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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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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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Target Five Property Consultants – HMO Journey So Far

Since our formation in 2013 we have established ourselves as experts in the HMO property development field having undertaken 350+ renovations.⠀
It has been interesting putting together this post and pictures to see how far we have evolved from what was; I guess we shall call ‘standard & compliant’ HMO renovations that were similar across the country.⠀

The type of HMO being offered to let now has vastly changed due to the changing needs and expectations of the tenant, who want and deserve a level of luxury in their shared accommodation. Taking the above into account, we have had to evolve and adapt our model quickly and with consideration. ⠀

Changes we have made: – ⠀

👉 We view every new property as an opportunity and challenge to shake things up. With each new property we hold interior design brainstorming sessions, which we then develop into mood boards.⠀
👉 Each property is CAT 5 & broadband ready, with USB ports located in the ‘useful’ places.⠀
👉 Considered and thoughtful living spaces, designed to be practical for coliving homes.⠀
👉Casual spaces such as hallways and landings are not forgotten and are given a little extra something, whether it be a feature wall, amazing paint effect or vinyl art.⠀
👉 En-suite showerrooms: this change we feel is a must given the current climate of the coronavirus, being able to offer your tenants as much of their own safe space as possible! not to mention the end rental figure achieved for our investors.⠀
👉 Bespoke furniture: here we focus on our interior design and what will work within budget but also be durable! Using companies that specialise in landlord furniture packages, such as @landlordfurnitureco who offer fantastically designed furniture for all concepts and budgets.⠀

And much more!⠀

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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

PRESTON STREET, BRIGHTON

We sourced and developed this property for a new investor.  This was a tricky development, as the property itself was a 4 bed flat over 3 floors above a restaurant, to access the flat you had to go through the restaurant itself!  So there was a lot of legal constraints to iron out during the conveyancing process re: leases and then obtaining planning permission to reinstate the separate entrance to the the property, which we cordoned off from the restaurant itself.

Target Five renovated this property in a six week time frame that our investor had to work to.  The property is now a stunning 6 bed HMO located in the centre of Brighton.

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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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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.

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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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Blog

What is freedom to you?

We all have goals. Not all are life changing some are simply to be better at something or learn from challenges, but I believe we all have one common goal and that is to be free.

Freedom. What does it mean to you?

It is commonly perceived that money equals freedom, in fact our experience is freedom is achieved by gaining more time. More time for family, for fun, for learning. Our aim is to find ways to offer our clients that valuable commodity of time, and in turn freedom. Does this sound appealing to you? We can help, but first we have to understand a few things about your goals.

Being able to live free from your financial restraints can seem impossible, we all have bills to pay, mortgages to cover, school fees due perhaps. To help you to start on the journey to becoming less beholden to these constraints we have to first understand these costs and work out what your ‘ passive income’ figure is.

Passive income is the amount of money you would need to receive from your investment to cover the cost of living for you. Passive income by its very nature is income received without having to work. Consider how much you need every month to live comfortably and ensure all your obligations financially are met. When we know this figure it allows us to start to focus and hone in on what type of property investment is right for you. This isn’t a ‘one size fits all’ situation and we are very committed to making sure we really listen to your needs and end goal and tailor the search and investment for you.

Our next step is to consider how much you are looking to invest. It doesn’t always have to be large sums of money for us to be able to offer you a return on your investment. We are look at the best way to make your money work hard for you.

We also need to consider your appetite for risk, there are varying options for investing and some offer more risk than others. For example buying a plot of land unconditionally without any planning on hope that you will get the planning for development you are hoping for can be risky if you haven’t considered all the elements that could go wrong, however this comes with a larger reward if handled correctly and bought well.

We offer a range of investment opportunities and can help you choose the right one to give you the freedom you are looking for;

  • Standard Buy-To-Let Investment – this is a ready made option, usually buying a small one or two bedroom apartment in a central location offering an immediate monthly rental return to you.
  • Small Conversion Opportunity – Purchasing a lower value apartment, or small house where we have identified an opportunity to add value through refurbishment, extension or conversion into multiple units.
  • Large Block Investments – Purchasing a larger block that can be converted through a planning process or change of use to form large HMO’s or flats.
  • Mixed Use Investments – these have a commercial shop, office or restaurant on the premises but with a residential element usually found above. This allows a spread of your risk as the commercial space can be rented out on a longer lease. The residential spaces can often be converted and extended and the allowed permitted development rights make these slightly easier than standard residential opportunities.
  • Land with Planning Uplift potential – Our experience, knowledge and team of specialist make these opportunities the most existing for us. We can often identify opportunities where others have not been able to and working along side our award winning planning consultants, Whaleback we are actively sourcing these opportunities right now for investment. The added value to property like this can be extremely profitable if done well.
  • Funding Investment – We can offer returns for investments of varying sizes through standard lending agreements, crowdfunding opportunities, joint ventures and other ways you can invest small to start to build up to a larger investment.

We work with you to consider which option is best for your needs and then we get to work on sourcing the right opportunity for you.

We get the most amazing sense of satisfaction helping you achieve financial freedom and our incentivisation is based on the success of the opportunity sourced.

If you having been thinking about a plan for your future, start now, get in touch to learn about our different options and let us help you embark on the journey to financial freedom. Send me a message, email me on Tina@spp.agency or give me a call to discuss how we can help you be free.

Tina Wenham – Target Five Director