Singing Pig

Hi all,

I'm a novice to BMV in that i understand and have read about this but have no direct experience-athough i wish to start soon. I have a couple of queries which i'd really appreciate the advice of those experienced in this area.

Pretty much i have been researching a number of web based companies who offer leads -some even going as far as to 'package' the entire deal for the investor which in some examples has included a decent (23%+) BMV discount, cash back, and a positive cash flow with current tennants. I understand that for this i will pay them a fee of usually a few thousand pounds however (perhaps the sceptic in me) I find myself questioning why these companies are offering such an amazing deal for only a few thousand pounds- e.i why are they not simply buying the properties themselves when they clearly have the financing solutions available, would get equity out, and would have the rental giving positive monthly cash flow.

 I cant decide if i'm being too much of a sceptic or if i'm right to question why anyone would offer these deals for a few thousand when it appears possible they could make more money themselves from the lead (if everything they say is true).

If anyone had thoughts, insight, personal experience of using companies like those described above i'd really appreciate their thoughts

Many thanks

John

You are right to be sceptical - unfortunately the property industry is pretty much unregulated, despite the huge sums of money involved.

If a company is routinely getting BMV properties how is it achieving this? Surely if there is a constant stream of BMV properties this means that they are not BMV, it just means the developer/seller couldn't get the price they wanted and are now having to sell at a price which is acceptable to the current market! No developer or individual is going to accept less than MV, unless there are specific one off reasons such as a cashflow problem.

If a property is advertised as 23%+ BMV is this provable by an independent valuation by a qualified valuer (not an estate agent)?  Is a mortgage company willing to lend 85% on the MV (not 85% of the BMV price)?

If a property is tenanted, who are the tenants? do you consider them to be a good credit risk?  Inspect the property to make sure that the property is in good repair and take out full references and credit checks.  It can take 5-10 months to get a defaulting tenant out and the law protects the tenant not the landlord, so do your research.

Your main problem is lack of control

It is true that some deal sellers will 'gild the lilly' in order to make their deals seem attractive. No surprises there

And this is what you have to be careful of!

However, there are many sold deals that are great value for money. Its naive to assume that just because a deal is being passed on, then there must be something fishy going on.

Why does any broker broker anything? Why don't they just enjoy the benefits of their offering themselves?  Ive passed good profitable deals on many times for reasons that suited me at the time. I have many happy takers who will vouch for this!

Its all about the relationship between research by the buyer and the level of risk that you want to introduce to your buying strategy. 

you ra eright to be sceptical, what with all the bad press about investment clubs over the last 2 years, however there are a number of preople offering deals and qualified leads

www.converytmydeal.com is one chap i know well

his main focus is on negotiating the deal for lead generators, where they do not have the time/skill/confidence themselves. if the deal negotiated is not wanted by the lead generator, out of area, property too much or too little, leasehold, needs doing up, rentback etc whatever the lead generator is not looking for gets sold on

investors tend to look for specific things, whereas the leads generated will be a mixed bag. Howver some just want to build a portfolio of property within say an hour of their base and will buy deals to fulfil that

i think you have to work out what exactly is it that you want from property, i don't necessarily want to be a landlord, but i am, i feel that i am unlikley to buy many more BTL's unless they are absolute bargains, but thats me.

Rik

Thanks for the advice guys!

So are there any companies out there people have used and would like to offer any feedback on?

As i mentioned i'm a novice so im trying to make an informed deceision as to whether using a company with pre-pakceged BMW deals is a good way to get myself started with a small portfolio-jurys out so far hence this post!

What types of checks, due dilligence would people recommend in addition to whats offered by the company selling the lead as most claim to do all of the DD o your behlaf using 'independent' valuers etc- again taking this with a pinch of salt!

Cheers everyone!

 Research is the Key!

Most of these lead companies show you the post code so research on the internet and find out how much houses or flats in that area have actually sold for.  Try www.nethouseprices.com or www.mouseprice.com these sites will give you an indicator. Also, don't be afraid to ask the Lead company more questions that you need answered.  Dont be afraid to ask them as much as you need to know as you are investing.  If it is a ready made deal then usually The company would have exchanged contracts with the seller so an official RICS valuation would have been granted.  However, if they have not exchanged ask how the valuation amount was confirmed.  Was it through agents? or was it through RICS surveyors or was it even the vendor that valued his own house!  sounds silly but I have seen many silly things regarding valuations. 

 Also check out the actual lead company and try and find out how many leads they generate, how they are sourced.

I hope this has been of some use 

All the advice about doing your research is good but I'm amazed that anyone these days would even think about an RICS valuation.

Over the past couple of years in terms of property hype, RICS valuers been running with the pack and from what I have seen have produced a lot of wildly optimistic valuations.  I have seen many situations where they have got it spectacularly wrong and the original buyers now face massive losses selling into the current market. It follows that there are a now a number of cases where RICS valuers may well be sued for professional incompetence. 

If you want to buy property to rent out, BMV doesn't even come into your decision.  There is just one consideration and that is, after taking into account all you costs, whether or not it generates a positive cash flow.  Buying cheaper and getting BMV to obtain future capital appreciation is a bonus and subject to timing differences.  Obviously, you can choose when buy but the most important thing is being able to choose when you sell.  If your investment is cash positive, then unless there are some other external reasons for wanting to sell at a particular time, you need never be a forced seller into a market that is running against you.

By the time you add in the initial fees, you're going to be paying in the region of 7.5% for your mortgage, so look for provable rental yields of 8% and more, especially if the property is ex local authority.  For ex la you need to price in the higher risk of getting poor tenants.  Believe it or not, the odd one or two decent properties are now turning up at auction that can be bought where yields of over 8% are achievable (I have just bought one) and there's definitely more on the way.  But be careful to avoid the city centre 2 bed apartment wastelands where half the properties are still empty because the rents being asked just aren't achievable.

Get at least, an 'in principle' approval for a mortgage and start doing your due diligence.  Also, if its a repossession, be prepared to move fast.  There are one or two mortgage lenders that can move quickly, so consult your mortgage broker to find out which ones are best.  Also be aware that repossessions bought through auction often require 14 day completion, so don't get caught out with deadlines you can't meet.

If you want to buy a 'packeged' BMV deal, study all the aspects very carefully and don't just believe what you are told.  Go and find the answers and prove them to yourself.  Some sellers will, for a number of different reasons may genuinely sell on good leads but again, do your own homework thoroughly.

Good luck!

NickHam

Hi Nick,

 Thanks for your advice!

Where you say 'If you want to buy property to rent out, BMV doesn't even come into your decision.' i have to say that yes positive cash flow is of course very important (fundamental) to a buy to rent strategy! However the appeal of BMV is the ability to purchase with NMD- as i mentioned i am a newbie here and unfortunately dont have huge cash reserves to purchase at full market value currenty- add in the fact the market is dropping at the moment and i would have thought that its a given that if anyone is goint to buy in the current climate they ensure they buy below current MV otherwise there is a strong likelihood the price of the property will be less in 6months?

If i were unable to buy with little or NMD and were forced to pay 30%+ deposit to get a regular buy to let mortgage and were only achieving 8% per annum i would have to seriously consider the near and mid term capital appreciation on the property as i can get 8% returns from my bank account.

Hopefully from listening to peoples advice and experiences on here i will be able to come up with a workable strategy, many thanks for your help