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The future is bright, or perhaps a little less dark?

An announcement is expected imminently according to This is Money Magazine from the Royal Institute of Chartered Surveyors (RICS) that it is readying itself to begin valuation on properties again.

Could this mean the housing market will be back up and running again soon? What does this mean for investors, and homeowners?

The inevitable suspension of valuations and house moves due to the social distancing guidelines that were essential to the fight against COVID-19 meant that the housing market all but stopped. This resulted in lenders pulling mortgage deals overnight and subsequently a lack of confidence set in and immediately affected house prices .

A spokeswoman for RICS told the magazine that the return to valuing properties will come with a set of new guidelines for valuers and we suspect it will be a minimised service, but this is good news for the property market.

It is likely that the government advice not to move will remain in place, and the impact on business’ and employment will be significant.

It is unlikely that the market will be a buoyant one, but for us and our investor clients that is no bad thing.

This means we are seeing a number of investment opportunities surface and our local contacts in Brighton, Hove, Worthing and Littlehampton have already started to approach us with excellent off market property investment opportunities. Now is the time to invest and maximise returns. OK, these returns may take longer to show in terms of capital value gain, but our success model of adding value, size or design will means that your money could work harder than ever for you. Even if you don’t want to own an entire property or only have a small amount to invest, we have property investment opportunities for you to invest in. Now is the time to contact us to be involved in our next project.

We are also starting to see some of the darkness lift, our constructions sites are starting to return (safely of course) and our suppliers delivering again which means we will again be able to offer excellent quality accommodation in shared living environments.

All of this means that slowly, steadily but most certainly surely, the future economic picture is looking a little less dark. Actually no, a lot less dark and almost bright.

Tina Wenham – Director of Target Five

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Making Risk Work To Your Advantage In Property

If you can master the risks by building expertise in certain niche areas you may make profit by treading where others dare not. Knowing the enemy can be the biggest commercial advantage you have.

My specialist area, when looked at my career as a whole, is risk and risk management. My MSc is in Risk Management. I am an ex Bomb Disposal Officer and I have held several risk-management positions in and out of the military. Then I moved into property full time. At first, it felt like a complete change; my favourite hobby became my vocation and I celebrated just how different it was to the slightly stuffy world of working in commercial defence or being an Army Officer. Then I started to notice the similarities.

Geeky bit. Risk is calculated as probability x severity/impact. How likely something is to happen, multiplied by how bad it will be if it does happen. Imagine it presented on an x and y axis; top right is high for both. Imagine playing Russian roulette with an automatic pistol (please don’t actually try this) – the severity, certain death, is as high as it gets. The probability – it’s an automatic which ensures there will always be a round in the chamber- is also very high. This is maximum for both. Bottom left is low for both; perhaps the nominal chance of a paper cut when reading the glossy section of the weekend broadsheet. Everything else is in between. The art to risk is understanding where each risk sits and finding ways to mitigate or reduce that risk. The commercial advantage comes from identifying risks that are viewed irrationally – where people perceive a risk to be higher than it is, usually because they do not understand the probability. Examples are easy – fears around shark attacks and air travel are mostly irrational, yet they are incredibly unlikely. It is these areas that you want to focus on, areas that people feel are so risky when in reality, they are not.

The key thing in property is risk versus reward. For many the perceived risk associated with property development is too great.  The papers and social media are full of failed ventures and people who got their numbers wrong. For others, the rewards of property, financial and in perceived status, draw them in and blind them to the risk. As with most things in life the key to success is about finding the balance. The more work you can do in understanding the risks associated with your area of property, the closer you can sail to the wind. The closer you sail to the wind the fewer people there are racing with you. You suddenly find yourself trading fresh ground. Some may consider you foolhardy, but if you are able to navigate choppy seas that others cannot, the crowded spaces of open houses, busy [pre-COVID] auction rooms, and Rightmove launches become a thing of the past.

Our areas of interest are High Yield centrally located properties to hold, and land and planning opportunities to sell. Fairly mainstream in many ways. The key for us is to carve out niches within that. For High Yield I love mixed use properties. Generally speaking, the upper parts are large and versatile; we buy everything on calculated sq. ft price, and the best value per sq. ft in our chosen area is almost always mixed use or commercial with Permitted Development rights. Also, there are numerous Permitted Development type opportunities both present and anticipated that can make them far more interesting. A lot of people don’t like them and a lot of lenders don’t like them. By understanding the risks involved you can manage them and then turn them to your advantage. One of our key strategies is taking mixed use properties, dealing with the issues, maximising the space and value and then making them attractive to both the rental market and future lenders. For example, hot takeaways built into properties on the margins of existing retail areas. They look horrible: pictures of Canton Dragon, last refurbished circa 1980 spring to mind. They are great! PD rights to convert to C3 residential and 2 further units above if the accommodation is ancillary. Centrally located too (or no one would have used the takeaway). We have tonnes of these little hacks.

Land is just the same. I dealt with my first Japanese Knotweed property 2 years ago. It was a headache and we spent almost £40k getting it sorted to ensure it did not hit end sales. Now I would actively seek those opportunities out. Why? Most people would be put off so the price at entry will be lower. We did not take full advantage of the tax advantages, but in many cases, you can claim back 150% of the remediation costs. PLUS, you then get a reputation for dealing with those issues so opportunities literally seek you out. A perfect scenario from a less than perfect starting situation.

I actively encourage you to understand the risks associated with your craft and rather than turning away from them, turn in to them. Master them and make them your friend. The cleanest air and the fewest people are at the top of the mountain. Why? This is because it is where the most risk is perceived to be. If you can overcome and manage those risks (risk never goes away) you can get to the top of the mountain in your area. Property is full of lots of mini mountains for you to master. If one looks crowded, find another and master it!

We are always looking for the best way for our clients to potentially achieve success through investing. Through our partnership with @Leopropcrowd we feel we have found an interesting and considered way to invest small and potentially build to bigger returns. We are excited to be working on our first project with them and although we are not quite ready to ‘lift the lid’ on that yet, we have some similar recent project case studies on their website now. Take a look and ask any questions you have through the forum or message us directly. ⠀

You can see an example by clicking the link – lhttps://www.leopropcrowd.com/property/detail/case-study-hmo-preston-street-brighton-by-target-5

Investment in property related assets puts your capital at risk and returns are not guaranteed. Past performance is not a reliable indicator of future success.

 – Andy Babbayan Director Target Five

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A Blended Approach To Property Investment

Choose your favourite partnership or team. Cagney and Lacey, Torvill and Dean or Scholes and Keane – we all have favourites. Long term property investment needs to be a partnership between holding property and trading property, one for long term income, and one for short term capital growth.

Much is made nowadays on the need to focus – to stick to one thing and do it well. In a previous article, I discussed the need to choose if you are in property – to buy and hold for yield – or in money – to use the property as a trading vehicle to build cash reserves. I also intimated in that article that you should not be fully in one or the other. You need a blended approach. There should however be one central strategy built around one of these, with the other supporting.

To be in property and investing in property, you need money. You may start with money and get into property investment, or you may start with nothing and use property investment to build money up. From there you decide to build a portfolio for income or to continue to trade and make that your core strategy.

The need for a blended approach is both a practical one and a risk-related one. Practically in order to continue to build up a portfolio, there will at some stage be the need to put more capital in. Assuming property investment is what you do well and is your main vehicle to make money, you should then look to use this to build the cash reserves up. Having a blended approach also mitigates risk. No one really knows what will happen post-Covid 19 in the property market. We do not know whether a period of inflation will drive down the value of money and property up, or we will see a market correction or even collapse. Money and property are to an extent a hedge.

The likely outcome is that in the short-term being cash-rich will be good to take advantage of bargains. In the long term, however, it is likely that the fiscal measures the government takes to right the ship, Government Bonds or Quantitative Easing, will result in a devaluation of money. Holding assets in that situation will be beneficial as they will naturally gain value-  if the value is measured in monetary terms!

In my next post I will talk about the need for a layered approach to long term property investment and the importance of creating an inner circle.

At T5 we have two clear strategies – income strategy – high yield property refurbishment and onwards rental and capital return strategy – land planning and development and resale. If you want to know how you can work with us or have any questions get in touch!

Andy Babbayan – Director of Target Five

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Maintaining a healthy pipeline

For a number of different reasons, it is key to our business to plan ahead to ensure we have an appropriate stream of projects coming up.

Our extended teams of contractors need to be kept ‘well fed’, our sister company Sussex Property Partnership needs to forecast and prepare for what properties will become available for let, our clients forecasts and business plans require an element of strategic flow of investment and return options and finally our business plan relies on the income stream from these projects.

It was, therefore, a challenging process during lock-down to maintain a healthy pipeline of projects and purchases to ensure the interruption to this was minimised.

We had to ensure the purchases still made sound investment sense for our clients and continued to meet our targeted yield return figures, despite and change or disruption to the market. This meant we had to negotiate a few of the offer prices and analyse the investment again.

In addition to this we had to ensure that we continued momentum in sourcing new investment opportunities to prepare and mitigate against any lull or break in the projects that could have been a by product of this unprecedented time.

In the end we continued with all but one of our purchasing commitments and have managed to secure some potentially very exciting new opportunities for ourselves and our investors, with many more coming through everyday.

Now that the government guidance has restarted the property market we are working closely with our teams of professionals to progress the matters as quickly as possible to exchange and get started on the refurbishment and redevelopment to realise the returns on our clients investments with as little delay as possible.

We have most certainly hit the ground running and are excited about what the future holds and we look forward to working with our clients to provide sound investment opportunities and aim to hit the target yield returns that our clients are looking for.

If you are interested in hearing about any of our new investment opportunities get in touch.  information@targetfive.co.uk or 01273 525656

Tina Wenham – Target Five Director

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Target Five & Knight Support, Helping the homeless of Brighton & Hove

Our charity partner Knight Support is a great service for the homeless and rough sleepers in Brighton & Hove. We are aiming to offer further support this year and need your help too

“Service to others is the rent you pay for your room here on earth.” Mohammed Ali

The Housing, Communities and Local Government Committee in the UK Parliament today announced the launch of an enquiry into the effect of COVID-19 on homelessness and the private rented sector, designed to review how effective the Government support has been and take a look at the proposed strategies that will be put in place to support the sectors in the long term. They are inviting written evidence for review by 1st May 2020 to ensure that the support is sufficient and continuous after the current measures in place expire.

This made me stop and think. This is a weird, stressful and troubling time for all of us, but just think how different it would be for you if you had nowhere to go, if you were a street sleeper or perhaps in between homes and been sofa surfing.

At Target Five and Sussex Property Partnerships we have had a long standing commitment to give back to our local community and have been working closely over the last 12 month with our charity partner Knight Support. https://www.knightsupport.co.uk/

We previously have held events to support and provide a safe space for the most vulnerable of our community and try and use our contacts, network and business position to help Knight Support. Our Boxing day curry party was a great success. Held in one of our clients empty properties and supported by our contacts making donations, providing food and generally just being an ear to chat. We were intending on continuing these events through the year but of course the social distancing measures have prevented this. We will start these again as soon as we can.

We provide a store free of charge to the service to help keep costs down, the generous donations that people of Sussex provide need to be sorted, distributed and where possible sold. This storage area helps with that huge task. We are hoping to help with more permanent premises for this in the near future.

We provide administration support to founder Lynne Knight and her team, to make sure the applications for grants, funding and general flyers etc can be completed in the most cost effective way.

Just this week we have had ‘virtual’ meetings with Lynne about how we can help further and make sure the street sleepers, homeless or nearly homeless are supported during this worrying time. We are aiming to apply for full charity status and my business partner Andy Babbayan and I are intending on becoming trustees of Knight Support.

For now all we can do is keep supporting in any way and we can and ask you to do the same. If you want to help us support this amazing service, get in touch and we can discuss the best way you can help.                                                      Tina Wenham Director Target Five

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Why Yield Is Everything

Long term holding of good quality property is profitable and logical, provided it is beneficial for the owner and the resident. Profitable because in the longer-term any lending stays the same or drops away as values and rents increase, so over time it becomes more profitable. Logical because you may as well – the barriers to entry are high, taxes, refurbishment costs and property set up, it is logical to hold it to see a return on investment. For a long time the play was to hold property and for it to ‘wash its face’ – but this makes no sense. Given that in the same geographical area property levels rise and fall at broadly the same rate relative to each other, why buy a property that only ‘washes its face’ when you can have one that cashflows well from day 1. It also massively de-risks the property.

Price rises instantly are not guaranteed, but usually some movement will be seen in 5 years, at least in line with inflation. In a post-Covid 19 world it is likely to be a higher increase only because there will be a dip first, a dip to take advantage of. Either way fiscal policy is uncertain, interest rates could rise, lenders could become more nervous. The higher the yield the less exposed an owner is to these changes.

Yield has to be created though. There has to be a value add at every stage of the process. I never listen to an estate agent when he gives me a yield for a property at a certain price. Firstly because it needs to be calculated first hand, but secondly because it will not reflect the potential of the property.

There are 6 points at which yield can be maximised, as per the attached infographic –

  1. Knowing the Market – is it right to achieve not just what you want but what the market wants.
  2. Buying at the right price – this impacts everything but it still needs to be right, negotiate hard but be fair!
  3. Scoping the property – there is a correct solution and balance to every property, this means extra rooms and ensuites, but also communal space and a flow to the property.
  4. Correct licensing and planning – this is a value add as well as a compliance issue.
  5. Cost-effective refurbishment – use professional investment property contractors – right quality, the right speed and right spend.
  6. Achieve rents and Occupancy. The market will dictate the rent, but a good agent will get you good rents, good occupancy AND look after your residents!

At T5 we have two clear strategies – land planning uplift and development for CAPITAL GROWTH and high yield property development and conversion for LONG TERM INCOME. Once the rest falls away it is these long term high yield investments that will remain and will see us into a retirement few could dream of. The subject of this article is getting this right! This links closely to our first Crowdfunding raise starting soon – SO WATCH THIS SPACE!      Andy Babbayan – Director of Target Five

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Never too old to share

What age do you think the average house sharer is in the UK? 18? 20? 25?

Recent data released from Build-Asset Management, shows the average age of renters living in shared properties in the UK has risen by 5 years since 2017 bringing the average age of co residents of shared houses to nearly 30 (28.2). Given this rise it make sense that the average time that renters remaining in shared residences has extended also, from 12 months in 2017 to just over 18 months in 2019 over a 50% rise.

As you may expect, the 18-25 age category still accounts for the largest percentage of all room share tenants, with 43% of those renting falling into this bracket. This starts to decline as the age increases:

  • 36% of room shares are aged between 25-35
  • 13% between 35-45
  • 6% between 45-55
  • Just 2% are aged 55 or over

It is clear however that there is a market in need of quality housing, professional sharer residents.

At Sussex Property Partnership and Target Five, we recognised this change in the dynamic of sharers last year when the student renters market in Brighton & Hove was left with many un-rented rooms following the start of the academic year.

We knew we needed to resolve this for our clients and also saw it as an opportunity to reassess our specification on projects, and make sure we were still offering the best quality we could to renters.

We immediately started sourcing and refurbishing investment opportunities for our landlord and investor clients to cater for this change in the demographic of sharer residents. This meant not only upgrading the remaining rooms on offer, but looking at a diversification of properties. Not only does this spread the risk and ensure the maximum rents can be achieved for our clients but also caters for the ever growing need of the local sharing residents market in Brighton & Hove.

It also, however, became clear very quickly through our research and development of the new properties on offer, that there were other emerging areas in the professional sharing residents market that needed a solution and therefore we extended our search area for sourcing opportunities to convert and develop to Worthing and Littlehampton.

We now have the first of these specially designed rooms available for sharers looking in Brighton, Hove, Worthing & Littlehampton. Stylish, beautifully furnished, functional, well located properties, with excellent facilities, bills included and additional extras on offer like cleaning and faster WIFI.

Unlike our competitors, our business model is based on us being incentivised by our clients success and as such this makes us focused and determined to not just sit back and let you deal with the problem of a un rented house or room. So when the very real problem of a reduced return hit our clients last year, it hit us to. This made us focused and driven to solve the issue and are constantly looking to diversify and evolve through assessing markets and demand areas.

If you have recently been left with empty rooms or houses and are just looking to diversify your portfolio with an upgrade to your existing properties or looking to invest to add to your offering as a landlord, we can help you contact me and I can discuss you individual requirements. We have great opportunities available to secure now.

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Are you in Property or in Money?

This is a question I ask clients when I first meet them to understand their motivation in getting in touch. Usually it draws a blank coupled with a glance towards the door. I then explain that it is a simple question and one that very quickly gets to the bottom of why they want to buy another property. Are they doing it because they are convinced of the long term fundamentals of property and are looking to hold it, or because they want to refurbish and sell it, to flip, or to sell in the near future? If it is the former, they are in or want to be in property, if it is the latter they are only using property as the vehicle to get money.⁣
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Investment Banks are primarily in money. They cash out their position at the end of the trade, they may be almost instant arbitrage type opportunities or longer term holds, but they will cash out once their prediction is realised i.e. stock goes up, or down if shorted. Few investors actually believe truly in the stock they are holding, but Warren Buffett is a good example (I Just read the Snowman – great read!) of someone who is in stocks, or in companies. He sees it as an investment in that company and its long term fundamentals – he has held shares for decades. He invests in his investments and keeps doing so because he believes in them.⁣
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It is important before setting out on a property journey to understand where you are. Neither are wrong, or right for that matter and it can be both or neither and you can of course have a dual strategy, which is what I personally believe in. McDonalds are to a large extent a property company that uses burgers as a vehicle to get occupancy on their real estate sites, but they have to make money from the burgers as well.⁣
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I have some friends who do rent-2-rent, subletting in old language. They achieve great cash flow and many see themselves as being in property, which they are, but in reality they are only using it as a vehicle to make cash flow. They benefit from the increase in rents over time, but most likely will have to pay higher rents in return to achieve these.⁣
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I went full time into property because I believe I am in property. I believe in the long term fundamentals and see property as any other physical commodity, it has value, you can touch it and there will always be a need for it. Since we came off the gold standard and moved to a fiat type currency – one that is not pegged to anything physical so just floats, tied to other floating things – we have seen constant inflation. Our Keynesian western economics relies on inflation. We all know with reasonable certainty that a cappuccino that costs £3 today will probably cost £6 in 10-20 years time. The other way of looking at it is that if you had sold the cappuccino and held the money, you would only then be able to buy half a cappuccino. Property generally outperforms the markets, which is not really a good thing, but it does not need to, it just needs to keep up with it and hold its value. Stocks and shares may rise or fall, companies come and go. Property stays. The great thing about it is that it pays really well along the way!⁣⁣
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Projects Completed

WESTERN ROAD, LITTLEHAMPTON

Target Five acquired this very rundown 7 bedsit property, with a separate studio flat in Western Road, Littlehampton.

Working in cooperation with the local licensing officer, Target Five renovated this property to legal requirements to a 6 bedroom, 4 bathroom HMO and a 3 bedroom, 2 bathroom self contained flat.

The property has been finished to the highest Target Five design specification, making this an attractive rental proposition to either students or young professionals.  This property has recently been revalued at nearly double the purchase price!

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Projects Completed

WILSON AVENUE, BRIGHTON

Target Five acquired this 4 bedroom semi-detached chalet bungalow for our investor and have competed the renovation by reconfiguration/subdivision of existing rooms to a 6 bed HMO (Large kitchen communal space, 6 bedrooms, 3 shower rooms and a back garden area)

The property has been finished to exceptionally high specification, with final finish and furnishings designed by T5.

This property is ideal for students/professional sharers, with great access links to the city centre, close proximity of Brighton Racecourse, Brighton Marina and local amenities.