Fame at last!

I was recently interviewed for an article in the excellent Your Property Network magazine. For anyone who hasn’t seen it, I thought I would reproduce the article here as it acts as a neat overview of the main methods I currently use to profit from property.

The exposure has generated a massive amount of interest and I’ve been inundated with emails from people wanting to know more about my methods. Many thanks to everyone who’s responded. If you haven’t yet received a reply please bear with me… I will be in touch shortly.

Why Buy-to-Let when you can Build-to-Let?

Like most people, my first venture into the property industry involved the purchase of a small buy-to-let house. Over a seven year period that original £28,000 investment was leveraged to amass a £10 million residential and commercial portfolio.

My methods were completely self taught. In the main, I refurbished rundown properties, increased their value and then re-mortgaged. At that time – when finance was readily available – it was a fantastic way to build a real estate portfolio. I sourced the properties via a network of estate agents and finders, all of whom knew that I had an insatiable appetite for rundown properties requiring full refurbishment. I used bridging funds to buy the houses for ‘cash’ and had two teams working full time to refurbish the houses. All lettings and management was done in house.

Why the move into developing?

Although I’d built a portfolio of 80 houses, I realised there was a limit to how much regular income I could earn from buy-to-let. After finance, management and maintenance costs, my monthly income was not going to make me a multi-millionaire anytime soon! I realised I needed to broaden my outlook and bought the site of an old Methodist church in my hometown of Westhoughton for £120,000. I managed to borrow 70% of the purchase price, paying a deposit of £36,000. I then obtained planning permission to demolish the church and replace with eight mews houses. In doing so I increased the land value to £200,000 which provided the equity I needed to get the build started.

Each of the eight houses had a market value of £125,000 so the gross development value (GDV) was £1m. The bank agreed to fund 70% of GDV, so I was able to secure £700,000 of funding. I owed £84,000 on the land, which left me with £616,000 to build the houses and cover all costs, which proved to be more than enough.

This one small development returned a profit of over £250,000 within around 18 months. It would take me years to generate that sort of income from my buy-to-let portfolio. I was hooked!

I went on to complete further development projects including apartments schemes and luxury barn conversions. Each time I would buy the land off-market and without planning permission. That way I could ensure I had good profit built into the land element of the deal before construction even began.

A few years ago, this approach provided me with the capital I needed for the self build of my home. I was able to purchase the site for a total of £110,000 as, on the face of it, there was very little chance of obtaining residential planning permission due to traffic restrictions on the access road. By applying my specialist planning knowledge, I quickly obtained the relevant permissions and could have sold the site straight away for at least £250,000. I must admit a quick £140,000 profit was very tempting – but in the end I decided to keep the site and build my 7,000 sq ft dream home.

Planning Gain Deals

I continued with my development projects but realised I could also make a substantial income simply by dealing in land. I would secure a site, obtain planning consent and then sell the ready-made scheme to another developer at a healthy margin. A good example of this was a former MOT garage not far from my home in Bolton. This was on the market with a local agent who hadn’t spotted its redevelopment potential. I bought it for £220,000 – what it was worth as a garage – obtained residential planning consent and sold it for £535,000 within six months, netting a staggering £300,000 profit for just a few hours work.

Finding good quality land was the key to my success. Last year I helped launch the land agency service Landlounge.com. It provides a free service to land owners enabling them to market their sites directly to property developers. If anyone is interested in planning gain or development projects, it’s the ideal place to start their search.

Do you need lots of capital to get started in developing?

I don’t think it’s possible to embark on a new build development without any funds at all as planning applications and finance broker fees need to be paid upfront. But if you have a little capital to hand – as little as £5k to £10k for a small single unit – it’s definitely something worth considering.

It’s still possible to obtain finance at 70% of GDV although admittedly, not as cheaply as a couple of years ago. But as long as you buy the land at the right price and employ a good architect to get the most from the site you stand a good chance of keeping costs below the 70% threshold. I’m about to embark on a project consisting of just a pair of semi-detached properties:

This allows £19,000 for finance and should give a profit of around £80,000 after incentives.  The finance isn’t cheap at around 1.5% per month so I can’t afford to keep the houses on the market for long. Luckily I’ve pre-sold one of them and will refinance the other if it hasn’t sold at time of completion. However, as there’s good profit in the scheme, I can afford to offer an attractive discount to encourage the sale and still make a healthy return.

There are ways to reduce the amount of upfront capital even further by entering into a joint venture with the landowner. These deals are becoming increasingly popular amongst developers large and small. They are easier to source than you may think – I’ve brokered many such deals between our LandLounge.com members – and because the developer doesn’t actually buy the land, they are much easier to fund. I’ve just agreed a JV deal on a site for 16 houses. We don’t intend to start until next year when the market has improved further, but essentially the landowner will be putting his land into the deal and we will be arranging the development. I’ve secured a loan from the bank to fund the build. On completion, the bank is repaid first, the landowner next (at an pre agreed figure) and we then split the profits. The deal should clear £400,000 for my company.

I go into a lot more detail about sourcing and structuring JV deals in my newsletter. Your readers can subscribe for free via my website: www.ukpropertyexpert.com

What construction experience do you need in order to start developing?

You don’t need a lot of experience if you employ a main contactor to carry out all the work under a fixed price contract. There are different types of contract but basically ‘fixed price’ means that the main contractor handles all the construction work within an up-front agreed price.

Over the years I’ve established a fantastic team of professionals – specialist financiers, planning specialists, architects, structural engineers, contractors, surveyors – who now take all the stress, hassle and much of the risk out of my development projects. If anyone is considering embarking on a new build project, they’re more than welcome to drop me a line and I’ll happy introduce them to my team.

Do you think development is an option for an average BMV investor?

Yes I do. But if you don’t have construction experience then always rely on a single, main contractor. Most banks will insist on this anyway. Development projects aren’t that different from renovating a house to sell… they just involve bigger numbers. The principals are the same. I’m not saying there isn’t a great deal to consider but if, like me, you start small – perhaps with a self build or single dwelling – it should help you conquer that initial learning curve and give you the confidence to move onto larger schemes.

I go into quite a bit of detail about new build developing in my newsletter. It’s written with the beginner in mind so should be an ideal resource for your readers. They can subscribe on my website: www.ukpropertyexpert.com

What other methods do you employ to make cash from property?

Over the last few months I’ve concentrated on the commercial property market. Certain retailers – the likes of Tesco, Aldi, Lidl, KFC – have benefited from the downturn and are desperate to secure new sites. So during the property crash I turned my attention to sourcing development sites on behalf of the retailers in return for finders fees. You’d be surprised how lucrative and simple it can be. For example, the finders fee for a small Tesco Express site can be £30k+.

Commercial investments with strong covenants are extremely sought after, especially in the current climate. I quickly learned that it’s possible to maximise profits further by finding a developer interested in building out the site as an investment property. I can then charge them an introduction fee too! I’ve used this tactic as part of a current project which will return over £300,000 once planning is granted.

Retail site finding has been a great way to ride these turbulent times and I’ll continue to dedicate a lot of my time to it even though I’m starting to venture back into developing and land trading. With such huge risk free profits to be made, I’d be crazy not to!

I’m currently writing a free report which reveals how easy it is to discover exactly what the retailers require, how to source a suitable site and how to claim your five figure introduction fee. I’ll be releasing the report to my newsletter subscribers soon. It will come under the umbrella of my new property education venture ukpropertyexpert.com. By sharing my knowledge of retail and residential site finding, planning gain, residential refurbishment, buy-to-let, self build and new build development, I hope to generate an on-going source of quality JV opportunities.

I also hope to explode the myth that a no-money-down property portfolio is a realistic way for newbie investors to “get rich quick”. I don’t believe that model is practical these days. It certainly isn’t a viable method of earning a life changing income in the short to medium term. So I’ll be going into more detail about the various strategies I use to generate substantial short term income which people can replicate to support, or even replace, their long term portfolio building strategies.

Anyone interested in finding out more should visit my website and subscribe to my free newsletter: www.ukpropertyexpert.com

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It’s about time I brought you up to date on my little refurbishment project.

As you’ll remember, a few weeks ago I bought a rather sad and rundown terraced house with the intention of quickly renovating and selling it for a quick return.

As you can see from the latest photographs, the property is now finished. The electrics and gas were certificated yesterday and the carpets went down today. So all that’s left to do is give the property a thorough clean.

I’ve already pre-sold the house so the purchaser’s surveyor is scheduled to make an appearance on Friday and all the legal paperwork is already well underway.

I’m really pleased with the end result, especially considering the house was in such a poor state when I we bought it. It would have been a mammoth task as a DIY project but using specialist contractors the whole works took less than six weeks.

If anyone in North West England is undertaking a renovation or new build project and would like my recommendations for reliable construction or renovation contractors then please get in touch. I’d be happy to help.

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I was speaking at my local property network meeting recently when a member of the audience asked me a very simple question. It’s a question that, surprisingly, nobody has ever asked me before. A question I should have been able to answer without hesitation. However, for some reason as I stood there in front of a room full of people eager to hear my response, my mind went blank.

I feel I must apologise to everyone who attended the event. I can’t imagine my long-winded and garbled response to such a straight forward question helped or enlightened anyone that evening.

Over the last few days I’ve replayed those few, long, embarrassing minutes of my life over and over again in my head. How should I have responded to that question? Why didn’t I have an answer on the tip of my tongue? I lay in bed for several hours last night, unable to sleep, unable to figure out how I should reply if someone asked me that same question again.

Eventually, I realised I wasn’t going to get any sleep until I’d figured out the solution. I wandered into my study, pulled out a pad and pen and wrote down the question which had thrown me so much the other evening:

“What piece of advice would you give to someone starting out in the property industry?”

I then started to list all the property projects I’d been involved in over the years. My scrawled notes filled several sides of paper. When I’d finished, I sat back and scanned through what I’d written.

It’s the first time I’ve ever compiled a comprehensive list of my property ventures and documenting them in black-and-white brought back some good, and some not-so-good, memories. I went through the list and highlighted those projects which I considered to be the most successful, those which produced the most profit, those which resulted in a fantastic return on my investment of time and money.

Suddenly it hit me. The solution had been staring me in the face. Why didn’t I think of it before?

The answer I should have given my expectant audience was…

“Always look beyond the obvious.”

Is that it? I hear you shout. Allow me to explain.

Like most people, my first foray into the property industry involved the refurbishment of a small house which I then rented out. Within a few years I’d built a portfolio of around 80 buy-to-lot houses. At that point I could have carried on increasing my portfolio or sat back, satisfied with the regular monthly income it generated.

But I looked beyond the obvious. I realised there were other, much more lucrative, ways to make money from property.

I moved into developing – in a small way at first – by buying a small piece of land and overseeing the construction of eight houses. I started trading in land, generating massive profits by buying cheaply, obtaining planning permission and selling at a profit. I discovered the hugely lucrative commercial property market and devised ways to earn life changing sums simply by introducing those in need of development sites, to those people who own suitable land.

I looked beyond the obvious ways to make a living out of property – refurbishments and buy-to-let – and uncovered new, even more profitable ways to generate money. So whilst most property investors have been hit hard by the recent downturn, I’ve been shielded from the worst effects of the crash due to my many different and varied sources of income.

But looking beyond the obvious involves much more than just devising new ways to generate revenue.

When I’m introduced to, or identify, a potential new project I carefully evaluate its potential. Quite often, at first glance, the numbers simply don’t stack up. At that point most people would walk away. But my experience has shown that a little extra effort and some out-of-the-box thinking can sometimes uncover massive hidden potential.

The construction of my dream home a few years back is a good example of how this approach can pay huge dividends.

Self Build

After several years of marriage, my wife and I decided we wanted to build a family home to our exact requirements. I knew the most economical method of finding a suitable plot would be to source it ‘off market’. I’ve always preferred approaching landowners directly, allowing me to negotiate a good price with healthy profit margins once planning permission has been granted. Using this approach allowed me to concentrate on the locations in which we wanted to live, rather than being restricted to whatever land was available and on the market at the time.

Using my tried and tested techniques it didn’t take me long to find the perfect plot… or so I thought!

It was situated in my ideal location. It was in an affluent area, around an acre in size and overlooked greenbelt with a stream running around the edge. However, after a quick appraisal it quickly became clear why this idyllic plot hadn’t been snapped up already:

1. It wasn’t on the market so few people knew of its existence;
2. It was a greenfield site which, in planning speak, means that it is previously undeveloped land used for agriculture or that it’s simply been left to nature. Whilst a greenfield site is not as restrictive as a greenbelt site, obtaining planning would be a lot more difficult than if the area had been developed previously;
3. Previous planning applications for nearby developments had been rejected – even after appeal – due to a single track, narrow blind bend on the only access road.

Faced with these hurdles most sensible people would quickly walk away. But my wife and I had set my heart on the site so I decided to approach the owners to see if they were willing to sell. Fortunately, the couple who owned the land were fully aware of the problems I’d identified and had even employed a local planning consultant to appraise the land on their behalf. In his professional opinion, the consultant had advised them that the site wouldn’t get planning permission to be developed. With his advice still ringing in their ears, they agreed to sell the land to me for just £20,000.

I took the view that if all else failed I could lease the land to a nearby farmer, rent it / sell it to one of the neighbours or just sit on it and wait for a policy change. There was some risk involved but in the end I decided to go for it and dusted off my cheque book.

Once I owned the land I had to attempt to change its greenfield status. I knew this would be tricky. It’s generally accepted that a greenfield site can only be reclassified as a brownfield site after it’s been used as such for at least twelve years. However, I had a plan!

Under planning legislation, a garden is classed as a brownfield site, even if it’s never had anything whatsoever built on it. In theory, you could have two plots of land side-by-side: the first plot, a beautiful manicured garden, full of flowers and shrubs and boarded by a topiary hedgerow; the second plot, completely overgrown with brambles and weeds. In this example, believe it or not, the planners would be far more likely to allow a development on the beautiful garden but not the overgrown scrubland weeds!

So, my solution was to create a neat garden on my land. I cleared the weeds, mowed the grass, created a pathway and even erected an old poly tunnel green house. Crucially, I kept the hedgerows and tress around the plot very high so it wasn’t visible from the road. I deliberately made the ‘garden’ appear to be part of the neighbour’s property. A few months after my transformation, the land appeared as though it had been used as a garden for many years.

It was eight months after I’d bought the land that I got the opportunity to hatch the final part of my plan.

My initial evaluation had revealed that on two separate occasions previous developers had applied to build a house on an adjacent brownfield garden but both were refused as a result of the single track access road. For obvious reasons, planners didn’t want to increase traffic use of the road any further. Both applications went to appeal. Both were still rejected. So the president against further development on the road was well established and wouldn’t be overturned… or would it?

Just down the road from my new ‘garden’, there was a small, dilapidated, one bedroom bungalow.

I approached my local planning officer and asked whether he’d support a development if I was to demolish the bungalow and replace it with a new property on the same road.

Although he agreed in principle, he tried to argue that the new dwelling could be no larger than the bungalow it was to replace. Not much point in that!

Fortunately I was able to argue that the size of the new house shouldn’t be a consideration. After all, I could just as easily apply to extend the existing bungalow adding four further bedrooms. The planners would have great difficulty refusing such an application as planning had already been granted for similar extensions to several houses on the street. In the end, he relented and agreed that he would support my application.

I immediately approached the owner of the bungalow and agreed to purchase it for £90,000.

So although it took around 15 months, I managed to turn an undevelopable greenfield site into a brownfield plot with detailed planning permission to build a 7,500 sq ft family home (ten times the size of the building it replaced). I could have sold the plot there and then for a tidy profit of around £140,000. Believe me, a quick £140k profit was tempting but it was never a serious consideration, we wanted to live there so set about building our dream home.

Covenant Issues

Another example of looking beyond the obvious involved the site of a petrol station/MOT garage which I’d had my eye on for some time.

The site wasn’t for sale but I approached the elderly owner to see if he was interested in selling. Although he was ready to retire, he was quick to advise me that there was a restrictive covenant on the site preventing any redevelopment. The covenant was in favour of the adjacent landowner, a major UK property PLC. They had previously scared off other developers interested in the site by demanding a huge fee to waive the covenant.

That sort of news would normally be enough to kill the deal. But I knew the land had huge potential if it were redeveloped as an apartment complex. So I contacted the PLC to see if I could succeed where other developers had failed.

The company was of the opinion that the site would be worth £500,000 with planning consent and were demanding half of that figure. I argued that site was worth nothing like that amount for three reasons:

1. The nature of the site meant that a lot of expensive ground work would be required before any construction could begin;
2. The contamination issues associated with its use as a petrol station would increase construction costs yet further;
3. The fact that the nearest public sewer was 50 metres down the main road would result in an expensive bill for connection.

I explained that due to these issues I intended to submit a planning application for just three detached houses on the site and showed them my scheme.

Faced with such a powerful argument the company agreed to surrender the covenant for a fee of just £40,000. I also managed to secure an agreement that the fee would only be payable once I’d gained planning permission. However, I didn’t specify what sort of permission I intended to obtain… so was able to proceed with my application for apartments.

The rest was easy!

I submitted my planning application which was approved without problems and bought the site from the owner for the £460k agreed. I also paid the PLC their agreed fee of £40,000. The land was subsequently valued at £700,000!

So in conclusion…

I hope these two deals highlight the fact that if you’re willing think outside the box and show a little patience, it’s possible to succeed where others fail. You just need to look beyond the obvious.

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I thought I’d give you a quick update on the little refurbishment project I mentioned a few weeks ago.

If you recall, I was browsing through a property auction catalogue and spotted a three bed terraced house badly in need of some TLC. After a quick viewing I agreed to purchase the property for £56,000 before it went under the hammer. At the time of writing, that was about four weeks ago.

I immediately got an offer from an investor friend who was prepared to pay me £9,000 over and above the asking price. However, if I oversaw the refurbishment work myself I could make anything up to £30,000. The £9k was tempting – especially as it involved no work – but in the end I decided to turn the offer down and go for broke.

The property is a typical northern terraced house with front and rear reception rooms and a small two storey extension to the rear. At some point in the past the extension has been extended further to include an ‘outhouse’ with toilet at ground level and – strangely – a bedroom beyond the bathroom on the first floor!

It’s such a weird layout. You have to wander through one bedroom to get to the bathroom. You then have to go through the bathroom to get to a further bedroom beyond!

Obviously, such an original (?!) layout would drastically reduce the property’s sale value so we decided to move the bathroom to the middle of the house by ‘stealing’ a corner of the large rear bedroom. The old bathroom and third bedroom were converted into one large double bedroom. To access these new rooms we had to create a corridor through the rear bedroom which involved removing a large chimneybreast.

Downstairs we planned to remove the walls between the kitchen / pantry and the pantry / outhouse to create a much larger family-friendly dining kitchen. By doing this we would, in effect, add a second reception room for little extra cost.

Although the changes to the layout would involve a lot of work I was sure it would be worth it. The new layout – consisting of two reception rooms, large dining kitchen, three double bedrooms and a large family bathroom – would be much more saleable.

Even though I’ve completed a lot of similar refurbishment projects, I was surprised at the bad state of the house. I suspected that a lot of work would be required but the true extent of the challenge only became apparent once our building contractor started to ‘rip out’ ready for the work to commence. To give you an idea of the scale of the project, the works include:

• strip out throughout
• sand/cement render to 1.5 metres throughout
• install damp proof course
• remove two existing fire places and replace with modern units
• remove structural walls to pantry and outhouse
• fit new front and back doors
• fit new internal joinery (doors, skirting boards and architraves)
• new screed throughout
• new ceiling frames
• plasterboard / replaster throughout
• install new central heating system throughout
• level first floor by raising floorboards
• remove chimney breast to first floor
• stud new corridor to first floor
• rewire throughout
• new light fittings throughout
• install central heating system throughout
• install new kitchen units
• create new bathroom in rear bedroom
• fit new bathroom suite
• install new PVC double glazing throughout
• decorate throughout
• retile kitchen and bathroom
• fit new carpets and floorcoverings
• install new fence panels
• repoint rear walls and repaint brick work

Luckily, I know a number of excellent one-stop-shop building contractors who I can call upon to carry out all the work for a pre-agreed set fee. I’ve worked with them on numerous occasions so they know exactly what standard of finish I expect. I’ve visited the site a few times but other than that I simply leave it to the experts.

As you can see from the photos, the work to the first floor is well underway and nearing completion. They should have all the work done and dusted within the next 2 – 3 weeks.

Adding Value

We’ve added considerable value by carrying out a total refurbishment. However, by making structural improvements and changing the useable space within the property we’ve further enhanced the property’s value and desirability.

In fact, the extra work and expense has already paid off. We’ve just sold the house to a first time buyer. To keep finance charges to a minimum, we offered a few incentives to encourage a quick sale. It means we’re not making as much money out of the deal as I’d first hoped but I think that’s a small price to pay for an immediate sale on completion.

The whole project will take just over eight weeks from purchase to sale. The refurbishment is going to cost more than I’d originally budgeted due to the terrible state of the house. However, it’s involved very little of my time and energy and will return a profit of around £15,000.

So, I’m now searching for my next project. Anyone know of any houses in desperate need of a Forshaw makeover?

Part 3: Auction Property Renovation Project. Done and Dusted!

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I’ve been an entrepreneur for many years now and it’s certainly been a rollercoaster ride. However, when I first set out I didn’t really set myself detailed goals. I was too busy enjoying life and bumbling along. I had a vague plan and I certainly wanted to be successful and enjoy the wealth that would come with it but I’ve found in recent years – perhaps since my brood came along – I’ve become much more focused on getting where I want to be in life.

 I’d have thought that most people set themselves goals whether they’re entrepreneurs or not. However, for those of us involved in the property business either through investing, developing or whatever, I believe the need for such goals and targets is paramount to our success. Goals help us measure our achievements in life and provide essential motivation along the way. 

 There’s a million books out there on the subject so I’m not going to go into great detail about the whys and wherefores here. Instead I’d be really interested to hear from people out there.

• What goals you set yourself? 
• Do you visualise your goals?
• Are they written down?
• Do you have monthly / yearly / 10 yearly goals or specific targets?
• Do you put mechanisms in place to monitor your progress? 
• Has the current market affected your goals?
• It is material wealth or spiritual wellbeing you seek?
• How BIG are your goals? Are you trying to attain the wealth of the Dragons from the Den or are you simply striving to be debt free? 
• Is property investment just one of the tools you use to reach your goals?
• Are goals essential to you or do you survive without them?
• Do you just want to be happy? Is that a goal in itself?

I also wonder whether those with a positive outlook on life generally achieve more than those without. Within the various books I’ve read on property investment, making money and self improvement, there’s often much written about the importance of targets and goal setting. But what do you think? Is it essential to success? Does a positive attitude really count?

 Apart from seeking the opinions of my close friends, I rarely get to find out whether those on the front line actually practice what these books preach. I’m genuinely interested to hear from people just how they set their goals and manage their path towards them. Hopefully, if enough people share their thoughts, methods and practices, we can all learn more about the path to success and how to navigate it more clearly.

So come on, please leave a comment and share your secrets to success.

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