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 Strategies for investing in property for the seasoned investor or for anyone starting with little or no cash
Fire in the Belly
3/29/2020 3:18:33 PM

What’s your Fire in the Belly? Asks Pete Lonton.

Pete bought his first property at the age of 20, out of necessity for somewhere to live while working on a contract in the UK.  He continued to grow his portfolio and within a few years had 16 properties.  Today, property is a key part of his investment strategy.  Pete and I both started property investing around the same time so we chatted about what the markets were like, negotiating deals and the mortgage market.

Last year Pete launched the Progressive Property Network (PPN) in Northern Ireland providing a platform and meeting environment for anyone interested in property whether as an existing owner or as someone keen to get into property.

As a business owner Pete’s new project is Fire in the Belly.  As Pete says “why do some people get out of bed and achieve amazing success and why do other people get out of bed and watch tv?  He talks to success people about what motivates them, keeps them going in tough times and what is their Fire in the Belly,

Join Pete and I for a chat about property investing, business and Fire in the Belly.

How to Use Investment Cycles
2/18/2020 1:14:14 PM

Investment Cycles

Every investment has a natural cycle for when it is popular and not so popular.  When prices are high and prices are low.  Investors are looking to buy low and sell high.  It’s how they make their money. If the general public are selling then investors are the ones buying.  When the general public are buying, investors will be selling.  There always has to be a buyer and a seller. 

Investors specialise in finding investments that are out of favour with the general public and buying them at a low price.  When the investment becomes popular again and there is demand for the asset the price will go up and investors will start selling the asset.  The asset can be anything that has a deemed value.

Throughout our training courses, we cover 4 categories of investing – business, property, paper and cash.  Within each of those categories are different types of investments for example in the property category there is residential property that consists of single lets, multi lets, hmo, apartments and student lets as just some examples of residential property.  But you also have commercial property, holiday lets, garages, storage.  All examples of different types of property investments. There are hundreds of different types of sub-categories within each type of investment not just property.  All of these types of assets have their own investment cycles that go up and down.  As an investor you can buy into any downward trend sub-category ready for when the next upward trend begins.

The question I am always asked is how do you know the cycle is at the bottom and ready to go up? 

It would be lovely to say I have a crystal ball that says invest now.  It doesn’t work that way.  What you need to do is look at what the markets are doing and assess where you think that investment is.  Then cross your fingers, take a deep breath and hope like hell you have reached the turning point. 

When analysing an investment, I always assume that it might go down slightly when I buy it.  Be prepared.  If it does go down don’t panic. It will go up. Your timing just wasn’t quite perfect but you’ll get it right next time. 

 

 

Investment cycles vary in time for each investment.  The gold bullion cycle can last decades.  Property investment cycles usually cover a recession whether that be a year, 5 years or a decade.  A tip is to look at the trends for recessions within your country.  Then overlay the property cycles and you will notice a pattern of when prices go up and prices go down.  It doesn’t just need to be property.  You can apply this to any asset and see how it is affected during the recession cycles.

Once you buy the investment at the low level, sit back and wait for it to grow and either cash out at the high or as close to a high as you can. Or you could hold the investment and let the next cycle kick in and do its thing.  It is unusual for a low to go down below a previous low.  Inflation, usually ensures the low is higher than the last time. 

Imagine a coil, continuous going around in an upward spiral.  This will represent the bottom of the investment cycle the asset you are investing in.

Example 1 -  I purchased property in 2002 for £35,000 the property went up to £120,000 by 2007.  During the recession the value dropped and the new low was £95,000.  More than £60,000 higher than the previous low and this was during one of the worst recessions in history.  Property prices are again rising.  Who knows where the new high will be.  Already house prices are higher than the 2007 price.  There’s probably room for them to go even higher.  I wouldn’t be surprised if the new high isn’t around £150,000+ for that property.  Just watch the cycles and see what happens. Be realistic if you are waiting for prices to drop back down to start investing. Don’t expect the property to drop back down to £35,000 as that is highly unlikely to happen.

Example 2 – I started buy Gold Bullion in 2004 when the price was around USD400 by 2008.  I was then selling at around USD1822 in 2011 even though the price kept going up to USD1896.  The price of Gold bullion dropped by January 2016 to USD1100 but today is trading at USD1587.  Where will it go this year is anyone’s guess.  20 years ago, it was trading at USD200 will it go back down to that level is very doubtful.  Inflation and demand will probably keep it at the higher levels.

Every investment has a cycle.  To take advantage of the cycle investing you have to track the data, keeping your own records.  Identifying where you believe the cycle is and where you believe the price will move next.

A tip I can offer is to watch the newspapers.  When the newspapers say this is the best performing investments and the next best investment, you know the general public will be buying and the price going up.  When the paper suggests you get out of an investment the general public will be selling and the price going down.  An investor is contrarian to the general public.  That is when they sell an investor buys, when the public buy an investor sells.

Every investment has a natural cycle.  Making money from an asset is about understanding where it is in the investment cycle and being contrarian.

 

How to Invest in a Property for Just £1
1/28/2020 8:49:38 PM
How to Invest in a Property for just £1

Have you ever heard or even been guilty of saying “you need money to make money”? and what about “I don’t have enough money for that” or “when I’m rich I’ll buy that”.

Well, would you be interested in knowing you could start a property portfolio with just £1.


Property Sourcing

There are lots of people who would like to sell a property but can’t find a buyer and vice versa there are people who would like to buy property but don’t have the income or the credit rating to do so.  You can act as a sourcer of property or as the middleman either with a buyer in mind or buying the property for yourself.  It costs just £1 to complete a contract between yourself and the seller to act on their behalf to sell the property either fairly quickly or at some specific time in the future. 

Example 1 – I have control over a property on which I have the right to buy it at any time within the next 8 years.  The property is 3 bedrooms end terraced, and tenanted with a regular income from the property.  A letting agent manages the property and under the agreement, between the seller and myself, I pay the seller a fee each month on the property.  The fee covers the seller’s mortgage and gives them a little something in their pocket.  The remaining income from the rent is my profit.  The cost of doing this deal was £1 to make the contract legal and the time put into negotiating with the seller.  The deal is a win/win for both the seller and myself.

Example 2 – I have another property with the right to buy the property in 10 years.  This deal was put together by a property sourcer.  The deal is similar to example 1, where the seller receives a payment which covers the mortgage and a little something for themselves.  I have an agent who manages the property and the remaining income from the rent is profit.  The only difference with this deal is I paid a sourcing fee for the deal.  This was a win/win/win deal.  Win for the seller who wanted to sell but couldn’t due to certain circumstances.  A win for me as I have control over a property I don’t yet own but which generates income for me.  It’s a win as I can purchase the property at any time in the next 10 years.  A win for the property sourcer as he earned a commission for putting the deal together.

Property sourcing is about talking to the seller, solving a problem they have and then finding a potential buyer.


What do you need for this type of deal?

For hundreds of years businesses have used the right to lease land or property.  A lease is frequently used with builders and supermarkets.  Traditionally, they will ask a landowner to give them the right to purchase the land sometime in the future in exchange for a small fee paid to the landowner either monthly, quarterly or annually.  The builder or supermarket does this so they can get planning permission approvals without the cost of buying the land and then having to sell if they fail in their planning application.

The same principle is used to acquire property to buy at a future date.  This is known as a lease option.  It gives the owner of the lease the right to control the property as if they owned it.  It also gives them the right to buy the property for a pre-agreed price sometime in the future.  If the potential buyer is unable to buy the property for any reason or simply decides the property is not suitable to them, they walk away from the deal at the end of the term or when ever there are break clauses in the contract.

The seller, on the other hand, has an agreement to sell the property some time in the future for an agreed price.  They no longer have any responsibility for the property other than the mortgage payments.  The owner of the lease will pay the seller a monthly fee to cover the mortgage payments (if there is a mortgage) and they will generally also receive a little something for themselves as a commission for the use of their property.  If the property does not sell within the agreed period the seller knows the property will come back to them or they can renegotiate the deal for an extended time.

The only thing needed to complete this deal is a Lease Option Agreement and the exchange of money to make the contract legal.  There is £1 between the negotiator (sourcer) and the seller.  There is a commission between the negotiator and the buyer.  If they are the same person then the property deal has cost just £1.


Why would a Seller Agree to this?

There are a variety of reasons why sellers would be open to a Lease Option.

·         It could be that the property is in negative equity and they can’t sell for current market prices.  A deal done on a 10 year lease allows the property to go up in value and the seller to sell the property and cover their costs.

·         It could be that the seller has been unable to sell the property but has another deal in place for a new property.  Putting the property on a lease option means they no longer have responsibility for the property as that passes to the option holder and the seller is free to move to their new property

·         Marriage breakups are often a source for lease options.  Neither party want the responsibility of the property but it isn’t selling so a lease option takes the burden off their shoulders and allows a deal to go through at a later date.

·         The seller may think they have sold their property but the deal fall through and they don’t want the burden of looking after it

There are any number of reasons why a seller will be happy to use a lease option and sell at a future date.

 

Who are potential buyers?

The most common type of buyers are property investors who want to quickly build a property portfolio without the hassle of having mortgages.  A second source is someone who would like to buy a property but doesn’t have the credit rating to be able to purchase a property.  Both these types of purchases are good a looking after the property and are most likely to complete the purchase at a later date.

 

Lease Options are a great way to get into property as an investor or as a buyer.  If you source the property deals yourself then you could purchase the deal for only £1.  If you buy from a property sourcer then be prepared to pay commission for the deal.  Commission is based on around a percentage of the property value.  The higher the value the higher the fee you can expect to pay.

For further reading I recommend

Lease Options Made Easy


Escape the Rat Race with Lease Options

 

 

 

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