Good Morning folks,
I have been a member for sometime researching the Australian market and deciding which way I was going to go next on my investment journey. I have decided that I am going to continue to buy in the UK and I am going to use this thread as the place where I document my journey for all to see and learn from, firstly some background:
History:
I am a UK qualified IFA and Mortgage Broker (No longer current) with old networks in Scotland (I will be focusing purely on Scotland) an old career and home I moved away from some time ago but still with active links via investment networks.
It has taken nearly a year to ensure everything was in place to source secure and value add on UK repossessed property.
There are a huge number of routes to source the property from and it has taken longer than we would have liked to peel through the layers to buy as close to source as possible (Avoiding middlemen adding their slice)
We also needed to find reliable tradesmen to bring the properties up to a good standard in a quick timescale (We aim for a 3 month turnaround start to finish) just the same as here in Australia this is easier said than done.
Strategy:
We buy Scottish properties where the asking price from the lender is discounted significantly from the independent RICS valuation (Royal Institute of Chartered Surveyors) anywhere from 25-50% is our aim.
As in Australia the lender has a legal responsibility to achieve as much as possible for the property however there is stock available with these and sometimes even better discounts.
This is only the first stage, as we know Scotland like the back of our hand (Existing portfolio and lived there most of our lives) we actually remove a large number of properties from our interest list due to local factors which we benchmark them on, I can't disclose all of these for obvious reasons but I will say that it is a highly regarded score card system with some local knowledge thrown in.
As an example:
We had the opportunity to buy a 2 bed flat in Bellshill North Lanarkshire (About 10 miles South East of Glasgow City Centre)
The independent RICS valuation was at 60k (GBP) and the lender was happy to accept 27k (GBP) which is a huge discount.
With legals and refurb costs we could have had this property ready to flip/keep for 32k (GBP)
On carrying out our due diligence we found that the local area was being ear marked for social housing predominantly for homeless tenants (Ex Eastern Block new arrivals to Scotland) in a high rise literally round the corner from the property in question.
As you can appreciate this discounted it as a property of interest very quickly and we moved on to our next potential purchase.
Options:
We work on 3 potential options which we decide on before we commit to the purchase
1 - Refurb and flip to a fellow Investor with a significant discount from the RICS valuation - Aiming for circa 10k (GBP) profit after all costs
2 - Refurb and sell via a local estate agent for as near as full market value as possible - Depends on cash flow as this may take several months longer than Option 1
3 - Keep the property and rent out at local market rates either to a member of the public via an agent or via the local authority Private landlord scheme
Note on Private Landlord schemes
Every Council in Scotland has the ability to have their own Private Landlord Scheme depending on local area demand. We have several properties rented directly to the local authority under this scheme, it normally entails a 3, 5 or 10 year guaranteed lease with annual increases in line with the Retail Price Index.
The rent is paid quarterly in advance and it is a nice hands off approach to renting. We get paid even if the Council has nobody living in the property.
It would take too long here to explain why this scheme came about but it is a combination of local laws (Every person claiming homelessness must be catered for) and lack of available authority housing (People were given an option to buy their social housing with heavy discounts and did so) therefore the council need Private Landlords to bail them out.
Why Scotland/UK?
Personally I believe it is much better value than the majority of Australia.
Scottish Pensions are just about to be amended to allow property purchases, potentially fueling an increase in property buyers/investors similar to the SMSF boom here in Australia
The UK housing market especially at the lower end where we purchase will likely give good returns when the market recovers (If and when which is why we use Option 3 for 10 year holdings to diversify)
The AUD/GBP exchange rate is circa 1.80 long term forecasts point towards a continued weakening of the AUD which gives as a Forex profit when we sell and move the funds back to AUD.
Next steps:
We currently have a short list of 3 potential properties and will be moving on 1 potentially 2 of these within the next week or so.
As soon as we do this I will post PDF's here for full transparency and for people to follow and ask questions on. I will also post regular updates on closing, refurb etc so that folks can track the progress in real time.
Until then please feel free to ask any questions you may have.
Regards
ScottyB
I have been a member for sometime researching the Australian market and deciding which way I was going to go next on my investment journey. I have decided that I am going to continue to buy in the UK and I am going to use this thread as the place where I document my journey for all to see and learn from, firstly some background:
History:
I am a UK qualified IFA and Mortgage Broker (No longer current) with old networks in Scotland (I will be focusing purely on Scotland) an old career and home I moved away from some time ago but still with active links via investment networks.
It has taken nearly a year to ensure everything was in place to source secure and value add on UK repossessed property.
There are a huge number of routes to source the property from and it has taken longer than we would have liked to peel through the layers to buy as close to source as possible (Avoiding middlemen adding their slice)
We also needed to find reliable tradesmen to bring the properties up to a good standard in a quick timescale (We aim for a 3 month turnaround start to finish) just the same as here in Australia this is easier said than done.
Strategy:
We buy Scottish properties where the asking price from the lender is discounted significantly from the independent RICS valuation (Royal Institute of Chartered Surveyors) anywhere from 25-50% is our aim.
As in Australia the lender has a legal responsibility to achieve as much as possible for the property however there is stock available with these and sometimes even better discounts.
This is only the first stage, as we know Scotland like the back of our hand (Existing portfolio and lived there most of our lives) we actually remove a large number of properties from our interest list due to local factors which we benchmark them on, I can't disclose all of these for obvious reasons but I will say that it is a highly regarded score card system with some local knowledge thrown in.
As an example:
We had the opportunity to buy a 2 bed flat in Bellshill North Lanarkshire (About 10 miles South East of Glasgow City Centre)
The independent RICS valuation was at 60k (GBP) and the lender was happy to accept 27k (GBP) which is a huge discount.
With legals and refurb costs we could have had this property ready to flip/keep for 32k (GBP)
On carrying out our due diligence we found that the local area was being ear marked for social housing predominantly for homeless tenants (Ex Eastern Block new arrivals to Scotland) in a high rise literally round the corner from the property in question.
As you can appreciate this discounted it as a property of interest very quickly and we moved on to our next potential purchase.
Options:
We work on 3 potential options which we decide on before we commit to the purchase
1 - Refurb and flip to a fellow Investor with a significant discount from the RICS valuation - Aiming for circa 10k (GBP) profit after all costs
2 - Refurb and sell via a local estate agent for as near as full market value as possible - Depends on cash flow as this may take several months longer than Option 1
3 - Keep the property and rent out at local market rates either to a member of the public via an agent or via the local authority Private landlord scheme
Note on Private Landlord schemes
Every Council in Scotland has the ability to have their own Private Landlord Scheme depending on local area demand. We have several properties rented directly to the local authority under this scheme, it normally entails a 3, 5 or 10 year guaranteed lease with annual increases in line with the Retail Price Index.
The rent is paid quarterly in advance and it is a nice hands off approach to renting. We get paid even if the Council has nobody living in the property.
It would take too long here to explain why this scheme came about but it is a combination of local laws (Every person claiming homelessness must be catered for) and lack of available authority housing (People were given an option to buy their social housing with heavy discounts and did so) therefore the council need Private Landlords to bail them out.
Why Scotland/UK?
Personally I believe it is much better value than the majority of Australia.
Scottish Pensions are just about to be amended to allow property purchases, potentially fueling an increase in property buyers/investors similar to the SMSF boom here in Australia
The UK housing market especially at the lower end where we purchase will likely give good returns when the market recovers (If and when which is why we use Option 3 for 10 year holdings to diversify)
The AUD/GBP exchange rate is circa 1.80 long term forecasts point towards a continued weakening of the AUD which gives as a Forex profit when we sell and move the funds back to AUD.
Next steps:
We currently have a short list of 3 potential properties and will be moving on 1 potentially 2 of these within the next week or so.
As soon as we do this I will post PDF's here for full transparency and for people to follow and ask questions on. I will also post regular updates on closing, refurb etc so that folks can track the progress in real time.
Until then please feel free to ask any questions you may have.
Regards
ScottyB