Singing Pig

Looking through alot of the content on the threads it is quite surprising the number of threads that only discuss BMV (Below Market Value for those that are not so good with acronyms). What about the other areas of property investing? Not everything is dependant on getting a property BMV. After all if everyone is relying on BMV to get purchases, then in effect TMV (True Market Value's) will be distorted.

I for one am focussing on refurbishing, conversion and most importantly for me Developing! I am not talking about build from scratch, but larger type conversions of properties. Now some of you might say that apartments are over-supplied - I would agree when looking at swanky over-priced new builds. Having a £150,000 new build flat churning out 6% yield is not exactly going to make you cash rich with decreasing property prices. However, converting a large commercial or residential building into say 7 flats offers a lot of scope - to not only add cash generating rental properties to your portfolio, but also make money by selling these on with rental yields of 8% to yield hungry investors. I have done a range of these projects with average unit cost prices coming out at £50k - £60k. A newly fitted conversion up for sale at £90k with an 8% rental yield sounds alot more attractive than an over-priced new build apartment at £150k. And before you say these deals are few and far between - that depends on how hard, and where you look? I have 7 prospective deals on my desk right now!

Anyone else making money from property now without relying on BMV? Would be interested to know...

i thnk that you are just over analysing this

the traditional BMV way was to be able to pick up a porttfolio of properties for free, i.e. no money in and often pulling cash out to be able to offset all the costs of advertising

you make you money when you buy is a maxim often trotted out, however consider that you being skilled see something in the property that others have missed.

For example being able to split the land off into 2 building plots.

you see it, no-one else does.... so if the house is for sale at 125k and the land with planning will be 100k, 125k looks like like a bargain basement BMV deal to me, indeed with your conversion project, if you see 7 flats whereas others only see 5, is that also not BMV if its for sale with 5 flats in mind and priced as such

or perhaps a property that can be converted into a 5 separate studios, and run as a HMO that will rent for 26k PA rather than a house at £7200 p.a. up for sale at 95k, (will need cash spent on it either way) looks cheap to me

pricing is subjective, thats all i can add, often dreamed up by Estate Agents.... spot what other miss and you are buying BMV anyway

Rik

Sone:

Not everything is dependant on getting a property BMV. After all if everyone is relying on BMV to get purchases, then in effect TMV (True Market Value's) will be distorted.

Anyone else making money from property now without relying on BMV? Would be interested to know...

BMV, TMV......what about AMV? (Above Market Value)

Just an example of how you do not need to rely on BMV purchases to make money. A friend of mine has recently been making very good money by buying large victorian properties that have - for many years - been split into flats.

The following example begins with the purchase of two flats (at slightly below market) out of four - that includes the freehold of the building. The two flats are on the ground and basement.

Once in possession he immediately applied for planning permission to extend both flats. He then approached the other two owners and asked if they would be willing to sell him their properties. One jumped at the chance to sell at market price because they did not like the idea of living on a building site for the next 9 months. The other 'hinted' that he would possibly sell if the price was right. Eventually they agreed on a price of £350000 for a flat that was worth no more than £250000 - £100000 AMV!

My friend eventually sold this property as a single unit and made a 40% profit. He sold this property in the third quarter  of last year so was very lucky with his timing. The property is in London.

The above example shows how you can pay above the odds and still make money if you work the right angle.

Hello Rik,

You hit the nail on the head - Pricing is subjective! The lack of mortgage finance available at economical prices has meant that the notion of the Value of a property is an area that if you get it wrong on the high side can cost alot of investors alot of money! Gone are the days of making money through a rising market - prices will correct - question is in how long and after how much of a fall?

Any other ideas as to how to make money - I liked the previous example of buying up a whole block and making money selling on as a whole with planning - bit risky though in the current market if you haven't got large piles of cash to avoid having to finance if you can't sell.

Is anyone doing 'Lease options'. Sounds interesting and from my research it involves finding a tenant that wants to buy but does not necessarily have the deposit. They rent from you but pay a premium which goes towards building up a deposit which they can eventually use towards buying the property in future. This way landlord has better cash flow, tenant that looks after the property (can include clause that tenant does all maintenance and repairs) and can get share of future capital growth. I have not done and would be keen to get someone's advice who has or is doing it.

The problems I see with this 'lease option' are: the tenant would need to be credit checked which could exclude many people, sourcing these buyer tenants could be hard, getting a much higher rent to build up a substantial enough deposit can be unaffordable for many tenants wanting to buy, at what level do you set the agreed price in future (if house prices fall for a long period you could end up making no money as the sale price gets closer to your mortgage?) This method could potentially be a solution for many people unable to afford to buy with little or no deposits, but there are complications. Any useful thoughts - clarity would be great...

Surely 'BMV' is a misnomer, especially in the present market. The value of a property, like any other commodity, is the price someone is prepared to pay for it. Drop the price low enough and there will be a queue to buy it quickly. Raise the price and people start leaving the queue: you might get the price eventually but it could take a long time before the right buyer appears. Raise it enough and everybody leaves the queue.

Surely if you are running a business, what counts is that the figures stack up for your particular business model, including the cost and availability of finance. Then you decide what purchase price you can pay - the value of the property to you. Somebody else may be committed to a different business model, so the 'value' to them could be higher or lower. So, yes, it is subjective - stick to what you are good at, and don't miss out on a good opportunity because you are hung up on BMV.

Hi Toby!

Nice to see what you look like, I'm glad someone brought this up. It's been at the back of my mind for a while now.

It's as though "BMV" is the only way to make cash - over the last 30 years I have certainly made my income from property much more by adding value than any other way. Adding value can be done as much by sorting out a problem with a property as refurbishing it.

I do like to 'earn' my money then I know how I did it so it's repeatable - while I can not knock anyone for win-fall profits from inflation or trading on adversity earning a regular income means you make money whatever the climate.

Anyway enough from me - Good Point!

Carl Henry