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The topic of this interview is "Numbers never lie .. ". Vanessa talks to Landlord/Investor John Corey on the importance of stacking deals correctly to ensure that there is positive net cash flow after all expenses.Without positive net cash flow, you are in a risky position. It simply is not good enough that the property just "washes its own face". Stacking deals as part of your due diligence will also ensure that you do not waste time (and money) viewing properties that do not work from an investment point of view.
Simple calculations can show you whether it really is a "deal" ... or not!
Recorded in November 2010 with thanks to Waterstone's in Piccadilly for the use of their Champagne Lounge to record the interview.
Further reading on this topic:
What due diligence do you do on a property before stepping outside your front door?
Relationship with numbers
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
Maths doesn't lie and 2 plus 2 will always equal 4. Statistics are made up by people and therefore subject to error, interpretation, or misinterpretation. Maths is the universal language of the universe. If aliens came down to earth, they would be able to understand maths!
The rule of making sure that finance costs are no higher than 60% of the rent is very simple and an excellent message.Which is why I'm always surprised that lenders STILL have 125% or 130% rental hurdles. Based upon this model, they should be 175%.And the lenders are applying these hurdles whilst rates are low.I have a commercial facility that requires 190% coverage - That is perhaps cautious, but it forces me to do good deals.
Hi V & JC,Clear and to the point as usual. The 60% rule is so true, nobody told me that when I first started. Better to learn it alter than never though!Thanks for this and the other interviews you have done recently.Steve
-Recorded in November 2011 !!!!!!!PT TV - A year ahead of its time again I`m pleased to say ! - Good to put another face to a photograph so to speak. I promise to look at the 60% rule in more depth but being rebellious by nature I cant promise to stick to it! - My solicitor, an investor now also ( inspired I like to think a bit by me nagging him to stop pontificating and get on with it) often uses this phrase `washing its own face`. I like it. I shall have a look at where it originates from. Its all good stuff thanks.
Jonathan Clarke. http://www.buytoletmk.com
Great video John. Lots of common sense advice for any business.Personally, I haven't found that I need 40% of my gross rents to cover my letting costs, over the last 11 or so years of being an "REI" But probably 25% is likely.Having said that I'm not including the initial fit-out so amortised over (say) 10 years or so it's probably higher. We are just working through refurbs of our initial purchases which are looking a bit tired (after 10-11 years use).Lots of investors forget to factor in those mini-refurbs every 5-7 years ... ouch! New tiling, bits of plastering, decorating, new bathroom suite, blown DG units, carpets, exterior work etc.My tip is to maintain a refurb fund ... discipline yourself to take 15-20% of gross rents and deposit those funds into a separate bank account.This provides a nice pot to dip into as required & so means that as the cash is there, repairs & refurbs can be completed without worry. Very powerful in terms of tenant retention if you are proactive.Stephen Fay ACA
I agree, great video.Nothing over-complex, just simple, straighforward, sensible advice.RobProperty Consultant, Wakefield, West YorkshireE: firstname.lastname@example.org, P: 07960 753550 T:@walkerfox