BH Property Investments | High Yielding Investment Properties
BH Properties combines the experiences of a partnership of a local Manchester property landlord investing since 1998 with a portfolio of numerous properties and a US investor with experience building single family homes, renovations of apartment complexes, investor in land and owner of a licensed bridging company from the US.
All of us whom are in the property businesses already know that it requires a lot of capital. And unless you were fortunate enough to have started with a lot of wealth, you know that having access to the capital of others is essential if you are trying to scale. You need to have a base of investors, and continuously grow it. Why investors versus the banks? Time ….leverage and risk. Due to Brexit, it seems the banks are acting in slow motion. At least for us. We have 2 Social HMOs that generate almost 24,000 a year….we wanted to be cautious and get a 50% LTV…but SLOW MOTION.
If you remember 2009 banks tightened up yet the deals opened up. There were so many great deals that would have made investors and property investors very wealthy. Buying cheap and sitting tight…Pretty simple in thought…but most could not do this. They could not raise the funds or raise their risk threshold.
I was recently asked what was the most important issue in order to grow our business…Simple answer told him…
We most needed in order to grow my business. He was very surprised by my answer: “More investors.”However we qualified the right investors. Investors who can make a decision quickly once presented all the facts. Investors who are liquid. Investors who are like minded. Investors who are realistic ( Not like a gent who told us he wanted to make 20% every 6 months).
When we had our bridging company we went through a group of wantabee investors…However ended up with a core 5. A pool of investors is just like a well for water. If you keep using it, the water will dry up. You need to dig more wells—and deeper ones, as you grow. We had our core investors however picked up an investor here and there.
We are sure that youheard the phrase, “Find the deal and the money will follow.” Surely everyone saying that can’t be wrong, right?
I’ve got bad news for you—they are. And it won’t. For example we have 3 properties that can be converted into Social HMOs that will cost approx 83k…the rents will be 12,480 NET! With no voids…no management…and maintenance covered up to 5,000 per year. This is a 15% Net return…
We emailed out these deals to various investors who said they are very interested last night….Here it is 10.04 am UK time…Not one email back yet. It is not easy as there are so many tyre kickers out there.
We are always out there doing our own deals…using bank finance as well as looking to expand our inner circle. We thought to join the Chamber of Commerce. Attend Pin meetings and meetups. Go to property conferences. Get to know people here on the forums. Out of all of the outreach I’ve done over the years, none has born more fruit than just talking to others everywhere we go & simply saying what we are doing.
We are not selling. We are offering solid opportunities. This is the way you need to think about working with investors. We tell people that we are in the property investment business. We tell them about deals we have done and deals we plan to do. If you haven’t done any deals, find a partner who brings something to the table that you don’t, and do some deals together to build your track record.
The idea is to spread the word. Maybe they tell a friend who turns out to be interested and they put you together.
The main thing in property is moving forward. Constantly moving forward.
Clearly there is fear due to Brexit….warranted or not warranted. Personally we feel the niche in which we work is relatively resistant. I use the word relatively. The reason is that anything can and will happen but we are not working in Mayfair. We are buying properties that in most cases are in bad shape, bringing them back to life and tenanting for social housing. This does not appeal to most who want city centre or beautiful flats.
There is a shortage of quality housing for social needs. This is what makes the niche more interesting. It is not overly easy as there are constant issues….building issues….planning issues….but all in…Social housing is a niche that we believe in….Helps society….and is very profitable for us.
We have a block of flats we are trying to get through legals. It is never easy and want to make sure all of our boxes are ticked. We have been waiting on a certificate of lawfulness for several weeks. If the vendor can not provide we need to simply walk away. However we have two other projects in the pipeline also going through legals.
Once we have the certificate of lawfulness, we will do an inspection with our builders once again. This a block of 8 flats. 7 x one bedrooms generating £85 and 1 x two bedroom generating £113.92. The gross rents on this block are close to £37,000 per year. We are purchasing for £222,000. Including legals, SDLT and refurbishment we will be approx at £255,000. This comes to a cash on cash of approx 14.5%. As we are conservative property investors we will look to have a £125,000 first charge on the property if we do not sell the property after 6 months of full tenancy. We would look for a capital repayment loan and assuming if interest keep up the way they are going ( unbelievably still going down once again). Assuming approx £700 a month in payments max…..Approx £28,600 NET. As we focus on Social housing we are in talks with a charity to take the property with a guaranteed lease, no voids and no management.
Bottom line we are looking for approx +20% return while treading water to sell the property after updating and placing the Social Housing provider.
If anyone is interested to know more about our refurb/conversion projects and if anyone who wants to be our next private investor or JV partner just PM or email us…Happy holidays.
When you are in property and have built a track record of Professional HMOs, Conversion projects and social HMOs you have many people who reach out who want to join your success. However a JV partner is a relationship and need to understand what they want to achieve. Our goal is to make them safe…This safe means they own the property themselves in the Land registry. Safe also means we have a RX1 that they can not sell out the property without adhering to our agreement.
The JV agreement can be structured in numerous ways.
Can be a first charge on the property
The JV partner can buy for cash prior to the refurb then refinance and hold for the long term
Combination of both
All depends on what the JV partner seeks. More so, to entice we have a preferred rate of 5.5% given to the investor before profit split. Currently we have 3 projects in legals and in the process of planning permission.
We have an abandoned building in which we are making 3 flats
We have a building in which we will refurbish 8 flats. We are buying the building for 222k. The vendor bought the building in 2004 for 240k. It should generate gross 36,000.
We have a shop in which we are converting into 2-3 flats depending on architect. First we are doing the searches and if all ok then proceed with the architect.
As mentioned in the title, need realistic JV partners. Realistic means they have liquidity. Realistic means we meet them and feel comfortable with them. Realistic means realistic return expectations. For example we have a London Gent who wants 20% every 6 months. We explained, that as much as we have sold within 6 months it might not be realistic. More so as we are waiting to sell, we are cash flowing amazingly. On our HMOs that are all up for sale, cash on cash without finance we are anywhere between 12-15% NET. The kicker comes in when we sell. Combining the rents and the capital gains we are anywhere between 25-50% on many projects.
There seem to be many new investors in Professional HMOs and simply follow the crowd. We would suggest investors in HMOs to find a specific niche or area or reason. All of our Professional HMOs or Social HMOs have this. Below are following examples
One 6 bed Social HMO extremely close to an Ikea store and tram right into City Center Manchester generating approx Net18,000 a year
We have two Social HMOs each 4 beds in an area in Liverpool which just became Article 4. These both generate close to NET12,000 per year and there will be price appreciation due to the limitations of new HMOs
We have 3 Social HMOs in Crewe in which the HS2 will be coming through. One of these we just completed was a 5 bed Social HMO that generates in excess of NET15,000 a year.
We also have a Professional HMO in Eccles Salford in an Article 4 area. This generates a gross of approx 22,000 a year and we will have price appreciation in the future.
Our point is simple….Just don’t make a Professional HMO….Find a specific niche and reason as there are more and more HMOs and if you do not have a niche you might not have tenants.
Always in our Professional HMOs there is drama. This weeks drama is we had a tenant do a runner. Typical joy…however to cover ourselves we have a 250 deposit. Actually it is better he did a runner in our Professional HMO. He is gone. This morning sending the cleaners in…making the property sparkling and ready for viewings. It is a great double en suite room. The only issue is right before Christmas. Hopefully we will get the room rented this week. Learning lesson for all of those you want to be HMO landlords. Be proactive. We chased the tenant for payment. We went to the property immediately. We are cleaning the property immediately. We have posted on Spare room immediately. Unfortunately too many HMO estate agents do not work in this fashion. We have only found several in Manchester who keep to their word and manage the Professional HMO as if it was their own.
New Professional 5 Bed HMO Doncaster £24,000 per Annum
We are in the finishing stages of another Professional HMO in Doncaster. This is a 5 bed that generates approx £24,000 per year. Why Doncaster, one word…AMAZON! Amazon has massive distribution center in Doncaster. There are thousands of thousands of employees even with the employees that are robots…haha.
We make all of these Professional HMO rooms as ensuites. The reason of ensuites is that the tenants stay longer. Staying longer in professional HMOs means less drama and less headaches. More so we do them to a high standard thus less maintenance. All of these less….mean more…more profits…and more time to spend with our families. We recently sold a nearby Professional HMO to a London investor. We are starting to tenant next week and then this one is up for sale. We love the model….we cash flow as we have the property on the market to sell to a HMO property investor. On the last several we sold the buyers got 70% financing.
We had a group of property investors from abroad this week. Majority had no idea what a social HMO was but were told by so called experts and course sellers to stay away. They thought the properties would be trashed. We chuckled and explained that every social HMO has a housing officer who monitors the tenants. Compare this to our professional HMOs in which we have plenty of drama. We have had an attempted suicide …a tenant stealing not just the bed…but the mattress and then begging us to let her rent again from us…
We just finished another Social HMO. This one will cash flow approx 15,000 per year net. No voids..no management…maintenance covered up to 5,000 per year. Regardless of a good economy or bad…there will be more and more need for Social housing in the UK…
Surviving Property Crashes…Learn From Experienced Property Investors
I just read a story about John Arrillaga [#346 on the Forbes 400], who was a star athlete at Stanford in a different generation. He got out of Stanford and started building little buildings around
Stanford. He kept doing it and was good at it and of course there was no better
market. In due time, he and his family had 15 million square feet, and the rents had
gone up and up and up.
The interesting thing was that instead of doing the normal thing real estate developers
do, which is borrow, borrow, borrow, so that money earned goes up and up and up,
John gradually paid off 100% of the debt on his buildings so that when the great
Silicon Valley crash hit and three million square feet of his buildings went vacant, it
was a total non-event – and, in fact, he could start buying buildings from others [who
Here’s a man who deliberately took some risk out of his life. He has no regrets in his
life. He was damn glad. I think there’s a lot to be said when the world is going a
little crazy around you, to at least put yourself in a position that if something really
unpleasant happens, that it might be unpleasant but will be a non-event in terms of
changing your life. We all might consider imitating John Arrillaga as things get
crazier and crazier.
Hong Kong Investors Viewing Professional HMOs -Social HMOs
We have been getting more and more interest from Hong Kong property investors. We have seen some of these Hong Kong investors go and buy Manchester city center flats and some even try to source, refurbish and manage from a million miles away. Unfortunately seen numerous horror stories where some of these investors who did not have local knowledge fell prey to dishonest sourcers, builders etc. They overpaid for properties and even bought properties that were in article 4 areas of Salford that could not be converted into professional HMOs.
We have some numerous Social HMOs and Professional HMOs to Hong Kong investors. Not exactly sure how they find us…but they are serious and motivated property investors. Today our colleague who lives in Manchester is taking around 7 property investors from Hong Kong. Last week he met for coffee with another Hong Kong property investor.
We tell them our honest opinions about beautiful city center flats & all the risks entailed …ie ground rents etc. We are showing them conversion projects now that are on guaranteed rent programs with no management. This seems to resonate with them even if they are not luxury. These savvy investors want solid returns and realise that management is the key or failure of their property investment in Manchester.