Podcast Summary
Five Deals Rejected by Property Investors and One Positive Signal: Investors shared reasons for rejecting five property deals due to lack of clear exit strategy, potential planning issues, and other risks. One positive sign was Virgin Money's relaunch of buy-to-let deals with high loan-to-value ratios.
While there are opportunities in the property market, it's important for investors to carefully evaluate deals before making a decision. This week on the property podcast, the hosts discussed five deals they had turned down this year, providing insights into the specific reasons for their decisions. One positive news story emerged with Virgin Money's relaunch of buy-to-let deals with up to 80% loan-to-value, signaling lender confidence in the market. However, the majority of deals the hosts' business considered were ultimately rejected. The first deal they shared involved a desirable city, but the proposed project lacked a clear exit strategy and had potential planning issues, making it a risky investment. By sharing these experiences, the hosts aim to help listeners develop a better understanding of what to look for when assessing potential deals.
Assessing deals: More than just planning approvals: Even with planning approvals, a deal's viability depends on the quality of the plans and the amount of work required to make them buildable.
Even deals that seem ideal on paper can be rejected based on various factors, such as the quality of the plans and the amount of work required to make them viable. The speaker shared an example of a deal in Leeds that appeared promising due to its location, the developer's reputation, and the existing planning. However, upon closer inspection, the plans were so poorly designed that they required significant reworking, making the deal less attractive. The speaker emphasized that planners do consider the desirability of units and the external look of schemes but may not pay as much attention to the internal layout or buildability. This experience challenged the speaker's initial assumption that planning approvals would ensure a reasonable design. Instead, it's crucial to carefully evaluate all aspects of a deal before committing to it.
Quality of planning approvals can impact investment opportunities: Investing in property requires careful consideration of planning approvals, as poor quality schemes may need reapplication or a new buyer.
The quality of planning approvals can vary greatly depending on the local planning authority and the architects involved. Some schemes may be poorly designed and approved, potentially due to developers trying to maximize price points. These schemes might not meet the standards that Property Hub Invest would accept, and the developers may need to reapply for planning or find another buyer. It's important to note that Property Hub Invest also sources existing tenanted stock, and sometimes they lose out on deals due to the competition and the way their investors finance their deals. Despite these challenges, the team remains committed to finding high-quality opportunities for their investors.
Development opportunity in Liverpool with red flags: Exercise caution when investing in Liverpool, as some deals may have hidden risks like inconsistent pricing, negative online information, and lack of developer track record.
While a seemingly promising development opportunity in Liverpool presented itself, it was ultimately passed on due to several red flags. The developer did not own all the apartments in the block, causing inconsistent pricing and a perception of potential issues. Additionally, negative online information and past marketing of the investment opportunity to the public raised concerns about potential instability and mortgage eligibility. With Liverpool becoming an increasingly popular market for investors, it's crucial to exercise caution and thoroughly research potential investments, as not all deals may be as sound as they initially appear. Developers in Liverpool may use shiny websites to attract investors, but a lack of track record and high deposit requirements can be signs of potential risks.
Importance of due diligence in real estate investing: Always research developers, invest no more than 10% in off-plan developments, maintain a professional approach during negotiations, and explore new markets for strong investment opportunities.
Due diligence is crucial in real estate investing. Schemes and developers attempting to take advantage of naive investors are prevalent, especially in popular investment locations. Always research the developer, and never invest more than 10% of the deposit in off-plan developments, even if they claim protection. Prices can vary greatly, and it's essential to do thorough research before making an offer. Developers can sometimes become emotionally attached to their asking prices and may react negatively when challenged, potentially ending negotiations. It's important to maintain a professional and respectful approach while negotiating prices, even if they seem unrealistic. Additionally, consider exploring new markets with strong fundamentals, such as Derby, to expand your investment opportunities.
Evaluating investment price points in real estate: Investors must reference local market conditions and comparables to avoid overpaying in real estate investments. Manchester's large market demands extra diligence to find the best deals.
In real estate investing, it's crucial to carefully evaluate the price point of potential investments based on local market conditions and comparables. In the discussed cases, the developers in Liverpool and Manchester proposed prices that were significantly higher than what was justified by the local market. In Liverpool, the high deposits and the developer's reputation were concerns, but the price was the main issue in Manchester. Despite the developer's good reputation and acceptable deposit terms, the price was hard to justify due to overly ambitious pricing and a saturated market. By referencing comparable schemes and doing thorough research, investors can make informed decisions and avoid overpaying. Manchester, with its large market size and high demand, requires extra effort and diligence to find the best deals, but it's worth the investment.
Evaluate price per sq ft and quality of facilities: Secure exclusivity and ensure mortgageability by speaking to mortgage brokers and inviting surveyors early in the investment process.
When considering an investment opportunity, especially in competitive markets like Manchester, it's crucial to evaluate the price per square foot and the quality of facilities and services offered in comparison to similar developments. Overexposure of a development online can negatively impact mortgageability, potentially leading to down valuations or even making it un-mortgageable. Investors may need to provide additional cash if the development becomes unmortgageable. To mitigate these risks, it's essential to secure exclusivity and ensure the development is acceptable to lenders by speaking to mortgage brokers and inviting surveyors on site early in the process. While it may limit the number of deals, this approach increases the likelihood of successful mortgage applications and successful investments.
Be cautious and selective with property deals: Investors should focus on deals that meet their criteria and have potential for impressive resale values, turning down 90% of considered deals due to various reasons.
Not all property deals are worth investing in, despite how many companies may be marketing them. Many deals may have issues that make them less desirable, such as inflated prices, heavy marketing, large deposits required, or even mortgageability issues. In fact, the speaker mentioned turning down about 90% of the deals they consider due to various reasons. It's important for investors to be cautious and selective, focusing on deals that meet their criteria and have the potential for impressive resale values. The speaker emphasized the importance of careful consideration and a solid reputation in the industry, as not all developers and deals will be around in the long term.
Stay critical and conduct thorough research for each real estate deal: Investors must ask tough questions and research deals thoroughly to make informed decisions, even when working with vetted companies. Most deals won't be good fits, and rejections are normal.
While everyone involved in real estate investing wants to make deals happen, it's crucial for investors to approach each opportunity with a critical mindset and conduct thorough research. The investor's role is to ask difficult questions and challenge potential deals, even when working with a company that has already vetted the deals. The majority of deals may not be good fits, and it's normal to encounter rejections. A tool like Krisp, which detects and silences background noise, can be helpful for investors working from home or in noisy environments. Overall, staying diligent and committed to research is essential for making informed investment decisions.
Claim tax relief for home office expenses: Working from home? You might be able to claim tax relief on certain home office expenses like a desk, chair, or broadband/phone line. Check specific rules in your country or region.
If you're working from home and need a quiet space for occasional important conference calls, you might be able to claim tax relief on certain expenses to help create a more productive home office environment. This could include items like a desk, chair, or even the cost of your broadband or phone line. It's important to check the specific rules in your country or region, as eligibility and allowable expenses can vary. And if you're looking for more property education resources, be sure to check out PropertyHub.net, where you'll find a wealth of free articles, videos, and a supportive community. Don't forget to subscribe to their YouTube channel for regular updates. Stay productive and we'll see you next time!
