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  • Property-a-holics

    What does BMV mean to you?

    Hi all,I was talking to Rich earlier and got me thinking this would make for a good topic to get people's thoughts on.A property that needs no work market value £100k and you get it for £70k is 30% below market value, nothing new there.How about a property that is currently worth £85k [needs some work] comps are worth 100k, and you negotiate the purchase to £70k. If you sell it for £100k do you think you got the property at 30% BMV on the true value of £100k?Or do you take its current maket value of £85k and negotiate 30% of that value, so you buy it at £59,500? (which could be taken as 40% BMV under the real value of 100k)Similar with a property worth £70k because it needs a lot of work to being it up to its true value of £100k: would you take that as 30% BMV or negotiate 30% off the current 'value' of £70k i.e. £49k?It would be great to get peoples thoughts on how they interpret BMV as either under its real value or its current value, this only applies I would think when the property needs some work.This would depend on how much the work would cost to bring it up to the true value.Look forward to your thoughts.
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    BMV - below market value for the specific property given its condition, etc. In other words, if the comparable properties are £100K then it is worth £100K. If a property needs work it is not comparable to a property that does not need work. Like for like. To force them to be comparable you would discount the total value by the adjustments (corner lot vs. middle of the lock, recent remodel vs. needs remodeling).
    In the example above the property that is worth £85K as it needs work is only worth £85K in its present condition. If you wanted to buy it below market value, you would need to pay less than £85K.
    John Corey
    Follow me on Twitter-> https://www.twitter.com/john_corey
    https://www.ChelseaPrivateEquity.com/blog
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    John Corey 


    I host the London Real Estate Meet on the 2nd Tuesday of every month. 11 years and running. If you have never been before, email me for the 'new visitor' link.

    PropertyFortress.com/Events

    Also happy to chat on the phone. Pay It Forward; my way of giving back through sharing. Click on the link: PropertyFortress.com/Ask-John to book a time. I will call you at the time you selected. Nothing to buy. Just be prepared with your questions so we can use the 20 minutes wisely.

    Hi John thanks for your reply.So you would pay 70% of 85k, £59,500?
    That is nearly 40% under it's true value..
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    Rob Crane said:
    BTW 30%, 40% or more BMV is achievable. If you aren't getting these opportunities then you are probably not doing your marketing right.
    Agreed and I'm interested to hear specifically what marketing has worked for you to achieve your discount?
    For example, in my patch estate agent-marketed repossessions are aggressively priced to start (albeit not close to 30-40% under a comparable) and I'm finding that they are often becoming the subject of a bidding war and thus selling close to or even above the asking price. Hence, I'm keen to learn about and test the other marketing avenues that are available so as to sidestep a bidding war if possible. Am interested to learn your experience.
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    Fernando Duzaza said:
    Hi John thanks for your reply.So you would pay 70% of 85k, £59,500? That is nearly 40% under it's true value..
    If the seller wants the value to be what the place could be after the repairs are completed, let them finish all the work and fund it before you buy.
    A half empty bottle of soda is not worth the same as a full bottle. Just because a full one would sell for more does not mean the empty space has value that should be given to the seller.
    Think of the uplift in value from the refurbishment as the profit that goes to the party that does the work.
    If you want to pay based on possible future value I can find you lots of deals where i will buy cheap and you can pay me for the work I am not going to do.
    John Corey
    Follow me on Twitter-> https://www.twitter.com/john_corey
    https://www.ChelseaPrivateEquity.com/blog
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    John Corey 


    I host the London Real Estate Meet on the 2nd Tuesday of every month. 11 years and running. If you have never been before, email me for the 'new visitor' link.

    PropertyFortress.com/Events

    Also happy to chat on the phone. Pay It Forward; my way of giving back through sharing. Click on the link: PropertyFortress.com/Ask-John to book a time. I will call you at the time you selected. Nothing to buy. Just be prepared with your questions so we can use the 20 minutes wisely.

    Thanks for answering that Rob, it really helps me shape my view and strategy.
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    Fernando
    You got some good advice from the pro's here.
    My experience is that buying BMV is just a numbers game. First learn how to do your own realistic desk top valuations and then what types of properties are good renters. Then start making offers, the more the merrier, every no is one closer to a yes. No is a maybe and maybe is yes.
    If you are not a marketing guru go to the auctions but make sure you've done your homework, got the finance agreed at least in principle and looked at the properties you are going to bid on and taken a good builder with you if you don't know what to look for. Also make sure you know how to read a legal pack. get a conveyancing solicitor to train you. I expect to buy 1 in 20 that I did on. I probably only bid on half of those I look at. Have no doubt, it's hard work and involves driving all over the country for a month prior to the auction if you want to buy a couple a month. However, at todays values if you save £50k per property it makes sense. My brother is a builder, whilst we've been buying aggressively this has been a full time job for him.
    If you don't fancy auctions look at leafleting. Remember, 10 X 10,000 is better than 1 X 100,000. What I mean by this is that it's better to leaftlet houses 10 times over 10 months than hot 10 houses only once. When I was doing leafletting I used Royal Mail to design, print and deliver. I found a special deal for this service that cost me £11,000 a month to hit 100,000 properties in selected post codes areas. I ran the campaign for a year but skipped August and December as these times are seasonably bad. This was in the boom when people expected top dollar and it was hard to buy BMV at less than 10% discounts then. Nevertheless, I got around 30 opportunities a month and purchased 3 or 4. This was based on my standard script, "I am a trade purchaser and typically pay 80% of market valuation. What makes me different is that if we shake hands on a deal tonight you could have your money within two weeks or you can exchange contracts so you know you've sold to me and stay there as long as you like". If they were interested I did my desk top valuations and visited them, it's that simple. My motto "some will, some wont, so what, who's next?".
    I've also tried local newspaper adverts and leaflets in newspapers. They work but the cost per deal always worked out higher for me. I've also been told off for fly posting, making up signs and sticking them on traffic light posts, roundabouts and all areas where lots of traffic has to slow down. I was cheeky, it worked but the reputational risks to my day job of getting arrested stopped me, even though the fines might have been worth paying because they are cheaper than adverts Wink
    I hope this helps.
    Take care
    Mark Alexander
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    Regards


    Mark Alexander - Property118.com
    Twitter: @iAmALandlord
    Mark,
    I like the leaflet advice plus the bandit sign insight (good for business, bad for one's reputation)
    John Corey
    Follow me on Twitter-> https://www.twitter.com/john_corey
    https://www.ChelseaPrivateEquity.com/blog
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    John Corey 


    I host the London Real Estate Meet on the 2nd Tuesday of every month. 11 years and running. If you have never been before, email me for the 'new visitor' link.

    PropertyFortress.com/Events

    Also happy to chat on the phone. Pay It Forward; my way of giving back through sharing. Click on the link: PropertyFortress.com/Ask-John to book a time. I will call you at the time you selected. Nothing to buy. Just be prepared with your questions so we can use the 20 minutes wisely.


    REI said:
    Mark,I like the leaflet advice plus the bandit sign insight (good for business, bad for one's reputation)John CoreyFollow me on Twitter-> https://www.twitter.com/john_coreyhttps://www.ChelseaPrivateEquity.com/blog
    John

    Greetings from the Sunshine State.
    I don't inderstand this message. What advice brochure and what is the bandit sign insight?
    Regards
    Mark
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    Regards


    Mark Alexander - Property118.com
    Twitter: @iAmALandlord
    Mark Alexander said:
    REI said:
    Mark,I like the leaflet advice plus the bandit sign insight (good for business, bad for one's reputation)John CoreyFollow me on Twitter-> https://www.twitter.com/john_coreyhttps://www.ChelseaPrivateEquity.com/blog
    John

    Greetings from the Sunshine State.
    I don't inderstand this message. What advice brochure and what is the bandit sign insight?
    Regards
    Mark
    Read the your response just prior to my comment. Where you offered Fernando some advice.
    Maybe you have been in the FL sun too long.
    John Corey
    Follow me on Twitter-> https://www.twitter.com/john_corey
    https://www.ChelseaPrivateEquity.com/blog
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    John Corey 


    I host the London Real Estate Meet on the 2nd Tuesday of every month. 11 years and running. If you have never been before, email me for the 'new visitor' link.

    PropertyFortress.com/Events

    Also happy to chat on the phone. Pay It Forward; my way of giving back through sharing. Click on the link: PropertyFortress.com/Ask-John to book a time. I will call you at the time you selected. Nothing to buy. Just be prepared with your questions so we can use the 20 minutes wisely.


    Richard Greenland said:
    LOL I wondered this too, but now all is clear. The sort of thing we might do early in our careers but not later as our reputation becomes more valuable!
    Hi John
    It was reference to insight that confused me. One of our JV Partners is called Insight Financial Associates. Get it now LOL.
    Fernando is a Newbie it would appear. The signs never did me any damage, perhaps other then within the local council. They worked for me but I'm more into auctions these days. I agree that reputation is important. As the campaigs snowballed I also used brand advertising on the Radio. If I could roll the clocks back 10 years I would do exactly the same again. Reputation is earned by the way we treat our properties, tenants and lenders. Exposure is good. Not everybody will like the fact that I buy house at a trade price in just the same way that not everybody likes car dealers. We all have our place though. It works so why knock it?
    Regards
    Mark
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    Regards


    Mark Alexander - Property118.com
    Twitter: @iAmALandlord