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Commercial To Residential – Doing It Right

In years passed the value has been turning residential into commercial property, especially in central locations. Now the tide has turned and it could be explosive. Retail has been under threat for years, but with the Covid-19 we will see all manner of commercial properties no longer become viable. This combined with a chronic under-supply of residential property we will see a huge switch.⠀

Government led relaxation of planning laws and increased Permitted Development (PD) rights will act as the facilitator.⠀

We have been moving this way for some time and plan to ride the wave but we are determined to ride it well and where possible consult with local planners even where it may not technically be needed. ⠀

We are going to be careful to keep our own ambitions in check and manage expectations of clients. With deregulation comes increased responsibility. Will we be doing as many deals as we can – yes! Will we put quality over quantity and try to do it right as well? Yes, we must.⠀

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BRRR-Yield Vs Capital Uplift

𝘞𝘩𝘢𝘵 𝘥𝘰 𝘺𝘰𝘶 𝘵𝘩𝘪𝘯𝘬 𝘢𝘣𝘰𝘶𝘵 𝘉𝘙𝘙𝘙, 𝘠𝘐𝘦𝘭𝘥 𝘢𝘯𝘥 𝘜𝘱𝘭𝘪𝘧𝘵?⠀

My take:⠀
For a long time the key to portfolio building has been the ability to recycle cash. This means adding value and achieving a refinance sufficiently high that once you⠀
refinance onto a new longer term product, as much of your initial deposit, refurb costs and other fees is pulled out for the next purchase. This is now referred to as BRR, BRRR, or even BRRR (depending on how many Rs you want to add). ⠀

The key to making this happen therefore is capital uplift rather than yield created. Whilst the Yield – the income from the property, is important, it only needs to be sufficient to drive the loan. It is the capital uplift against the capital employed – the profitability of the project that drive the ability to recycle cash.⠀

My recommendation? Create an arbitrary figure for Yield that works for you. For us it’s 10% Gross Yield – this means we know it will make good cashflow. Our main focus is⠀
on Capital uplift – creating value. This is what allows us to keep moving our money, creates sensible equity, de-risks the project and allows the wonders of leverage and⠀
compound interest to do their work.⠀

The critical number – 25% profit on GDV. If all costs come to 75% of GDV then you can recycle your cash.⠀

If you are interested in working with us then get in touch! on information@targetfive.co.uk⠀

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Blog

Estimating Build Cost – How Do You Do It?

My take on it:⠀

Perhaps the hardest thing when evaluating a deal and the bit most likely to go wrong iis the unknown element, the cost of refurbishment. The price, within reason is fixed, costs, (Stamp Duty etc) are fixed, the rent and end value are not fixed but entirely predictable. ⠀

Add to this the need to act swiftly and make quick decisions and you need to have a methodical approach that enable you to get this right. How often have you underestimated the costs? I have done it loads of times and our PMs biggest gripe with me is that I can sometimes do this. ⠀

How am I doing it now? Put simply for £200k refurbs or less I use A 2 phase approach. Firstly look at £/sq ft spent on SIMILAR refurbs THAT YOU OR SOMEONE YOU KNOW AND TRUST HAS DONE, allowing for all costs, and apply that. Then Secondly add up the component parts, create a price list and add it up. I.e. ensuite – £4k. Dormer Loft – £30k etc. Then look at the two and take the higher plus 5% contingency. THEN sanity check it.⠀

For £200k or more AND ALL LAND DEALS I employ a QS. For £250-£1000 you will get far more certainly and peace of mind.⠀

If you are interested in working with us then get in touch on information@targetfive.co.uk

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Projects Completed

CENTURION ROAD, BRIGHTON

We are excited to show you our recent renovation completion, Centurion Road, Brighton.  We pushed on during the lockdown with a bare minimum team to complete this renovation for our returning Property Investor client, who has now completed 4 properties with Target Five.

Target Five sourced the property for our client, with works starting at the end of February 2020 and completing (with a slight delay due to Covid-19 lockdown and the difficulty in obtaining building materials).

The property was originally a 3 bed family home and is now a stunning 5 bed (planning for 6 bed) with 3 shower rooms.  The property has been finished to a high specification and the interior design was undertaken by the T5 team, to create a top end rental property, creating a fantastic yield for our client and was let off plan!

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Projects Completed

LANSDOWNE PLACE, HOVE

Finally we can reveal our first projects since Covid-19, Lansdowne Place, Hove. Given a new life, 2 houses which were originally both 4 beds are now 7 beds each with en-suites making this a perfect professional sharers house with stylish and well considered spaces.

Both properties were sourced by Target Five and renovated for our returning Property Investor Clients.

As you can see the property is moments from Hove seafront – perfect

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Projects Completed

LANSDOWNE PLACE, HOVE

We are delighted to share our recent property renovation, the second of our two properties in Lansdowne Place, Hove.  Both properties were sourced and acquired for our returning Property Investor clients.  Although progress was slowed due to the Covid-19 lockdown, we have managed to complete both properties ready for the summer rental market.

The property was originally a four bed family home, which we have designed and renovated to an 8 bed/9 bathroom house.  The Target Five team also designed and furnished each room, maximising the space available by raising the beds in some of the rooms.  Each bedroom has it’s own en-suite bathroom, making the rental yield for this property fantastic!

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Blog

Multi Exits Identified

Following on from our focus on Risk is the need to assess your exit. If you do not have multi exits identified in the following key areas, DO NOT BUY!

  1. Use:  The more versatile the better. There will always be an A plan, the one that is projected to return the most profit, but B, C and D plans must also be potentially profitable. If only plan A is financially viable then DO NOT BUY!
  2. Rental Market: The critical R in BRRR (Buy, Refurbish, Rent, Refinance) in my view is Rent. If you are a long-term hold then it needs to produce good income. This means it needs to be robustly rentable and attractive to multiple markets. The best way to ensure this is spacious, well-proportioned and central properties. They are not always the cheapest but they are generally the easiest to rent! If you are banking on one tenant type to make money – DO NOT BUY!
  3. Sales or refinance: You have to ensure there is a market for your property. Too often people are over reliant on a commercial valuation to refinance a deal. Ensure you have a product attractive to multiple lenders and attractive to buyers. If it is not attractive to both then DO NOT BUY!

We will aim to do £30M plus worth of deals this year as we have each year for the past seven years. We are always looking for the best way for our clients to potentially achieve success through investing. Through our partnership with @LEOcrowdfunding 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. (https://www.leocrowdfunding.com/property/detail/case-study-hmo-preston-street-brighton-by-target-five)

Get in touch to find out how you can get involved 01273 525656 or email information@targetfive.co.uk

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.  Please read the full risk warning at www.LEOcrowdfunding.com/risk before deciding to invest.

 

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Blog

We Love Commercial & Mixed-Use Properties

T5 love mixed-use and commercial conversion to residential!

I have always found it impossible to understand why residential investors ignore commercial and mixed-use property. Why? Whilst there are many reasons, I have distilled this down to three key reasons why I feel they create a true arbitrage opportunity:

Price per sq/ft: If you are not already valuing everything on a price per sq/ft or sq/m basis, then start now. It is how commercial and development opportunities have always been valued and is the easiest way to assess value, potential uplift and to show value to a valuer. Put simply these properties offer the best 3/sq ft rate around.

Locations: Mixed-use or commercial and ancillary use properties are historically located in busy, central and well-connected areas. Perfect for renting to every type of market.

Permitted Development rights: Build, Build, Build! You heard the man!  With the extension of Permitted Development rights, it is not only just the case that you can often add two flats above, but in many cases the entire building can be converted under Prior Notification, which means a simple planning process and no need to comply with space standards – ideal to create yield in central locations!

We will aim to do £30M+ worth of deals this year, as we have each year for the past 7 years. We are always looking for the best way for our clients to potentially achieve success through investing. Through our partnership with @LEOcrowdfunding 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. (link to bio/ case study for Preston Street)

Get in touch to find out how you can get involved 01273 525656 or email information@targetfive.co.uk

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.  Please read the full risk warning at www.leocrowdfunding.com/risk before deciding to invest.

Categories
Blog

Target Five Property Selection Process & How We Do It

My view is that making property work is knowing when to say no, which is almost all of the time, and knowing when to say yes, with certainty. The best way to do this is to develop a rigid criteria, selection and offer process.⠀⠀
⠀⠀
I will share ours. As an ex-military chap, I love a process and I love a phased operation. Our selection process has 3 phases, each one more complex than the last.⠀⠀
⠀⠀
Firstly our SELECTION. What we are looking for. We only deal in certain locations. For the High Yield properties we hold, it is central Brighton, Hove, Portslade, Worthing and Littlehampton. These are defined on a map, down to the street. The type, mixed use, single let and HMO. Any other issues, article 4, listed or conservation, flood areas. If it doesn’t fit it is deselected at first sift. We don’t even view.⠀⠀
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Secondly is the CRITERIA. Price per square foot, rooms sizes and ratios, number of windows, parking, garden. All are defined. Some are must haves, some are nice to haves and effect the OFFER process below.⠀⠀
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The final phase is the OFFER process. This only takes place once the property is viewed and the CRITERIA logged. This process is very similar to valuing land. It starts with grading the property by location, A, B or C for its location and then by using known sales and revaluation data to create end value per sq ft, which in turn allows us a justified GDV. This is real value not hope value. We then allow for 20% profit minimum. From here we assess the price of the work on a sq ft refurb price and any other costs and fees. All of these figures create a BUY price, which we try to beat. If we dont beat it we move on!!! ⠀⠀
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If you are interested in finding out more about pur selection process and how Target Five work for our investors, please DM us or email information@targetfive.co.uk⠀

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Uncategorized

What stage are you currently at in your investing in property journey?

What stage are you currently at in your investing in property journey? 

Seasoned Investor? 

Accidental Landlord? 

First Time Investor? 

It is not a ‘one size fits all’ industry.

Most of our investors have these common goals: 

  1. To achieve appropriate returns on the investment made, in line with market competition.
  2. To carefully consider the risks involved
  3. To look for financial freedom

How can we help you?

Through our various investing opportunities: 

  1. Passive Investing with our associates LEOpropcrowd
  2. Portfolio Review and Improvements
  3. Strategic Investing Opportunities 

Of course, there are no guarantees and that is a very important first lesson that we discuss in our initial meetings.  There is an element of risk that must be considered when investing in property and although we aim to invest well and offer the potential returns that we are asked for, it can sometimes not work out as planned. 

What do we do? 

Assess your needs

Find The right strategy 

Offer a few opportunities

Work with you throughout the process. 

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 here https://www.leopropcrowd.com/property/detail/case-study-hmo-preston-street-brighton-by-target-5

Risk Warning: 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.