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Hey, I'm Russell Le >> and I'm Anna Lee >> and welcome to the Property [music] Investors Podcast. On this week's show, we're going to be talking about a loophole that landlords have been using. Hey, I've been using. Lots of our students have been using. >> I have. >> That is being closed by HMRC. There's been a big update. It was actually supposed to be closed on the 31st of March [music] this year, which is not very long away.
>> No, time is running out. but it's been extended and it's now not going to be closed till the end of the year. So, you've got a bit more time to take advantage of this loophole. So, we're going to talk a bit more in detail about what exactly the deadlines are, how it all works. But first of all, let's talk a bit about what this loophole actually is and should you be using it on your properties or even buying specific properties to use this strategy.
So first of all, it's a type of buy refurbish finance deal. Yeah. If you're buying exclusively. So buy refurbish finance is essentially where you buy a property. It it's kind of the clue here is kind of in the name. You buy a property, you refurbish the property. >> Wow. And then you >> refinance the property. >> Wow. Now, the reason this is such a great strategy, particularly in the UK, I think it works amazingly, is if you you you know, you'll have a street value. So, if you've got like a row of properties on a street, let's say in Manchester, all the properties, assuming they're a similar spec, are going to be a similar value, especially if they're the same type of property. You know, >> well, a road has a value, doesn't it? >> It will have a maximum street value. >> Yeah. >> You you actually want to avoid those properties as well. The problem with owning a property that's the best property on the street is that you'll be capped by the other properties. >> Yeah. And I know people that have done that and bought the nicest house in the street, >> Station Road. >> Yeah. And then they go to sell it and it's such a beautiful house, but it it's like nobody it can't be worth anymore because it's just way better than everything else in the street. So all the agents go >> in that that example, it's worth £450,000, >> but no one wants to pay £450,000 for it because it's like, >> yeah, but do I want to do I want to pay that nearly half a million quid to live on that road? Like I could go and live on this other road. Yeah, slightly worse house, but for 450. >> Yeah. >> So you are capped. So you do not want to get the most expensive house on the street. But typically, especially streets where they've all been built the same. >> Yeah. >> They'll there'll be a street value and most of the houses will be the same price. Let's say you took a random street in Manchester and all the houses worth 300 grand, for example. But then one of them is an absolute wreck. It's, you know, terrible repair. You know, it's got structural issues. It's got Japanese notweed in the garden. It's just awful. Right? Obviously, now no one's going to pay 300 grand for it because it's absolute wreck. So what that does is it means that much less people, >> terrible wording, but you get the point. Less people >> Yeah. >> are interested in this property. Okay. Especially if you can't even get a mortgage on it. >> Yes. >> Cuz if you if you all landlords when they buy a property want to get a buy to let mortgage. >> Yeah. >> You can't get a buy to let mortgage if the property is an absolute wreck because they'll be like, well, who's going to pay the mortgage? It's by to let you can't let it like that. >> Yeah. No one can live in it. >> No. We'll give you a mortgage when you fixed it up. >> Yeah. >> Um so in that situation, you probably either need cash or bridging finance to bridge the gap while you are fixing it up, which then rules out loads of investors. It certainly rules out anyone that wants to live in their personal home. >> Yes. >> Un unless it's like, oh, it's my dream home and I want to do you get the odd person like that. But most people it rules out. So you you're probably talking about 2% of people are now interested in this property. >> So that devalues it on its own. >> Yeah. >> It's also a wreck. It needs work. It needs effort. It really devalues it. So this £300,000 property might only sell for 180. Now if you can renovate it for say 50 grand, you've now effectively paid 230 grand for a £300,000 Yeah. property. You then get a mortgage on it. They lend you up 75%. In some cases, you can pull out all the money you originally put in and go and do it again. In some extreme cases, you could actually pull out all your money and some. >> Yeah. >> So, like Tim, do you know the property he bought in the Peak District? Just like a barn. >> Yes. >> He pulled out all his money and 23 grand in cash on top. And by the way, that's taxfree money because he refinanced it, which is amazing. So that's buy refurbish finance. And in other cases, you might leave a little bit of money in. It might be that you know you you get your mortgage back and it's like I've left 10 grand in. Oh wow. >> Some of my favorite they're probably the best value ones. >> But do you know when you find a street and then there's one so they were all built like 25 years ago or something or even longer. There was one on a road we lived on once and then there's one that's just looks like you've stepped back into t in time where it just looks like the 1960s or something. Which street is this on? >> There was one on Jordan's Way and it's actually got knocked down now, >> but the whole place, but it was like that bungalow on the end and it I felt like it could have been in like a movie set from back in the day. I love those properties and you can just >> that they're probably not so structurally damaged, but someone's lived in it for the last 60 years, hasn't done it up, and it's still like all the furniture from back then. I love going and viewing those kind of properties. because you're thinking I can quickly change this and make some money or because you just like old properties >> a mixture >> for me it's the l it's the latter well the first one the quick the quickly change it as fast as possible I saw an interesting video they were showing that like the color has left our lives so it was showing you know the home alone house >> this is what the home alone house used to look like and it was all like red and gold and everything and they're like now it looks like this it was like white and black basically >> our house is very like white and black they were saying it's not just houses. It's also like cars. Everyone used to have red cars, green cars, blue cars. >> And like I remember, didn't your mom used to have a yellow car? >> A yellow car. >> What was that, Elliot Spencer? One of you used to turn up. >> We had a green car. >> A yellow car to school. >> We didn't have a yellow car. We had a green car. Do you remember Samuel's first car was a purple car? >> Oh, it was >> He looked like the Joker going around in his purple >> and the light and the light blue car. >> And mine was bright red, but that wasn't that long ago. Well, I say that. >> Yeah. Yeah, you're older than you think. >> It was probably a 27y old cart now. It wasn't at the time. >> Anyway, >> but it's not in now, is it? >> No. So, all this old colorful stuff. No, we like we like browns. We like beiges. We like whites. We like grays. >> Look at our outfits. >> Yeah, that is >> beige and black and white. That's it, right? We we we like that. If it's >> colorful. Even like things like McDonald's though. McDonald's used to be yellow and red. Now it's like brown and green. >> Is it? No, it's not. >> The the M is yellow, obviously, but if you look at the stores now, they're not like bright red like they used to be. >> Oh, I haven't noticed that. >> Have a look. Google it. They not right now, but they're like brownie and dark greens. >> Oh, wow. >> The whole color scheme, it's all Anyway, it's all changed. >> Can't even remember what we're talking about now. >> We're talking about refurbs. >> Oh, yes. >> So, that's one way to do a buy refurbish finance. Now, here's the thing. There are other ways you can increase the value. So, you don't have to refurb it. You can increase the value by buying a short lease property and extending the lease. It's just paperwork. You can do borrow refer I know Elijah on on our on our academy. >> He bought a property a flat in London, had a short lease, extended the lease, pulled all his money out, didn't even refurb it. >> It's a great time to do that as well. >> It's brilliant. We've talked about that before on the show. And now here's the one that I want to talk about today and why this is so amazing and why you should so do this right now before it's too late. So >> this isn't just for BR though. >> Surely this is just anyone who needs to >> Yeah. But it's it's not just for BR, but it's it's for adding value to your house. >> Yes, of course. Yeah. >> Yeah. Yeah. You don't have to refinance it afterwards, but if you want to add value to your house, this is a brilliant way to do it. So EPC's big hot topic. We all know the the thing that gets talked about a lot with EPCs is you can't rent out your property unless it's a C in 203 I know they keep changing the year uh but like 2030 or whatever it is and right now is it uh what is it right now? C is it E right now? >> It's E right now and they're changing it. They want everyone it's got to be C. Yeah. And above. >> Can't rent it out if it's unless it's a C or above. Uh EPC by the way in case you're like what's EPC? Stands for energy performance certificate and basically it's just how energy efficient is the property. So A would be like oh >> really energy efficient. B would be like still very good. C so on and so forth. G >> over the years they've made I remember the houses back in the day they were all G's and stuff weren't they? And >> and they've they then made it like it had to be E. And if your property is a G, while that sounds really cool, it's actually not cool, but it's like the worst. It's like my property is unbelievably energy inefficient. Like you >> be like the windows if you've got like >> Do you remember Clark H's farm that we used to live in literally like you're inside the wall, you're inside the the room, you could literally see in the wood a hole. You could see outside. There was literally light coming in like that kind that was very energy inefficient. that got away with it because it was a grade two listed building >> and there are some exemptions to this rule and grade two listed buildings are one of them. >> Um, and I think it's because they kind of are what they are, aren't they? It's like it is it was a really old TUDA farmhouse. They want it to stay looking like a TUDA farm. Unless you're going to totally renovate it and it isn't going to look like a TUDA property anymore. There's kind of not much you can do. So there's certain properties if you happen to live in one like that or own one where you can probably get away with it, but you do have to apply. It's not as easy as just, oh, I've got a grade two listed property, so I'm exempt. You do have to apply, but you can get an exemption on some certain properties. >> Exactly. Now, the general sort of rhetoric around this is like, oh no, bad news. Oh, landlords are getting hit again. Got my mind's an NF. Oh, how wo is me. Terrible. Right? However, it's not all doom and gloom. It's actually could be massively in your advantage. Let me give you an example. So, one of our academy students, by the way, if you want to learn how to do this type of strategy in way more detail, >> I'm running a free webinar. Free webinar, not just this strategy, but loads of other strategies as well. So, check it out for free. We'll put the link below. Um, it's totally free. What have you got to lose other than an hour of your time with me, which is Does it get better than that? I don't know. Maybe not. Um, so this property that Rob, one of our academy members, bought, he bought it, it was in the northeast of England. He bought it for 140 grand. And the property had a problem, which is a good thing. When you're looking for investment properties, you want properties with problems. Why? Because you can fix the problem, >> of course. >> So, here was the problem. Problem was, it had an EPC rating of an F, which is obviously really bad. It's about as bad as it gets. It's not even a G. It even sounds bad, doesn't it? It's an F. >> Sort of total fail, isn't it? An F. >> Yeah. F for failure. So, it was an F. >> So, what Rob did was he was like, well, I need to fix my APC. Got a problem. Won't be able to rent it out in many years. So, he added things to the property. So, the things he did, he added an internal uh wall insulation like >> so you couldn't see outside anymore, whatever was the problem with it, which made it more energy efficient. He added solar panels on the roof. Oh, >> he added >> I hate solar panels. But hey, >> hey, you're Stop it. You're a bad advert for this. >> Sorry. [laughter] >> He added >> everything else, just not solar panels. >> An airsource heat pump. I actually don't like airsource heat pumps that much either. [laughter] We had one of those at um Woodlands driver. We had a boiler and an airsource heat pump. >> Oh, yeah. We did. Yeah. >> And yeah, the was But anyway, he added it in airsource heat pump wall insulation. He added the solar panels. Oh, and heating controls. Okay. Now, all of this stuff cost him I've made a note just so I didn't get it wrong. Cost him 35 grand. 35 grand. But it took the property from an F and he made it a B. >> Amazing. >> I bet that was the solar panels. >> It was all of it. It was the whole combination of the lot. You could do your window. A lot of people have like old windows, things like that, but that's that's what Rob did. Cost him 35 grand. >> So, think about this. He spent 140 on the property and he spent 35 grand renovating it, making it a B. >> Yep. >> Great. Well done, Rob. However, any investor will now want to ask two questions. >> And the questions are, well, the first one was how much did it cost? 35 grand. And the second one is, well, what's it worth now? Yeah. >> Because it added 35 grand worth of value to the house. Well, if it only added 35 grand worth of value, >> was there no point? >> Other than you've got to. >> Other than you've Yeah, I suppose other than you've legally got to down the line. But it's not a good investment. He shouldn't have bought it in the first place. >> Not to just do as a BR. No. >> Yeah. [snorts] So, it actually added 50 grand worth of value. So, it was now worth 190. He got it revalued. Which means he made 15 grand. >> Yeah. >> Which if I say to someone, is that a good deal? Not really. Like a normal investor who's just buying a random property would probably go, "Yeah, it's kind of okay." I mean, he's made 15 grand, it's okay. But from a BRR perspective or a flip deal, you if you've tried to flip it, for example, you probably paid more in stamp due, you know what I mean? It's it's not it's not worth it. It's not it's not a very good deal. >> Um, however, Rob didn't pay 35 grand to get the reverb. Rob got the reverb for free. How did he do that? How did he get the reverb for free? I hear you ask. >> How did he get it done for free? >> Great question. I'm glad you asked. So, what he did was he applied to the government for an Eco4 grant. So, the government paid for his refurb. >> Yes. >> Which is amazing. So, he basically bought a property, the government paid for his refurb, and he made 50 grand. Now he can refinance it, pull out all his money. What a great deal. >> But it's not quite as simple as they just gave. There are rules around the grant. >> Like how'd you qualify? >> Yeah, you you have to qualify for it. It's not as simple as just, oh, brilliant. Oh, I want the grant then and now everyone's applying for these grants. >> No, you kind of can, but you're right. There are rules. So, this is what you got to do. >> First thing you want to do is you want to find yourself a freehold property. So you can there are certain stuff you can do with leaseold but it's nowhere near as good because I actually had a leaseold property. I went to the company I was like I've already got this property and they were like nah it's not really worth it. Um which was a shame but the freehold it works >> works really well. I think probably because I imagine you own the property like you can't put solar panels on a roof that you don't own or internal wall installation or do you know what I mean? >> So you want a freehole property. Next, you want a free old property that has got a really poor EPC. So, like G again would be the best. Back to G being the best. F is now good. >> Even E is is okay, but you want like an E, an F or a G. >> Next, whoever lives in the property, you want them to be on benefits. >> Yeah. >> So, like here are some of the benefits. I have made a list because I don't remember these off top of my head. So, you've got uh child tax credit, working tax credit, universal credit, pension guarantee credit, pension savings credit, income support, not credit, this one. [laughter] Uh incomebased jobseekers allowance or income related employment and support allowance or ESA. >> Oh, wow. >> Quick test for you. Name all of them. [laughter] So, that's >> actually I haven't heard of all of them actually. >> Yeah. Yeah. So, they need to be on at least one of those. Do you know David? >> Yeah. >> So, he was on was on the sick, wasn't he? He was on he was on benefits for a few years and he was renting a few houses. Every time he moved house cuz he was on benefits. >> The landlord did this. >> Yeah. It's actually very very clever, isn't it? >> Because I was telling you about this. I was like, "Oh, he's a build. He's a builder now." And I was like, "Oh, this is amazing." Blah, blah, blah. And he was like, "Oh, yeah. Yeah. I've I've literally done that four times. I've been the the tenant." Yeah, >> that's insane. So, landlords are really using this right now. It is running out. >> So, how much value does it add? That's the next question. So, the one that we just gave the example of, it added um you know 50 grand, right? >> It depends all over the country, doesn't it? We were looking at this. >> I know. >> And it So, it's not just like, oh yeah, it ups a property by percent. >> No, it does. >> And we learned that don't bother in the Midlands. >> No. So the West >> don't seem to care about being eco-friendly there. >> West Midland, that's where we're from. >> Yeah, >> it only adds, right? Bear in mind, [laughter] >> it was nothing. >> We spent like 35 grand refurbing the property. It adds on average 2.8%. 2.8% which is less than 8 grand on average. So >> which is why I see no solar panels in Warsaw. >> Yeah. Well, in Warsaw they're just like just wear a coat. What are you doing? >> What are you doing? We don't like energy. Green energy. Yuck. >> Where it works really well is more expensive areas. So, for example, in the southeast of England, >> yeah. >> Uh on average, of course, it will be area dependent, but the average, this is insane actually, is 23.85%. >> That's like because because they're more expensive properties as well, that's £112,000 on average. So, >> you buy a property with a really bad EPC. This is if you take, by the way, a G to a to a B. Yeah. >> Okay. >> Put a tenant in it who's on benefits. >> Put a tenant who's on benefits, apply for the grant, get the money, the government pay for it, and you make 112 grand. It's crazy. In London, you make even more. In London, it's 137 grand. I mean, they care more, I think, in London about energy efficiency and stuff. They're like, you know, they're more >> they're more on it, >> more greeny, more that way. And the properties are expensive. Yeah, >> 18%. Northeast works really well. Um, 18% on average. Northwest like Manchester and Liverpool that works really well. Uh yeah, most places work well. East of England not great. Southwest isn't great and the West Midlands is terrible. West Midlands we really are just not into it. Not feeling >> not feeling that. >> Not feeling the the uh the energy efficiency. So how to actually apply for it? How does it actually work? So, what we did when we did this is we did the whole thing for a company. So, we used a company. I'll see if we can put a link below. I have to try and remember to do that. If I didn't, I'll tell you now. It's elite energy.co.uk. >> elite energy.co.uk. And what they did was they took care of the whole process for us. So, do you know like the the whole PPI phone call things where they're like, you know, oh, do you PPI listers, we'll take care of everything on your behalf. And you're like, okay. You sort of fill out a form and then they sort the whole thing out for you. >> They're like that, aren't they? >> Kind of like that. Yes. So they literally they have got the contracts with like NP power. Do they even exist anymore? What are the energy companies? EDF energy and all all those >> EDF definitely are still going. >> Yeah. And um they've got all the contracts with those. So literally you just sort of tell them I qualify because I've got tenant they got the right property of a bad energy and it's sort it all. They get the grant they do the work and they just are like here you go ding done. and you can just like renovate your property for free. It's like an insane method. Also, there's something beautifully poetic about the government giving you money. >> For me, it's like, well, if that never happens. >> Yeah. It almost seems too good to be true, doesn't it? >> Especially when you're a landlord, >> like they get they're doing my refurbs for me. >> Yeah. Because this isn't just good for I know we're talking about BRR, but if you are a current landlord that has got loads of properties for years and have got a big portfolio, but they're now all D EPCD and you're thinking, "Oh, I'm going to have to sell because I can't afford to renovate all these properties. This is a great like well, you're going to have to put in some people who claim benefits." But you've probably got some I mean you let's face it if you uh have a big portfolio of properties you've probably got some people on benefits. >> Yeah all the adverts no DSS like DSS only. >> Yeah. >> Get it in quick before the Renters Rights Act comes in. You can't discriminate against nonDSS people. >> That is quite funny. Yeah. Suddenly everyone's getting the DSS. >> Yeah. We only want [laughter] we only want DSS tenants. >> I've never seen that on an advert but maybe that's going to be a new thing. Now, one question that I had, the first question that came to mind was, hold on a second, there's there's a kind of is it an oxymoron here or there's a bit of a conflict here because on the one hand, the government are saying and there'll be some smart people have already commented this, maybe you've already commented this, maybe you already have and I'm about to answer your question without having to respond to your comments. It's kind of live on it, right? But they'll be thinking, "Hold on a second. Didn't they say that you can't rent out a property that's got a poor EPC, but now they're saying buy a property, put a tenant in it, aka renting it out, and then >> apply for and that was my question. I was like, hold on a second. >> And I when I spoke to Elite Energy, I was like, hold on. How does this work? Because, by the way, it also works if you live in the property. So, if you're on benefits, >> you know, >> get yourself on benefits. >> Yeah. You own your own house. You get yourself on benefits. Yeah. Quit quit the job. Why you quit the job? Cuz I'm going to make 50 grand if you live in London. >> Yeah. I mean, just use all Rachel Reeves loopholes. [laughter] >> Yeah. You're probably better off on benefits. >> Yeah. Yeah. Leave leave your job, go on benefits, get paid more, and get a free upgrade on your house. You're living living the dream. >> Um anyway, where was I? Oh, yeah. So, how how how does that work? How does that work out? So what they what they told me and it seems to have worked is yeah kind of in principle there is a conflict there it doesn't really work when you go to your estate agent just explain to them look we're going to be renovating this immediately we're using this company that we are applying for this grant so what we need to do is we need to find a tenant on benefits and as soon as they're in we'll get the work soon as the contract signed they're in we'll get the work >> so a bit long a bit like as long as you're kind of proving that the work's about to be done. They let it slide. They they agree. As long as you can go, "Look, I am the minute they're in, we're going to get the works done." >> Yeah. >> Yeah. That's >> But there is a I I'd understand the hesitation there. So, what I would suggest is find a company >> like Elite Energy. Put the link below. Find a company like that. By the way, they don't do London. So, if you're London based, they're more of a northern based company. So, it's like Midlands and above where ours are >> annoyingly. ironically probably doesn't do much in the media. >> Didn't didn't even help that much but adds a bit. Um but if you're buying particularly I would if I was actually buying for this strategy which I do think is a good idea I would probably be looking in places like London, southwest of England and literally just going on right move and searching for like EPCG >> or you could move your mate in who's on benefits. >> We can't advise that. We can't advise that on the on on the on on the I mean if someone did that that would that would probably work but I I wouldn't >> we couldn't possibly say to do that >> we could possibly advise that but you but you could you shouldn't do that but if you did that probably probably would also work but don't do it and certainly don't say you heard it here Shana stop it >> stop giving real advice [laughter] >> doesn't call it advice it isn't advice it's what you [laughter] shouldn't do it's the opposite of advice it's uh >> no all [laughter] So >> just forget you heard me say that bit. >> So what are the new laws and how does it all work? That's kind of what it is. It's a brilliant strategy by the way. It's amazing. So >> basically sorry you going to say >> you go. You go to summarize it beautifully. >> No. Well I was just going to say I didn't realize when the budget came out but apparently it was in there that Rachel Reeves said Eco4 grant was coming to an end in March. I I missed that at the time actually. I didn't know that was in the budget. I've learned that like recently >> it got scrapped um in the budget. It was she didn't say we watched it obviously. She didn't say it was in the small print afterwards. Yeah. So she so she scrapped Ego for said it was going to end on 31st of March. However, >> just a few short days ago, depending on when you're watching this, they've announced they're now extending it till December of this year. here. Now, when I say it's being scrapped, it is being replaced by something, but I don't think it's going to be as good as what it is now. >> No. >> So, it's like the warm home. I mean, I'll look more into it closer to the time, and we I'm sure we'll do an episode and advise you on how landlords are using it and how investors are using it. Um, but it's not I don't think it's going to be as good as this. So, now is the time to take advantage of the they take enough of your money from you. let's go and upgrade some properties and make some money at the same time. >> Um, so yeah, now's the time to do it. So I would be if if I was looking if in the southwest of England or southeast of England, sorry, or London, even if it's got other problems, you know, even if it's got other issues with the property, why not get some of the refurb paid for by the government and then you do the rest? It just makes it's a brilliant strategy. I think now is the time. You're going to have to upgrade them anyway. All these properties are going to have to get upgraded anyway. >> So why not be the one that takes advantage of it? >> Why not make money from it? >> Yeah. >> Use the grant while it's here. 100%. It's actually good news. >> Yeah. >> For once. Yes. >> With this government. It's kind of bad news it's coming to an end, but it's good news that you can do this now. >> Yeah. And that it's being extended because who knows if that's how it's going to go. So it was meant to finish. They thought let's extend it. Who I mean the chances are they could easily end up extending it again, couldn't they? Well, you never know with this government. It's like the EPC rule. It was like they kept changing the then they scrapped it and they brought it back and it's just like >> I also didn't quite realize on the on the walk here today. I went oh well you've got ages 20 30 like and then I actually thought I mean it's not like it's next year but it's not that far away is it? I thought that sounded like >> ridiculously far away and then I was like oh no we are in 2026 now. I was like, gosh, that isn't as far away as I I was thinking it was. >> Yeah. 20 I know. 2030. I remember Eminem song where it was like 2020 and it was like 2002. And I was like 2020. I can't even imagine 2020. It's like, oh no. >> And 2030 feels like that. They're just saying 2030 just feels like, oh, I can't picture what life would be like then. And I'm like, oh no, that's four years away. >> Four years away. That will go around like that. I know. Already 2026. It is insane. Anyway guys, uh please do subscribe to the channel if you want the hot property investor news, the best places to invest, you want to know what's going on in the property market, subscribe to the channel, like, comment, let us know your thoughts. What do you think of the grant? Have you used this grant? >> Love to hear from people that have actually used this grant already and what was the whole process like? Have you got properties that are poor EPCs? You know, I'm going to take advantage of this or are you actually going to go and find properties to do this strategy on which would be an amazing power play in my opinion. I'm Russell Le >> and I'm Anna Leids. >> We'll see you next week.