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  • Buy-to-Let

    NMLI Strategy

    Hi All,

    Relatively new to Property Tribes and investing so all your help will be appreciated.

    I am looking to start investing in a couple of BTLs this year. I want to utilize the NMLI strategy to try and grow my portfolio as quickly as possible. I have read previous posts on NMLI but I feel it's a bit dated now. A lot of the old posts mention about buying run-down properties so to buy BMV and add value by renovating. However, from my research, I am under the impression that this is not really possible in this economic climate.

    For example: Buy a property worth £140k for £120k (15% below BMV)  and spending 10k on renovation isn't the best way to utilize your money, as you will spend 30k deposit + 10k renovation cost + fees = approx 43k. Then when it comes to refinancing you will release 20k. So, it works out; 43k-20=23k

    But: If you buy a property worth 130k for 120k (8% below BMV) and spending 30k deposit + 2k tidy up/paint, etc +3k fees = 35K. So, in this instance its cost you 35k - 10k = 25k.

    Also, in the second model where no renovation is really required, not only does it require less start-up capital but you'll be able to utilize the time better and get tenants in paying the mortgage quicker.

    These figures are rough but through my research, these are the type of prices and their differences I typically found.

    Obviously, I am new to this and all of you are a lot more advanced than myself when it comes to property, so anything I have missed or anything I'm getting wrong please correct me. Plus, any other information which you think may be relevant to this strategy would be hugely appreciated.

    Thank you PT.

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    Hi Carl,

    Just to point out. In your first example. 120K will not be 15% BMV if the renovated market price is 140K. I would say that the 120K is the market value for a property in that condition, I.e requires renovation. 

    To successfully execute this strategy you need to buy with sufficient margin but make sure you are comparing like for like when assessing BMV deals.
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    NMLI or 'recycling your cash' is obviously a powerful strategy as it allows you to grow your portfolio with less capital. However, as you say in this climate it's not as easy as it once was. There are so many factors and barriers to consider. Just because you found a property that you believe is BMV, you still need to be able to convince the valuer it's worth the higher value when it comes to refinancing.

    Without doing substantial work to the property you're going to find it a challenge to get an uplift in value when you refinance, especially within a 6 month period. It's also been reported on numerous occasions where properties upon refinancing have been downvalued by the valuer, despite doing a full refurb. There are ways to minimise this such as keeping a schedule of works etc to show along with comparables, but I still hear it happening often.

    It is possible to pull money out of deals but being able to pull all money out consistently and rapidly will be difficult. Good luck!

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    Thank you kindly for your answer, Trist. 
    With what you’re saying, would you say that this strategy is maybe not the best choice in this present economy? 
    Or is waiting to the end of a two year fixed rate on the mortgage, to minimise fees/expenses, to release the full value plus any capital gains a viable option. Or is renovating a must with this particular strategy?

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    I used 3- 5yr fixes

    I would then leave the refurb and do it just before the fix period was up and then extract cash

    If I did it day 1 then it maybe starts to look tired after 3 yrs so I would just wait

    I would chose a tenant who understood my strategy - often they would do the minor stuff themselves

    The offer of a new kitchen and bathroom  in a few years if they played ball  appealed  to many

    I would get the trades to work around them and reduce their rent as an incentive

     75% rent is better than zero rent with a void . I chose can do tenants not picky ones

    And then  yes you then benefit from  the uplift value + the natural CG put on it in a rising market

    So I always got my money back out which would give me 100% LTV on my new one

    If extracting after 6 mths today you have work much harder at it to please the valuer

    But its possible

    To that end you may even look to target to buy in an area where you make his job easier

    Buy a wreck on an estate when all properties are virtually the same anyway

    Then a valuer has multiple comparables and will find it harder to dispute any  figures

    We bought one wreck at 210 K when 250K was the going rate around us

    Pics before, during  and after backed up  with genuine checkable invoices tell a convincing story

    So 210K + 15K works adds value and you point at rightmove and say hey try and dispute that mister

    If your property is fairly unique though with no comparables they can just simply say you overpaid

    You will never be able to overturn that decision as you have zero evidence

    Your personal opinion means jack

    Mind you buying unique can have  its advantages if you are flipping

    I bought a relatively unique place for 400K with a bit of land .

    Lovely views . Nothing to compare it against

    Almost got 500K the next day for it ( but I wanted it for keeps anyway)

    This is where the mind plays tricks on the buyer though

    If you have zero comparables its a  bit like Minimal Art where beauty is in the eye of the holder

    And if a  canvas with 3 random strokes of a pen rocks your boat then 500K can make perfect sense

    Play to the crowd - be that a picky stubborn valuer or an eccentric  buyer who just dreams of unique

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


    Brilliant! Thank you very much for your detailed answer, Jonathon. That’s cleared a lot up for me. Would you say patience is the key factor in the NMLI strategy nowadays?
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    Patience yes, but also double your digging / networking / readiness to go

    Know your market inside out

    Give the agent / vendor a good reason to ring you first when these deals come along

    The better the deal the shorter the time span before you can extract some cash from it


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

    The stratergy of removeing your cash invested in a project

    comes down to one fact ??

    The Mortgage Co Valuer has the final say

    That 20 min visit for a remortgage will make a project work or Not

    and you have very little control over the opinion of the man with the clip board

    there was a post yesterday from a London investor who had been down valued

    I did a light referb with TMW and when the valuer gave the value it only just about covered the materials used on the job 

    This Topic proves to me that the only true 100% way of growing  a BTL business is to  have your own cash in your bank to pay a deposit and costs

    The Days of a quick turn around are gone so get saving and you need deep pockets with Stamp Duty ect ect and a good 25% deposit

    I complete on a purchase on Friday 80k purchase I needed around 25K  for deposit and costs and I am in the low value North East God know what a project would cost in the SE  in terms of cash needed to do a deal




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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.