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  • Property-a-holics

    My 3 unbreakable property buying rules



    Over the last 40 years when buying over 3.5K properties,  I’ve kept to my "3 Unbreakable Rules".  I ask myself 3 simple questions:

    1. Can I sell the property on at a profit without doing any work to the property ? 

    2. Can I sell it on having got Planning or refurbished at a profit ?

    3. Can I let it , refinance the property and take my original cash out of it or more , and purchase another? 

    If the answer is "No" to any of the above questions, should you go ahead with the deal? 

    I don’t !

    What are your unbreakable rules when you are assessing a prospective property deal?

    I hope you have found this information helpful, and, if you have, you may like to attend one of my training seminars, the next one being 10th June in Birmingham.

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    I ask myself this question :

    "Will I make a yield of 8% or more if I rent and how fast will I get my deposit back ?"

    I have never sold a property on my Landlord journey

    I just buy and hold ...

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.

    Hi I completely understand where you’re coming from but my 3 rules will still apply to what you’re doing too. 

     For instance with an 8% yield hopefully you can refinance if you want and to move on , alternatively you could sell at a profit to someone who is happy with the 6% yeild . Because you can manage those two things you probably could have sold the property on as soon as you purchased it at a profit without doing anything . 

    We are on the same page .
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     I agree John I find if I am getting an 8% yeild I am buying right and it ticks the boxes you have indicated

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.

    Hi there DL,

    I'm curious about your 8% rule. is this gross or net and do you also account for all costs to acquire the property and any refurbish/update costs before calculating yield or is this a 'quick calculation' based on the 'for sale' price of a property I wonder.

    Just curious as a recently new LL with 2 properties so far.

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    ManInTheMoon

    I try to keep it simple

    100k purchase 8% £8000 a year gross rent

    I find if I use this fig I am buying a property at the right price

    DL

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.

    I ask myself:

    1.  Is there high tenant demand in the area?

    2.  Does the deal stack up in terms of the level of borrowing the rent will support?

    3.  Is the property within a 10 minute walk of a major transport link such as station, bus route, etc.

    4.  Is the property within a 5 minute walk of a pint of milk?

    5.  Does the property feel like it is in a safe and secure area where you can walk home at night and feel comfortable?

    6.  Would I live there myself?  If not, then why should I expect my customers to live there?

    7.  Is there parking at the property or easy to park in the street?

    8.  Does the property have fast broadband?

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    Vanessa, point 6 would I live there is crucial for me, then 3, major transport, then 2 rental support. I will ignore 1, tenant demand if yield is really high allowing me to undercut market rents. As to point 6, I do actually move in when there are any major issues, especially houses with multiple occupancy.  Good tenants breath a sigh of relief when a landlord moves in to fix issues.

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    I am with DL. Nothing else matters. I have overpaid on market value on owner occupied values, because I could make the yield I want. You may argue other investors could see the potential. But that’s not always the case.
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    Yield is real, capital gain is speculation. If am am sure of the tenant, I can plot out his rent and reinvest this over the term of the contract.

    Oh and my golden rule. Will I be able to sell in the future and who to. I make sure I have an exit mapped out before I buy. This is highly important in commercial and there are many great deals if looking at present tenant but what then? Often not a lot.

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    ``Yield is real, capital gain is speculation``

    Both are speculation .

    Its only the time lag that often differs though  before they respectively become real

    Yield may become real at the end of the month if the rent is paid and there is no void

    Capital gain may become real  at the end of the year(s) when you remortgage or sell if the asset has gained value


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    Jonathan Clarke. http://www.buytoletmk.com