047: Bonus May Property Update with Mike Stenhouse and Special Guest Simon Misiewicz

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Home Sweet Home

Hey property insiders, Mike Stenhouse here and it’s the last show of the month again which means we’re taking a break from interviewing another inspiring property investor to focus on how my own journey has progressed over the last 30 days. The idea is to give some real world examples of the successes we’re having, the problems we’re facing, and what we’re doing to overcome them in order to build our own property business.

This month, we finally completed on the repossession property that we’re going to convert into an HMO, we’re at the half way mark on the development of our own home, we went through the process of renting out the 2 bed terrace we had previously been trying to sell, and we went to do viewings with a few motivated sellers as well. But before we got on to that in the show, we had a very special guest joining us to help us all maximise our income and minimise our taxes.

Many of you will know Simon Misiewicz as the head of Optimise Accountants. He is passionate about both accounting and property and runs the UK’s premier accountancy firm specialising in the property market. You can find out about his own property journey in episode 18, but during this show and for the next few months he’ll be joining us to share his best advice and knowledge on property accounting.

Simon’s Accounting Tips

During the show Simon talks about the different ways you can set up your property business including buying properties in your personal name, using Deeds of Trust, and setting up companies to hold the properties.Simon Misiewicz

He discussed the pros and cons of each, along with how you can determine which strategy is best for your own situation.

He also shared his top tips on minimising your taxes, including explaining what allowable expenses are and how these can save you thousands of pounds every year.

If you have any tax or accounting questions about your own property business, Simon has offered to answer them in next month’s show. Just get in touch here, and we’ll make sure your questions are answered at the end of June.

Back to Our Journey

Our biggest achievement was finally completing on the repossession we’ve been working on for what feels like ages. I first mentioned that we had an offer accepted on this one back in March, and then in the April update I was hopeful that we would exchange the next day. Needless to say that didn’t happen, so it’s taken us 2 months to complete on something that we thought would only take 28 days. Lesson number one is that even if the bank stipulates completion needs to be within 28 days, this is only applicable to the buyer and the seller can still drag their feet as much as they want.

So there were a number of delays on it that are worth mentioning in case you face them at . The first was obviously the other bidder that came in when we were half way through the conveyancing. I discussed how we dealt with that back in the April update. Once we got them out the way we assumed it would be quick from there, but we had two further concerns raised by our solicitor.

The first was that the title deeds only showed the property as having good leasehold rather than absolute leasehold. Now what this means technically I’m not exactly clear on, but from a practical point of view as I understand it you would not be able to get lending against a property that only has good leasehold. If you remember from last month we had already found another investor which allowed us to buy this property for cash, so it wasn’t necessarily a delay but we still wanted to ensure that we could refinance it once the work was done.

We consulted with a couple of advisors in our network as well as speaking directly to the land registry. Obviously no guarantees were given but everyone seemed fairly confident that upgrading the title to absolute would be straightforward once we had completed, so after a week or so of reassuring ourselves, we decided it wasn’t a big risk and so would proceed with the purchase.

Then there was a delay getting the ground rent documents from the bank as they couldn’t find them. A buyer can only be held responsible for 6 years worth of rent arrears on a property, but there have been cases with the ground rent is extortionate and demands are made for the 6 years as soon as the sale is completed. We insisted on waiting until the documents were found before we exchanged, which took another 10 days but thankfully when they did come through there were no arrears. At that stage everything was in order so we exchanged last week and completed on it earlier this week.

The plan with this is to transform what is currently in a 3 bedroom end terrace house into a 5 bedroom HMO, then refinance it with a commercial mortgage to get as much of our money as possible back out of it. From a financial point of view, we’ve bought it for £95,000 and expect renovations to cost £30,000 giving us a total spend of £125,000. At that stage it should get valued at £140,000 and we’ll borrow 75% of that or £105,000.

It’ll rent for £1,900 per month with total costs of around £1,400 a month including interest paid to the investor for the £20,000 left in the deal, leaving us £500 per month net profit and giving us the first quarter of our £2,000 a month goal for this year.

Two Bed Terrace – Why we’re renting instead of selling

We’ve also made the decision to rent out the two bed terrace that has been for sale for the past 8 weeks. It was priced well so we don’t know exactly why it didn’t sell but are attributing it to poor parking arrangements putting people off and a bit of a flat market in the run up to the election. Either way it’s actually not the end of the world as we always had at the back of our minds that plan B would be to rent it out.

As soon as we made the decision it was full steam ahead with the rental process. Obviously the beauty of having your own letting agency is you can act quickly, so it was on the market straight away, our database was notified, we had 6 viewings lined up for the next day and a deposit taken within 24 hours. To be fair it’s exactly how we treat every other property but it’s nice to see the system working so well on one of our own. The tenant is due to move in tomorrow (Saturday 30th May) on a 12 month tenancy paying £600 a month.

We’re in the process of arranging a remortgage on it as well which means we should hopefully only have £10,000 left in it by the end of the month. After the mortgage and other costs are paid it’ll leave us with over £200 a month net profit, giving a healthy 24% return on investment, and taking us another step closer to our goals.

Our Own Home – A Labour of Love

On our own house, the 4 bed semi that we’re renovating, progress is going well on that and we’re still on track to be in by the end of June, although only just. The building work is finished and first fix electrics and plumbing are done. If you haven’t seen the videos I did giving a tour of the house they’re definitely worth checking out and you can find them on the Inside Property Investing facebook page.

We’ll be doing a bit of a tidy up this weekend as the plasterer is making good progress already and I don’t want any mess holding him up, so I’ll try to get a couple more videos done after that. I’m quietly hopeful that we might be able to take some equity out of this one sooner than we hoped as well, but the first step it to get the work finished and get moved in so I’ll worry about mortgages on this one next month.

Lazy Lead Generation

Now if you remember from last month I also said I wanted to start doing more to generate leads from motivated sellers. Well sadly I let myself down on this one as it’s been another manic month, but just putting it out in the universe obviously helped as with no effort we were approached by two completely separate parties about motivated sellers. One was a sourcer who had a bit of a conflict of interest with a lead that came in so he passed it over to us to deal with. The other was a family friend who has been struggling to sell their property for a while and recently took to facebook to try and generate some interest.

I’ve been out to meet both of them and inspect the properties and will be getting offers out on both of them in the next few days. I’m not sure if we’ll have much luck with either of them, but it’s good practice anyway for when we ramp up our own marketing.

And if nothing else at least I’ll be able to share the details of the experience with you all next month.

Podcast is booming!

One final thing is just a quick mention for the podcast. I said last month we narrowly missed out on hitting 2000 weekly downloads in the final week of the month. Well the very next week we blasted through it to get 2,500 downloads and we’ve grown our audience another 20+% this month compared to last month, so I’m absolutely thrilled so many people are discovering this and enjoying the interviews I’m putting out.

I’ve literally just got back from speaking at the Liverpool Property Investors Network, and will be speaking at a few more in the coming months on the 7 habits of highly successful property investors, exploring the thinking and behaviours of some of my favourite podcast guests. It’d be great to see some of you at them, so be sure to come and say hello.

That’s it for another month. I wish you all huge success in whatever strategies you’re following and if I can be of any help you know you can reach me on our facebook page, in the comments on this page for this episode, or email me through our contact page.

See you next time property insiders!

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