In this week’s podcast I discuss investing in other people’s projects. Using service charge as leverage to buy the freehold and the Property Investment Success Cycle and why it’s important to know your number…
I’ve added the video below so that you can watch!
If you want to listen to the podcast, you can do so here: https://anchor.fm/the-nc-podcast
You can also join the Members Club waiting list here: https://ncrealestatemembersclub.com
You can read the transcript here:
How are you doing this week? How was your bank holiday? Actually this is coming out a week after the bank holiday, but I’m recording, on the Wednesday, two days after bank holiday weekend.
I am feeling pretty refreshed. I’ve been, I’m on annual leave from the university, although I was in yesterday just to do a little bit more marking for my masters students and get that finished because they submitted their assessments three weeks ago, so I need to make sure that they go back out on time.
Oh my gosh. Big News guys. I finished my teaching qualification. I saw yesterday in my university inbox the final little pieces that I needed to complete the final assessment had come in as like, right, Collin’s sit here, do your assessment, get it done and just do not think about it anymore. So I’m excited. So glad that that is over because I was just one thing that was weighing on my mind.
I know I spoke about it in a podcast a couple of weeks ago and I was like done is better than perfect. Hell yes. In this case done fine handed in. Yeah. Okay, beautiful. I’ve got to a point where I’m doing academic research and as much as you’re meant to be using textbooks, oh, the academics and looking at their writing and journals published. I’m going to be honest and say that now my source of referencing usually comes from people on Instagram who have got interesting topics or blog posts other online things I’m seeing. I felt a little bit kind of like, am I meant to be doing this. Is this professional enough? But I thought, hey, this is where the sources of information come from nowadays. This is where I get my learning from. And actually it’s where my eyes are open.
So I handed an assignment, which has a lot of youtube and Instagram references in it because I think that’s valid now a days. So, Hey, whatever marker get done is better than perfect. But for me, that’s where I learned the most from. I’m always on social media, flicking through things. I’ve been trying over the last week, not to get so heavily involved in discussions because I do actually have needed to remove myself and go just do a bit more work. And I find that I can be on social media, comparing myself to other people thinking, well, I’m not involved in this. I’ve been left out of this or I’m seeing other people do x, y and zed. Oh, social media can also drag me down a rabbit holes. So I’ve watched from afar most of the time.
I do see that post and I happily whatsapp friends and say, oh my gosh, cool post, just really nice comments that I’ve seen their Instagram stories and I’m really aware of it. I don’t put anything normally in comments sections. So if you do think that, if you know that I follow you, but I’ve never said anything, I do take note. I just try not to get too involved in discussions because I need to be on and off. But I like seeing what people are doing. So that’s a little bit of an aside, but I’m so glad that is over. Put that to bed, done, dusted, fabulous. You can get back on with all of the other things that I am doing.
Another thing that I wanted to talk to you about is, uh, that, you know, a while back we sold off flat and I was like, yeah, we’re now going to get investing and we’re going to be buying, buying, buying. Can I tell you a little bit of a, something that I’ve been feeling a bit of impostor syndrome about and a little bit guilty is the fact that I’ve not actually had time to go out and buy us another investment because I’ve been focusing really heavily on growing the members club.
So instead what I’ve been doing is I’ve been leanding my money to other investments, so kind of indirectly been investing in property. Um, but I haven’t actually bought anything for us just yet because quite frankly life seems to be getting in the way. So instead when whenever a member comes to me and they say, Hey, Natasha, I’ve got this cool project, I think, oh, I might get involved in this. And then I lend a little bit of money on that. I’ve been looking at some of my other colleagues developments and getting involved with those and doing the deal analysis and lending a little bit of money that, so rather than actually right now be buying something myself, I’m just popping my money in investments and I’ll take that back out at a later day and buy something. I’ve still got a good £50k set aside to buy something for us.
So in the meantime, I’m lending my money at 9% – 18% per annum, which is is quite good. It could be for a six month period, it could be for a 12 month period, it could be for anywhere in between. And then I collect interest on that on a monthly basis. So there’s a little bit of a return. It’s a nice way of doing it. So far.
The other thing that I’ve, I’ve had a lot of going on is one of my flats, the lease holder is about to go through an externals project.
You have no idea how much of my time that’s taking up because the emails that come through on a daily basis from the other lease holders asking me to confirm things. Honestly, it’s got kind of to the stage where I’m like, ah, okay. I found myself going through a service charge budget for the managing agents because they hadn’t been able to put that together properly. Reading the leases, making sure people were being charged the right thing. And you may say to me, ‘Natasha, it’s not your job. It’s their job to get it right’. Well, at the end of the day, I’d be paying the bill if they get it wrong or I’d be having to drag myself through leasehold tribunal. I really can’t be bothered, really can’t be bothered. I would rather just go, hey guys, look, I know how to do this stuff. I’ve been trained in it for however long I teach it. Give me your service charge budget. Let me have a look through and let me give you my advice on how I would do it. Now they get to choose whether they take it or leave it, but I know that I’ve done it properly because I’ve been doing service charge budgets and collecting service charges for the past 10 years. And do you know what also I understand completely i I could do a service charge budget and then I’d go, oh, uh, actually, um, this might not have added up, right? So I give it to a close colleague and I say to them, hey, you add it up. Right? So I completely get it that this managing agent might not have got it right first time as well. So I’m happy to almost be that friendly peer reviewer of the service charge because I know what I’m doing.
The other thing is, just taking a step back from my own personal perspective is that I would quite like to buy the freehold of this building. The only way that I’m going to be able to buy the freehold of this building is if the head lease holder buys the freehold first and the freeholder is really reluctant to sell the head lease holder and their share of the freehold.
Why, I can’t quite get to the bottom of it. Considering the head lease holder offered £40k above market value. Again, I do not get involved in that. That for me was a bit like, okay. Obviously you felt like you had no negotiation power. It is a bit of a conflict of interest for me to get involved in that but at the back of my mind I’m thinking if we do this service charge budget properly, that is going to be quite high liability for the freeholder because the way this works (bear with me) is that although the freeholder looks after the structure of the building and the roofs is actually the head leaseholder’s responsibility to do the works and recharge it back to the freeholder.
That’s what the head lease says. I’ve been through the head lease and I can confirm that. So it’s not straight forward head lease. Um, and, and so what I’m trying to do is make sure that in the service charge budget there’s a high enough amount of works being billed to the freeholder. So the freeholder goes, Oh wow, I’m not paying this amount of money. And so then the head lease holder can go to the free holder and say, well tell you what, I’ll pay for the service charge on your behalf. And then from that point of view, I’ll also buy it off of you so you don’t ever have to have that service charge liability again. So it’s kind of in my favor for doing that because the head lease holder has said that once they buy the freehold, they are going to be selling it onto the lease holders.
So it’s worth my while getting involved. It takes a long, a long time to get these things worked out. But also it’d be nice having a new roof on, have new windows, having a good looking building. We have been saving for this for the last however many years. So it’s not really as if it’s going to cost me a huge amount of money. It’s not like, oh my gosh, I’m going to get a bill for £10-£15k. The maximum this bill is going to be as £2,000. So there we go. That is the complicated nature of that deal. But I’m doing it for a reason to give myself leveraged so that I can buy the freehold and that will add a lot of value to that flat.
I’ve also got in mind that then when I pass it onto my kids, if I have kids in a few years’ time, they don’t ever have to worry about, extending the lease or what have you. So really I’m future proofing it and I’ve spent a lot of time doing that and it just so happened that this all came up at the same time.
The other thing that’s really exciting as I’ve got a lot of members who are buying properties at the moment, I’ve got a commercial portfolio going through a portfolio in Newport, going through a couple of properties in Stoke going through and these are all commercial and residential. One member’s doing deals in Sheffield, another member is doing some deals in Milton Keynes and I’m overseeing all of that as part of the Members club. And I get so excited by this because they email me and they’re like, Hey Natasha, this is working. Or if it’s not quite why I can, we tweak it a little bit and get them moving forward. I love that. I love that role of my job and, and so I’ve been spending a lot of time on that as well, making sure they get the right funding. And of course if there is deals that I want to invest in that I offered to invest in it. So it’s Kinda the best of all possible worlds.
Here’s something else I’m working on and I really, really wanted to share this with you because I am so excited about it. Over the last few weeks I have been putting together the property investment success cycle. Sounds like a lot of words, but my gosh, it is for my experience, the exact steps that each property investor needs to go through in order to keep growing that portfolio.
And I’m about to merge this in with the members club because the whole idea is that each of these six stages, once you’ve mastered them all, you’ll be able to keep buying your property portfolio and growing it. And I wanted to share it with you here so you can start to see the steps that you need to go through as well to grow that property portfolio.
So step one of the property investment success cycle is your goals. That is the very, very first place that you need to start. No matter what your experiences with property investment, you must start here. It’s important to understand your goals and pinpoint exactly what you’re looking to achieve financially and how you want your lifestyle to look. Because once you have got that down, you can then start creating your strategy.
So that leads you on to step two strategies to success. This is where you use your goals and you start creating those stepping stones between where you are today and where you want to get to when you hit your goals. And to do that, you just break your goals down into really actionable steps so it’s not being overwhelmed with the amount of money you might need to do this. It’s not being overwhelmed with the fact that you might not have the resources. No, it’s making it so that it’s completely actionable for you.
Then number three, you move on to the money and finance part of it, which most people always talk to me about and Natasha, hey, I don’t have the money to do this right now or this, that and the other. That’s cool. That’s fine. All you need to do is take your strategy and go, okay, I need x amount of money, so you need 20,000 pounds or 30,000 pounds. You can then start going through where you’re going to get this from. Are you going to get it from equity? You’ve already got, maybe you’ve got savings, maybe you’re going to be using investors or joint venture partners or other formats of sourcing the money. I’ve just had one of my members buy a portfolio of her parents and her parents have left some of the money in it as a gift to her so that she can afford to get the mortgage on it. And then within five years she’s got repayment plan in place that it’s completely paid off. There are so many different ways of doing this. It’s about being creative and looking at what you’ve got and what you can get a hold of.
Then moving onto step four is all about finding the perfect property, the property that suits your goals and your strategy . That could be buy to lets, HMO’s, that could be serviced accommodation, that could be commercial, it could be a mixture of all of them. It’s about getting down exactly what you’ve got in your goals and your strategy, knowing you know how to get the money for it and then from there going out and finding that property and that’s includes the location, the size, making sure it’s getting the net income that you want and making sure it’s in the right location that you want because that’s also super, super important.
Then number five, management and letting, so this is about holding the property. This is what you’re going to do with it and including colluded within your management is also going to be things like renovations, redevelopment. It’s basically that period of time when you own the property. So you need to be looking at exactly how you are going to manage it and maintain it. So you are making the most amount of income from your property portfolio. And that can be done really simply. It’s not something where you have to be in your property investment portfolio all the time, seven days a week, 24/7. It’s about you picking and choosing what works for you based upon those goals you set in your lifestyle. So you might be building a team, maybe you are doing some of it yourself, maybe you have a virtual assistant or someone to help you. But it’s about developing a management and letting and even a selling strategy that works for you and falls in line with the goals of your property portfolio.
And then finally you move onto step six. And that’s growth and legacy building. And this is where you look at the assets that you’ve got and you do a review. You Go, hmm, okay, how does this work at the moment? Does this meet my goals? Is there a place where I can maximize on this investment more, maybe increase the capital value, maybe the the value of the property has gone up. So actually you could remortgage and you can use that equity. It’s about looking at what you’ve got and seeing how you can maximize it and that’s really, really important. Actually I’m doing this with my mom at the moment. She’s got a bungalow on a plot of land which could get about three houses in and so I’m looking at it with her, how do we get planning permission on that? Would it be feasible for her to do this or should she sell it all? It’s something that we’re in the initial stages of discussion on, but there is always room for improve what you’ve got and that is what the growth and legacy building is all about.
And then you just go round the cycle again and again and again. And every time that property portfolio gets bigger and bigger and bigger. Or it doesn’t necessarily have to get bigger and bigger and bigger, maybe you just consolidate, consolidate, consolidate until you’ve got an unencumbered portfolio that is bringing you in a really nice income that you can live on. And so that is the property investment success cycle, and then for each one of those stages, I break that down into different packages which take no more than 60 minutes to do. So very, very, very simple.
I’d love to hear from you, out of those six stages, which, which stage do you think you are at? Give me a number between one and six, let me know where you are.