first lease option under our belt just to prove to ourselves they can be done.

I think direct mail letters to vendors whose houses have been on the market for a long time will be our first attempt, so we’ll see how that goes. Talking to guys like Neil Ward and Tom Wade about their systems for lease options has just got me so confident that if we can figure out how to get one in our area, more will surely follow.

Podcast Progress

Other than that the podcast is still going well. We narrowly missed out on my target of 2,000 weekly downloads in April, but got pretty damn close with 1935 last week. This week is even better already so I’m confident we’ll get there, and I guess since half of this week is still in April it’ll kind of count.

Overall though we’re 25% up on total downloads compared to March, which I think is amazing. A podcast mentor of mine suggests you need to be growing your audience at 10% a month to justify the effort, so we’re definitely doing something right.

Obviously the whole purpose of this show is to help motivate and inspire you to make leaps in your own property journey, and from the emails I’m starting to receive from people all over the world, it’s definitely doing that. You’ll no doubt have noticed that a couple of adverts have started appearing in the show as well though. Hopefully this isn’t an issue for most of you – I do need to justify the time spent recording and editing somehow.

The ads will always be relevant to property investing, and wherever possible I’ll try to secure amazing offers for you at the same time, like free entry to your first PIN meeting or a free issue of YPN magazine. I’ll keep them short, and I’ll keep them focussed, and they’ll allow me to keep the interviews coming 3 times a week.

7 Habits of Highly Successful Property Investors

On the back of the podcast, I’ve also been asked to speak at a couple of investor events over the next few months, starting with the Liverpool PIN in May, so if you’re in the area I’d love for you to come and say hi. I’ll be talking about the recurring habits I’ve noticed in our most successful guests and how you can apply them to your own investing.

I’m really looking forward to it, along with everything else I hope is going to come together throughout May. The scary thing about doing these monthly updates is it makes you realise just how quickly time passes by, so what are you going to do between today and my next update to make real progress in your own property journey? Let me know, and as always let me know how else I can keep improving the show to make it as relevant and useful to you as possible.

Thanks again for joining us, have a great month, and we’ll see you next time property insiders.

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